BILL NUMBER: AB 2330 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 15, 2014
AMENDED IN ASSEMBLY APRIL 30, 2014
AMENDED IN ASSEMBLY APRIL 28, 2014
INTRODUCED BY Assembly Member Mullin
(Principal coauthor: Assembly Member Wieckowski)
(Coauthors: Assembly Members Campos, Chávez, Gorell, Maienschein,
and Ting)
(Coauthors: Senators Berryhill, Gaines, and Vidak)
FEBRUARY 21, 2014
An act to amend Sections 17052.12 and 23609 of the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2330, as amended, Mullin. Income taxes: credits: research
activities.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including a
credit for a percentage of specified research expenses. These laws,
in modified conformity, apply the provisions of the Internal Revenue
Code, relating to the election of alternative incremental credit.
These laws provide that the provisions of the Internal Revenue Code
relating to election of alternative simplified credit shall not
apply.
This bill would , for taxable years beginning on or after
January 1, 2015, not apply the provisions of the Internal
Revenue Code, relating to the election of alternative incremental
credit, and credit. This bill would
, for taxable years beginning on or after January 1, 2015, and
before January 1, 2022, apply the provisions of the Internal
Revenue Code, relating to election of alternative simplified credit
in modified conformity. This bill conformity,
and for taxable years beginning on or after January 1, 2015,
would apply the provisions of the Internal Revenue Code, relating to
the inclusion of qualified research expenses and gross receipts of an
acquired person and aggregation of expenditures. This bill
would provide that these changes would apply to taxable years
beginning on or after January 1, 2014.
This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
This bill would take effect immediately as a tax levy.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17052.12 of the Revenue and Taxation Code is
amended to read:
17052.12. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "net tax,"
defined by Section 17039, for the taxable year an amount determined
in accordance with Section 41 of the Internal Revenue Code, relating
to credit for increasing research activities, except as follows:
(a) For each taxable year beginning before January 1, 1997, the
reference to "20 percent" in Section 41(a)(1) of the Internal Revenue
Code is modified to read "8 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to "20 percent" in
Section 41(a)(1) of the Internal Revenue Code is modified to read "11
percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "12
percent."
(3) For each taxable year beginning on or after January 1, 2000,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "15 percent."
(c) Section 41(a)(2) of the Internal Revenue Code shall not apply.
(d) "Qualified research" shall include only research conducted in
California.
(e) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted.
(f) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code, relating to qualified research expenses, is modified to
exclude from the definition of "qualified research expense" any
amount paid or incurred for tangible personal property that is
eligible for the exemption from sales and use taxes, as provided by
Section 6378.
(2) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 11 (commencing with Section
23001)."
(g) (1) (A) For each taxable year beginning on or after January 1,
2000, and before January 1, 2014: 2015:
(i) The reference to "3 percent" in Section 41(c)(4)(A)(i) of the
Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(ii) The reference to "4 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(iii) The reference to "5 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(B) Section 41(c)(4)(B) of the Internal Revenue Code shall not
apply and in lieu thereof an election under Section 41(c)(4)(A) of
the Internal Revenue Code may be made for any taxable year of the
taxpayer beginning on or after January 1, 1998, and before January 1,
2014. 2015. That election shall apply
to the taxable year for which made and all succeeding taxable years
unless revoked with the consent of the Franchise Tax Board.
(C) Section 41(h)(2) of the Internal Revenue Code, relating to
termination of alternative incremental credit, is modified by
substituting "beginning on or after January 1, 2014"
2015 " for "beginning after December
31, 2008".
(2) (A) For taxable years beginning on or after January 1,
2014, 2015, and before January 1, 2022,
Section 41(c)(5) of the Internal Revenue Code, relating to election
of alternative simplified credit, shall apply, except as otherwise
provided.
(i) The reference to "14 percent" in Section 41(c)(5)(A) of the
Internal Revenue Code is modified to read "10.5 percent".
(ii) The reference to "6 percent" in Section 41(c)(5)(B)(ii) of
the Internal Revenue Code is modified to read "4.5 percent".
(B) Section 41(c)(5)(C) of the Internal Revenue Code, relating to
election, shall not apply and in lieu thereof an election under
Sections 41(c)(5)(A) and 41(c)(5)(B) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 2014. 2015, and before January 1,
2022. That election shall apply to the taxable year for which
made and all succeeding taxable years unless revoked with the consent
of the Franchise Tax Board.
(C) (i) For taxable years beginning on or after January 1, 2022,
Section 41(c)(5) of the Internal Revenue Code shall not apply.
(ii) No election under Section 41(c)(5) shall apply to taxable
years beginning after December 31, 2021.
(3) Section 41(c)(7) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
(h) Except as otherwise provided in this section, Section 41(h) of
the Internal Revenue Code, relating to termination, shall not apply.
