Amended in Senate April 7, 2014

Senate Bill No. 997

Introduced by Senator begin delete Knight end delete begin insert Morrell end insert

February 13, 2014

An act to amend Section begin delete 23663 end delete begin insert 18724 end insert of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 997, as amended, begin delete Knight end delete   begin insert Morrell end insert . begin delete Corporate taxes: credits: assignment. end delete begin insert Voluntary contributions: California Fund for Senior Citizens. end insert

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Under the Personal Income Tax Law, taxpayers are allowed to contribute amounts in excess of their tax liability for the support of the California Fund for Senior Citizens until the year in which the minimum contribution is not received, or January 1, 2020, whichever occurs first.

end insert begin insert

This bill would eliminate the requirement that these contributions reach the minimum contribution amount.

end insert begin delete

The Corporation Tax Law allows various credits against the taxes imposed by that law. That law allows, for each taxable year beginning on or after July 1, 2008, any credit that is an eligible credit, as defined, to be assigned to any eligible assignee, as defined.

end delete begin delete

This bill would make technical, nonsubstantive changes to this provision.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

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

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begin insert SECTION 1. end insert   

end insert

begin insert Section 18724 of the end insert begin insert Revenue and Taxation Code end insert
begin insert is amended to read: end insert

18724.  

(a) Except as otherwise provided in subdivision (b),
this article shall remain in effect only for taxable years beginning
before January 1, 2020, and as of December 1, 2020, is repealed.

begin delete

(b) (1) By September 1, 2006, and by September 1 of each
subsequent calendar year that the California Fund for Senior
Citizens appears on a tax return, the Franchise Tax Board shall
determine whether the amount of contributions estimated to be
received during the calendar year will equal or exceed two hundred
fifty thousand dollars ($250,000). The Franchise Tax Board shall
estimate the amount of contributions to be received by using the
actual amounts received and an estimate of the contributions that
will be received by the end of that calendar year.

(2) The Franchise Tax Board shall provide written notification
to the California Senior Legislature of the amount determined
pursuant to paragraph (1).

(3) If the Franchise Tax Board determines the amount of
contributions estimated to be received during a calendar year will
not at least equal the minimum contribution amount for the calendar
year, this article shall become inoperative for taxable years
beginning on or after January 1 of that calendar year, and shall be
repealed on December 1 of that calendar year.

(4) For purposes of this section, the minimum contribution
amount for a calendar year means two hundred fifty thousand
dollars ($250,000).

(c)

end delete

begin insert (b) end insert  Notwithstanding the repeal of this article, any contribution
amounts designated pursuant to this article prior to its repeal shall
continue to be transferred and disbursed in accordance with this
article as in effect immediately prior to that repeal.

begin delete

SECTION 1.  

Section 23663 of the Revenue and Taxation Code
is amended to read:

23663.  

(a) (1) Notwithstanding any other law, for each taxable
year beginning on or after July 1, 2008, any credit allowed to a
taxpayer under this chapter that is an eligible credit may be
assigned by that taxpayer to any eligible assignee.

(2) A credit assigned under paragraph (1) may be applied by
the eligible assignee only against the “tax,” as defined in Section
23036, of the eligible assignee in a taxable year beginning on or
after January 1, 2010.

(3) Except as specifically provided in this section, following an
assignment of any eligible credit under this section, the eligible
assignee shall be treated as if it originally earned the assigned
credit.

(b) For purposes of this section, the following definitions shall
apply:

(1) “Affiliated corporation” means a corporation that is a
member of a commonly controlled group as defined in Section
25105.

(2) “Eligible credit” shall mean:

(A) Any credit earned by the taxpayer in a taxable year
beginning on or after July 1, 2008, or

(B) Any credit earned in any taxable year beginning before July
1, 2008, that is eligible to be carried forward to the taxpayer’s first
taxable year beginning on or after July 1, 2008, under the
provisions of this part.

