California Legislature—2013–14 Regular Session

Assembly BillNo. 2754


Introduced by Committee on Revenue and Taxation (Bocanegra (Chair), Gordon, Mullin, Pan, V. Manuel Pérez, and Ting)

March 24, 2014


An act to amend Section 17054 of, and to add Sections 18621.10 and 19171 to, the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 2754, as introduced, Committee on Revenue and Taxation. Franchise Tax Board: administration: dependent credit: electronic filing.

The Personal Income Tax Law allows a credit for each dependent of a taxpayer and does not require a tax identification number of the dependent to be included on the return filed with the Franchise Board.

This bill would require, for taxable years beginning on or after January 1, 2015, the tax identification number of a dependent to be included on the taxpayer’s return and would allow the taxpayer who did not provide the taxpayer identification number on the return to thereafter claim a credit or refund of that amount, as provided.

Existing law requires every taxpayer subject to the Personal Income Tax Law or the Corporation Tax Law to timely file a return with the Franchise Tax Board, unless exempt, on a form prescribed by the Franchise Tax Board.

This bill, for taxable years beginning on or after January 1, 2014, would require an acceptable return, as defined, of a business entity, as defined, that was prepared using a tax preparation software to be filed using electronic technology in a form and manner prescribed by the Franchise Tax Board. This bill would require a business entity that fails to comply with that filing requirement for returns filed for taxable years beginning on or after January 1, 2016, to pay a penalty of $500 for each failure unless the failure is due to reasonable cause, and not willful neglect. This bill would require the Franchise Tax Board to conduct programs to educate business entities on these requirements and liberally interpret and grant waivers of the penalty, as specified.

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

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

P2    1

SECTION 1.  

Section 17054 of the Revenue and Taxation Code
2 is amended to read:

3

17054.  

In the case of individuals, the following credits for
4personal exemption may be deducted from the tax imposed under
5Section 17041 or 17048, less any increases imposed under
6paragraph (1) of subdivision (d) or paragraph (1) of subdivision
7(e), or both, of Section 17560.

8(a) In the case of a single individual, a head of household, or a
9married individual making a separate return, a credit of fifty-two
10dollars ($52).

11(b) In the case of a surviving spouse (as defined in Section
1217046), or a husband and wife making a joint return, a credit of
13one hundred four dollars ($104). If one spouse was a resident for
14the entire taxable year and the other spouse was a nonresident for
15all or any portion of the taxable year, the personal exemption shall
16be divided equally.

17(c) In addition to any other credit provided in this section, in
18the case of an individual who is 65 years of age or over by the end
19of the taxable year, a credit of fifty-two dollars ($52).

20(d) (1) A credit of two hundred twenty-seven dollars ($227)
21for each dependent (as defined in Section 17056) for whom an
22exemption is allowable under Section 151(c) of the Internal
23Revenue Code, relating to additional exemption for dependents.
24The credit allowed under this subdivision for taxable years
25beginning on or after January 1, 1999, shall not be adjusted
26pursuant to subdivision (i) for any taxable year beginning before
27January 1, 2000.

begin delete

28(2) The credit allowed under paragraph (1) may not be denied
29on the basis that the identification number of the dependent, as
30defined in Section 17056, for whom an exemption is allowable
P3    1under Section 151(c) of the Internal Revenue Code, relating to
2additional exemption for dependents, is not included on the return
3claiming the credit.

end delete
begin insert

4(2) (A) For taxable years beginning on or after January 1,
52015, a credit shall not be allowed under paragraph (1) with
6respect to any individual unless the identification number, as
7defined in Section 6109 of the Internal Revenue Code, of that
8individual is included on the return claiming the credit.

end insert
begin insert

9(B) A disallowance of a credit due to the omission of a correct
10identification number required under this paragraph, may be
11assessed by the Franchise Tax Board in the same manner as is
12provided by Section 19051 in the case of a mathematical error
13appearing on the return. A claimant shall have the right to claim
14a credit or refund of adjusted amounts within the period provided
15in Section 19306, 19307, 19308, or 19311, whichever period
16expires later.

end insert

17(3) (A) For taxable years beginning on or after January 1, 2009,
18the credit allowed under paragraph (1) for each dependent shall
19be equal to the credit allowed under subdivision (a). This
20subparagraph shall cease to be operative for taxable years beginning
21on or after January 1, 2011, unless the Director of Finance makes
22the notification pursuant to Section 99040 of the Government
23Code, in which case this subparagraph shall cease to be operative
24for taxable years beginning on or after January 1, 2013.

25(B) For taxable years that subparagraph (A) ceases to be
26operative, the credit allowed under paragraph (1) for each
27dependent shall be equal to the amount that would be allowed if
28subparagraph (A) had never been operative.

