BILL NUMBER: AB 2754 INTRODUCED
BILL TEXT
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:
SECTION 1. Section 17054 of the Revenue and Taxation Code is
amended to read:
17054. In the case of individuals, the following credits for
personal exemption may be deducted from the tax imposed under Section
17041 or 17048, less any increases imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
(a) In the case of a single individual, a head of household, or a
married individual making a separate return, a credit of fifty-two
dollars ($52).
(b) In the case of a surviving spouse (as defined in Section
17046), or a husband and wife making a joint return, a credit of one
hundred four dollars ($104). If one spouse was a resident for the
entire taxable year and the other spouse was a nonresident for all or
any portion of the taxable year, the personal exemption shall be
divided equally.
(c) In addition to any other credit provided in this section, in
the case of an individual who is 65 years of age or over by the end
of the taxable year, a credit of fifty-two dollars ($52).
(d) (1) A credit of two hundred twenty-seven dollars ($227) for
each dependent (as defined in Section 17056) for whom an exemption is
allowable under Section 151(c) of the Internal Revenue Code,
relating to additional exemption for dependents. The credit allowed
under this subdivision for taxable years beginning on or after
January 1, 1999, shall not be adjusted pursuant to subdivision (i)
for any taxable year beginning before January 1, 2000.
(2) The credit allowed under paragraph (1) may not be denied on
the basis that the identification number of the dependent, as defined
in Section 17056, for whom an exemption is allowable under Section
151(c) of the Internal Revenue Code, relating to additional exemption
for dependents, is not included on the return claiming the credit.
(2) (A) For taxable years beginning on or after January 1, 2015, a
credit shall not be allowed under paragraph (1) with respect to any
individual unless the identification number, as defined in Section
6109 of the Internal Revenue Code, of that individual is included on
the return claiming the credit.
(B) A disallowance of a credit due to the omission of a correct
identification number required under this paragraph, may be assessed
by the Franchise Tax Board in the same manner as is provided by
Section 19051 in the case of a mathematical error appearing on the
return. A claimant shall have the right to claim a credit or refund
of adjusted amounts within the period provided in Section 19306,
19307, 19308, or 19311, whichever period expires later.
(3) (A) For taxable years beginning on or after January 1, 2009,
the credit allowed under paragraph (1) for each dependent shall be
equal to the credit allowed under subdivision (a). This subparagraph
shall cease to be operative for taxable years beginning on or after
January 1, 2011, unless the Director of Finance makes the
notification pursuant to Section 99040 of the Government Code, in
which case this subparagraph shall cease to be operative for taxable
years beginning on or after January 1, 2013.
(B) For taxable years that subparagraph (A) ceases to be
operative, the credit allowed under paragraph (1) for each dependent
shall be equal to the amount that would be allowed if subparagraph
(A) had never been operative.
(e) A credit for personal exemption of fifty-two dollars ($52) for
the taxpayer if he or she is blind at the end of his or her taxable
year.
(f) A credit for personal exemption of fifty-two dollars ($52) for
the spouse of the taxpayer if a separate return is made by the
taxpayer, and if the spouse is blind and, for the calendar year in
which the taxable year of the taxpayer begins, has no gross income
and is not the dependent of another taxpayer.
(g) For the purposes of this section, an individual is blind only
if either (1) his or her central visual acuity does not exceed 20/200
in the better eye with correcting lenses, or (2) his or her visual
acuity is greater than 20/200 but is accompanied by a limitation in
the fields of vision such that the widest diameter of the visual
field subtends an angle no greater than 20 degrees.
(h) In the case of an individual with respect to whom a credit
under this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's taxable
year begins, the credit amount applicable to that individual for
that individual's taxable year is zero.
(i) For each taxable year beginning on or after January 1, 1989,
the Franchise Tax Board shall compute the credits prescribed in this
section. That computation shall be made as follows:
(1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current calendar year, no later
than August 1 of the current calendar year.
(2) The Franchise Tax Board shall add 100 percent to the
percentage change figure which is furnished to them pursuant to
paragraph (1), and divide the result by 100.
(3) The Franchise Tax Board shall multiply the immediately
preceding taxable year credits by the inflation adjustment factor
determined in paragraph (2), and round off the resulting products to
the nearest one dollar ($1).
(4) In computing the credits pursuant to this subdivision, the
credit provided in subdivision (b) shall be twice the credit provided
in subdivision (a).
SEC. 2. Section 18621.10 is added to the Revenue and Taxation
Code, to read:
18621.10. (a) For taxable years beginning on or after January 1,
2014, if an acceptable return of a business entity was prepared using
a tax preparation software, that return shall be filed using
electronic technology in a form and manner prescribed by the
Franchise Tax Board.
(b) For purposes of this section:
(1) "Acceptable return" means any original or amended return that
is required to be filed pursuant to Article 2 (commencing with
Section 18601), Section 18633, Section 18633.5, or Article 3
(commencing with Section 23771) of Chapter 4 of Part 11, other than
the return for unrelated business taxable income required by Section
23771.
(2) "Business entity" means a corporation, including an "S"
corporation, an organization exempt from tax pursuant to Chapter 4
(commencing with Section 23701) of Part 11, a partnership, or a
limited liability company.
(3) "Tax preparation software" means any computer software program
used to prepare an acceptable return or for use in tax compliance.
(4) "Electronic technology" includes, but is not limited to, the
Internet, cloud computing, or an electronic information delivery
system.
(5) "Technology constraints" means an inability of the tax
preparation software used by a taxpayer to electronically file the
acceptable return as required by this section as a result of the
complex nature of the return or inadequacy of the software.
(c) Any business entity required to file a return electronically
under this section may annually request a waiver of the requirements
of this section from the Franchise Tax Board with respect to an
acceptable return filed for a taxable year. The Franchise Tax Board
may grant a waiver if it determines the business entity is unable to
comply with the requirements of this section due to, but not limited
to, technology constraints, where compliance would result in undue
financial burden, or due to circumstances that constitute reasonable
cause, and not willful neglect as applicable with respect to the
penalty imposed under Section 19171.
(d) This section applies to an acceptable return required to be
filed on or after January 1, 2015.
SEC. 3. Section 19171 is added to the Revenue and Taxation Code,
to read:
19171. (a) A business entity required to electronically file a
return pursuant to Section 18621.10 that files a return in a manner
that fails to comply with Section 18621.10, shall be subject to a
penalty in the amount of five hundred dollars ($500) for each failure
unless the failure is due to reasonable cause, and not willful
neglect.
(b) This section shall apply to returns filed for taxable years
beginning on or after January 1, 2016.
SEC. 4. The Franchise Tax Board shall conduct a robust education
program advising business entities affected by Section 18621.10 of
the Revenue and Taxation Code of the requirements of that section and
liberally interpret and grant waivers of the penalty imposed under
Section 19171 of the Revenue and Taxation Code to minimize any
unnecessary adverse impacts to business entities that experience
difficulty complying with these new requirements.