BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2754| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2754 Author: Assembly Revenue and Taxation Committee Amended: 8/22/14 in Senate Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 4-2, 6/25/14 AYES: Wolk, DeSaulnier, Hernandez, Liu NOES: Knight, Walters NO VOTE RECORDED: Beall SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 55-20, 5/29/14 - See last page for vote SUBJECT : Income taxes: credits: electronic filing: charitable remainder trusts SOURCE : Author DIGEST : This bill requires that the dependents tax identification number be included on a return when claiming a Dependent Exemption Credit, requires a business entity that prepares a return using tax preparation software to file the return electronically, and allows taxpayers to use specified tax credits to reduce tentative minimum tax. This bill also conforms state law to federal treatment for charitable remainder trusts generating unrelated business taxable income. Senate Floor Amendments of 8/22/14 conform state law to federal CONTINUED AB 2754 Page 2 treatment for charitable remainder trusts generating unrelated business taxable income. ANALYSIS : In 2013, Governor Brown signed the Governor's Office of Business and Economic Development (GO-Biz) California Competes Tax Credit as a part of the 2013 Budget plan to grant a hiring credit under the Personal Income Tax (PIT) and Corporation Tax for employment in specified geographic are-as. GO-Biz allocates the tax credit. Existing law does not require that the Taxpayer Identification Number (TIN) of dependents be included on state tax returns to take advantage of the dependent exemption. Existing law prohibits the disallowance of the Dependent Exemption Credit if the return lacks a TIN. The Legislature added this provision in 1997 following the Internal Revenue Code change that required the TIN of dependents on the PIT return in response to concerns about obtaining a TIN for newborns in time to include the TIN on the return. Federal law requires that the TIN of the dependent be included on the federal return to take advantage of the dependent exemption. Existing law requires income tax preparers who prepare more than 100 California individual income tax returns annually or prepare one or more using tax preparation software to e-file all PIT. If the return is filed on paper that should have been e-filed, there is a failure to e-file penalty of $50 per return, unless it is shown that the failure to e-file is due to reasonable cause and not due to willful neglect. Existing law does not conform to federal treatment for charitable remainder trusts generating unrelated business taxable income. This bill makes the following changes to the tax law: 1. Allows taxpayers to use GO-Biz California Competes tax credits to reduce tentative minimum tax. CONTINUED AB 2754 Page 3 2. Requires that the dependent's tax identification number be included on a return when claiming a Dependent Exemption Credit. 3. Requires a business entity that prepares a return using tax preparation software to file the return electronically. This bill provides that any unrelated business taxable income generated by a charitable remainder trust shall be subject to the personal income tax, and deletes previous law that conformed to pre-2006 federal law that revoked the charitable remainder trust's tax-exempt status if it generated unrelated business taxable income. This provision takes effect in the 2014 taxable year. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/25/14) Franchise Tax Board ASSEMBLY FLOOR : 55-20, 5/29/14 AYES: Achadjian, Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger Hernández, Holden, Jones-Sawyer, Levine, Lowenthal, Medina, Mullin, Muratsuchi, Nazarian, Pan, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada, Atkins NOES: Allen, Bigelow, Chávez, Dahle, Donnelly, Fox, Beth Gaines, Grove, Jones, Linder, Logue, Maienschein, Mansoor, Melendez, Nestande, Olsen, Patterson, Wagner, Waldron, Wilk NO VOTE RECORDED: Conway, Gorell, Hagman, Harkey, Vacancy AB:d 8/25/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 2754 Page 4 CONTINUED