29(e) A credit for personal exemption of fifty-two dollars ($52)
30for the taxpayer if he or she is blind at the end of his or her taxable
31year.

32(f) A credit for personal exemption of fifty-two dollars ($52)
33for the spouse of the taxpayer if a separate return is made by the
34taxpayer, and if the spouse is blind and, for the calendar year in
35which the taxable year of the taxpayer begins, has no gross income
36and is not the dependent of another taxpayer.

37(g) For the purposes of this section, an individual is blind only
38if either (1) his or her central visual acuity does not exceed 20/200
39in the better eye with correcting lenses, or (2) his or her visual
40acuity is greater than 20/200 but is accompanied by a limitation
P4    1in the fields of vision such that the widest diameter of the visual
2field subtends an angle no greater than 20 degrees.

3(h) In the case of an individual with respect to whom a credit
4under this section is allowable to another taxpayer for a taxable
5year beginning in the calendar year in which the individual’s
6taxable year begins, the credit amount applicable to that individual
7for that individual’s taxable year is zero.

8(i) For each taxable year beginning on or after January 1, 1989,
9the Franchise Tax Board shall compute the credits prescribed in
10this section. That computation shall be made as follows:

11(1) The California Department of Industrial Relations shall
12transmit annually to the Franchise Tax Board the percentage change
13in the California Consumer Price Index for all items from June of
14the prior calendar year to June of the current calendar year, no
15later than August 1 of the current calendar year.

16(2) The Franchise Tax Board shall add 100 percent to the
17percentage change figure which is furnished to them pursuant to
18paragraph (1), and divide the result by 100.

19(3) The Franchise Tax Board shall multiply the immediately
20preceding taxable year credits by the inflation adjustment factor
21determined in paragraph (2), and round off the resulting products
22to the nearest one dollar ($1).

23(4) In computing the credits pursuant to this subdivision, the
24credit provided in subdivision (b) shall be twice the credit provided
25in subdivision (a).

26

SEC. 2.  

Section 18621.10 is added to the Revenue and Taxation
27Code
, to read:

28

18621.10.  

(a) For taxable years beginning on or after January
291, 2014, if an acceptable return of a business entity was prepared
30using a tax preparation software, that return shall be filed using
31electronic technology in a form and manner prescribed by the
32Franchise Tax Board.

33(b) For purposes of this section:

34(1) “Acceptable return” means any original or amended return
35that is required to be filed pursuant to Article 2 (commencing with
36Section 18601), Section 18633, Section 18633.5, or Article 3
37(commencing with Section 23771) of Chapter 4 of Part 11, other
38than the return for unrelated business taxable income required by
39Section 23771.

P5    1(2) “Business entity” means a corporation, including an “S”
2corporation, an organization exempt from tax pursuant to Chapter
34 (commencing with Section 23701) of Part 11, a partnership, or
4a limited liability company.

5(3) “Tax preparation software” means any computer software
6program used to prepare an acceptable return or for use in tax
7compliance.

8(4) “Electronic technology” includes, but is not limited to, the
9Internet, cloud computing, or an electronic information delivery
10system.

11(5) “Technology constraints” means an inability of the tax
12preparation software used by a taxpayer to electronically file the
13acceptable return as required by this section as a result of the
14complex nature of the return or inadequacy of the software.

15(c) Any business entity required to file a return electronically
16under this section may annually request a waiver of the
17requirements of this section from the Franchise Tax Board with
18respect to an acceptable return filed for a taxable year. The
19Franchise Tax Board may grant a waiver if it determines the
20business entity is unable to comply with the requirements of this
21section due to, but not limited to, technology constraints, where
22compliance would result in undue financial burden, or due to
23circumstances that constitute reasonable cause, and not willful
24neglect as applicable with respect to the penalty imposed under
25Section 19171.

26(d) This section applies to an acceptable return required to be
27filed on or after January 1, 2015.

28

SEC. 3.  

Section 19171 is added to the Revenue and Taxation
29Code
, to read:

30

19171.  

(a) A business entity required to electronically file a
31return pursuant to Section 18621.10 that files a return in a manner
32that fails to comply with Section 18621.10, shall be subject to a
33penalty in the amount of five hundred dollars ($500) for each
34failure unless the failure is due to reasonable cause, and not willful
35neglect.

36(b) This section shall apply to returns filed for taxable years
37beginning on or after January 1, 2016.

38

SEC. 4.  

The Franchise Tax Board shall conduct a robust
39education program advising business entities affected by Section
4018621.10 of the Revenue and Taxation Code of the requirements
P6    1of that section and liberally interpret and grant waivers of the
2penalty imposed under Section 19171 of the Revenue and Taxation
3Code to minimize any unnecessary adverse impacts to business
4entities that experience difficulty complying with these new
5requirements.



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