(3) “Eligible assignee” shall mean any affiliated corporation
that is properly treated as a member of the same combined
reporting group pursuant to Section 25101 or 25110 as the taxpayer
assigning the eligible credit as of:

(A) In the case of credits earned in taxable years beginning
before July 1, 2008:

(i) June 30, 2008, and

(ii) The last day of the taxable year of the assigning taxpayer
in which the eligible credit is assigned.

(B) In the case of credits earned in taxable years beginning on
or after July 1, 2008.

(i) The last day of the first taxable year in which the credit was
allowed to the taxpayer, and

(ii) The last day of the taxable year of the assigning taxpayer
in which the eligible credit is assigned.

(c) (1) The election to assign any credit under subdivision (a)
shall be irrevocable once made, and shall be made by the taxpayer
allowed that credit on its original return for the taxable year in
which the assignment is made.

(2) The taxpayer assigning any credit under this section shall
reduce the amount of its unused credit by the face amount of any
credit assigned under this section, and the amount of the assigned
credit shall not be available for application against the assigning
taxpayer’s “tax” in any taxable year, nor shall it thereafter be
included in the amount of any credit carryover of the assigning
taxpayer.

(3) The eligible assignee of any credit under this section may
apply all or any portion of the assigned credits against the “tax”
of the eligible assignee for the taxable year in which the assignment
occurs, or any subsequent taxable year, subject to any carryover
period limitations that apply to the assigned credit and also subject
to the limitation in paragraph (2) of subdivision (a).

(4) The eligible assignee shall not sell, otherwise transfer, or
thereafter assign the assigned credit to any other taxpayer.

(d) (1) Consideration shall not be required to be paid by the
eligible assignee to the assigning taxpayer for assignment of any
credit under this section.

(2) In the event that any consideration is paid by the eligible
assignee to the assigning taxpayer for the transfer of an eligible
credit under this section, then:

(A) A deduction shall not be allowed to the eligible assignee
under this part with respect to any amounts so paid, and

(B) Any amount so received by the assigning taxpayer shall not
be includable in gross income under this part.

(e) (1) The Franchise Tax Board shall specify the form and
manner in which the election required under this section shall be
made, as well as any necessary information that shall be required
to be provided by the taxpayer assigning the credit to the eligible
assignee.

(2) Any taxpayer who assigns any credit under this section shall
report any information, in the form and manner specified by the
Franchise Tax Board, necessary to substantiate any credit assigned
under this section and verify the assignment and subsequent
application of any assigned credit.

(3) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code shall not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to paragraphs (1) and (2).

(4) The Franchise Tax Board may issue any regulation necessary
to implement the purposes of this section, including any regulation
necessary to specify the treatment of any assignment that does not
comply with this section (including, for example, if the taxpayer
and eligible assignee are not properly treated as members of the
same combined reporting group on any of the dates specified in
paragraph (3) of subdivision (b).

(f) (1) The taxpayer and the eligible assignee shall be jointly
and severally liable for any tax, addition to tax, or penalty that
results from the disallowance, in whole or in part, of any eligible
credit assigned under this section.

(2) This section shall not limit the authority of the Franchise
Tax Board to audit either the assigning taxpayer or the eligible
assignee with respect to any eligible credit assigned under this
section.

(g) On or before June 30, 2013, the Franchise Tax Board shall
report to the Joint Legislative Budget Committee, the Legislative
Analyst, and the relevant policy committees of both houses on the
effects of this section. The report shall include, but need not be
limited to, the following:

(1) An estimate of use of credits in the 2010 and 2011 taxable
years by eligible taxpayers.

(2) An analysis of effect of this section on expanding business
activity in the state related to these credits.

(3) An estimate of the resulting tax revenue loss to the state.

(4) The report shall cover all credits covered in this section, but
focus on the credits related to research and development, economic
incentive areas, and low-income housing.

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