(i) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(k) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
( l ) Section 41(f)(6) of the Internal Revenue Code,
relating to energy research consortium, shall not apply.
(m) The For taxable years
beginning on or after January 1, 2015, the amendments made by
subdivisions (b) and (c) of Section 301 of the American Taxpayer
Relief Act of 2012 (Public Law 112-240), relating to inclusion of
qualified research expenses and gross receipts of an acquired person
and aggregation of expenditures, shall apply, except as otherwise
provided.
(n) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2014.
SEC. 2. Section 23609 of the Revenue and Taxation Code is amended
to read:
23609. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "tax," as
defined by Section 23036, an amount determined in accordance with
Section 41 of the Internal Revenue Code, relating to credit for
increasing research activities, except as follows:
(a) For each taxable year beginning before January 1, 1997, both
of the following modifications shall apply:
(1) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "8 percent."
(2) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "12 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following modifications
shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "11 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "12 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(3) For each taxable year beginning on or after January 1, 2000,
both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code, relating to qualified research expenses, is modified to
exclude from the definition of "qualified research expense" any
amount paid or incurred for tangible personal property that is
eligible for the exemption from sales and use taxes, as provided by
Section 6378.
(2) "Qualified research" and "basic research" shall include only
research conducted in California.
(d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code, relating to basic research, shall be modified so that "basic
research," for purposes of this section, includes any basic or
applied research including scientific inquiry or original
investigation for the advancement of scientific or engineering
knowledge or the improved effectiveness of commercial products,
except that the term does not include any of the following:
(1) Basic research conducted outside California.
(2) Basic research in the social sciences, arts, or humanities.
(3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
(4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
(e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code, relating to qualified
organizations, shall be modified to include both of the following:
(A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code, relating to definition of institution of higher
education.
(B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, relating to exemption from taxation, is not a private
foundation, is designated a "specialized laboratory cancer center,"
and has received Clinical Cancer Research Center status from the
National Cancer Institute.
(2) For purposes of this subdivision:
(A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
(B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.
(f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
(g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
(h) (1) (A) For each taxable year beginning on or after January 1,
2000, and before January 1, 2014: 2015:
(i) The reference to "3 percent" in Section 41(c)(4)(A)(i) of the
Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(ii) The reference to "4 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(iii) The reference to "5 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(B) Section 41(c)(4)(B) of the Internal Revenue Code shall not
apply and in lieu thereof an election under Section 41(c)(4)(A) of
the Internal Revenue Code may be made for any taxable year of the
taxpayer beginning on or after January 1, 1998, and before January 1,
2014. 2015. That election shall apply
to the taxable year for which made and all succeeding taxable years
unless revoked with the consent of the Franchise Tax Board.
(C) Section 41(h)(2) of the Internal Revenue Code, relating to
termination of alternative incremental credit, is modified by
substituting "beginning on or after January 1, 2014,"
2015" for "beginning after December 31, 2008".
(2) (A) For taxable years beginning on or after January 1,
2014, 2015, and before January 1, 2022,
Section 41(c)(5) of the Internal Revenue Code, relating to election
of alternative simplified credit, shall apply, except as otherwise
provided.
(i) The reference to "14 percent" in Section 41(c)(5)(A) of the
Internal Revenue Code is modified to read "10.5 percent".
(ii) The reference to "6 percent" in Section 41(c)(5)(B)(ii) of
the Internal Revenue Code is modified to read "4.5 percent".
(B) Section 41(c)(5)(C) of the Internal Revenue Code, relating to
election, shall not apply and in lieu thereof an election under
Sections 41(c)(5)(A) and 41(c)(5)(B) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 2014. 2015, and before January 1,
2022. That election shall apply to the taxable year for which
made and all succeeding taxable years unless revoked with the consent
of the Franchise Tax Board.
(C) (i) For taxable years beginning on or after January 1, 2022,
Section 41(c)(5) of the Internal Revenue Code shall not apply.
(ii) No election under Section 41(c)(5) shall apply to taxable
years beginning after December 31, 2021.
(3) Section 41(c)(7) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
(i) Except as otherwise provided in this section, Section 41(h) of
the Internal Revenue Code, relating to termination, shall not apply.
(j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(k) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(l) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
(m) Section 41(f)(6) of the Internal Revenue Code, relating to
energy research consortium, shall not apply.
(n) The For taxable years
beginning on or after January 1, 2015, the amendments made by
subdivisions (b) and (c) of Section 301 of the American Taxpayer
Relief Act of 2012 (Public Law 112-240), relating to inclusion of
qualified research expenses and gross receipts of an acquired person
and aggregation of expenditures, shall apply, except as otherwise
provided.
(o) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2014.
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.