BILL NUMBER: AB 154 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Ting
JANUARY 16, 2015
An act to amend Section 23037 of the Revenue and Taxation
Code, relating to taxation. An act to amend Sections
17024.5, 17088, 17144, 17215, 18155, 19141.5, 19164, 19167, 19172,
19172.5, 19183, 19772, 23701i, 24307, 24427, 24439, 24870, 24871, and
24990.5 of, to add Sections 172 40, 17241, 17323,
19131.5, 24454, and 24459 to, and to repeal Sections 17131.7,
17131.12, 17131.14, 17134.1, 17201.1, 17280.1, 17322.1, 24452.1, and
24871.1 of, the Revenue and Taxation Code, relating to taxation, to
take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 154, as amended, Ting. Corporation Tax Law.
Taxation: federal conformity.
Under the Personal Income Tax Law and the Corporation Tax Law,
various provisions of the federal Internal Revenue Code, as enacted
as of a specified date, are referenced in various sections of the
Revenue and Taxation Code. Those laws provide that for taxable years
beginning on or after January 1, 2010, the specified date of those
referenced Internal Revenue Code sections is January 1, 2009, unless
otherwise specifically provided. Existing law requires, for any
introduced bill that proposes changes in any of those dates, that the
Franchise Tax Board prepare a complete analysis of the bill that
describes all changes to state law that will automatically occur by
reference to federal law as of the changed date. It further requires
the Franchise Tax Board to immediately update and supplement that
analysis upon any amendment to the bill, and requires that analysis
be made available to the public and be submitted to the Legislature
for publication in the daily journal of each house of the
Legislature.
This bill would change the specified date of those referenced
Internal Revenue Code sections to January 1, 2015, for taxable years
beginning on or after January 1, 2015, and thereby would make
numerous substantive changes to both the Personal Income Tax Law and
the Corporation Tax Law with respect to those areas of preexisting
conformity that are subject to changes under federal laws enacted
after January 1, 2009, and that have not been, or are not being,
excepted or modified. This bill would make certain other changes in
federal income tax laws applicable, with specified exceptions and
modifications, and make specified supplemental, technical, or
clarifying changes for purposes of the Personal Income Tax Law or the
Corporation Tax Law, or both, or the administration of those laws,
with respect to, among other things, tax credits, tax on specified
distributions from Archer MSAs, income exclusions, reporting
requirements, qualified tuition program investment direction,
disclosure of information with respect to foreign financial assets,
redemptions by foreign subsidiaries, listed property, and penalty
amounts related to the failure to file specified returns or include
specified information on returns.
This bill would also specify various dates on which specified
provisions apply and repeal obsolete provisions.
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.
The Corporation Tax Law defines a taxpayer as any person that is
subject to the corporation franchise tax, alternative minimum tax, or
corporation income tax.
This bill would make a technical, nonsubstantive change to that
provision.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: no yes .
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17024.5 of the
Revenue and Taxation Code is amended to read:
17024.5. (a) (1) Unless otherwise specifically provided, the
terms "Internal Revenue Code," "Internal Revenue Code of 1954," or
"Internal Revenue Code of 1986," for purposes of this part, mean
Title 26 of the United States Code, including all amendments thereto
as enacted on the specified date for the applicable taxable year as
follows:
Specified Date
of
Internal
Revenue
Taxable Year Code Sections
(A) For taxable years
beginning on or after
January 1, 1983, and on or
before December
31, 1983....................... January 15, 1983
(B) For taxable years
beginning on or after
January 1, 1984, and on or
before December
31, 1984....................... January 1, 1984
(C) For taxable years
beginning on or after
January 1, 1985, and on or
before December
31, 1985....................... January 1, 1985
(D) For taxable years
beginning on or after
January 1, 1986, and on or
before December
31, 1986....................... January 1, 1986
(E) For taxable years
beginning on or after
January 1, 1987, and on or
before December
31, 1988................. January 1, 1987
(F) For taxable years
beginning on or after
January 1, 1989, and on or
before December
31, 1989....................... January 1, 1989
(G) For taxable years
beginning on or after
January 1, 1990, and on or
before December
31, 1990....................... January 1, 1990
(H) For taxable years
beginning on or after
January 1, 1991, and on or
before December
31, 1991....................... January 1, 1991
(I) For taxable years
beginning on or after
January 1, 1992, and on or
before December
31, 1992....................... January 1, 1992
(J) For taxable years
beginning on or after
January 1, 1993, and on or
before December
31, 1996....................... January 1, 1993
(K) For taxable years
beginning on or after
January 1, 1997, and on or
before December
31, 1997....................... January 1, 1997
(L) For taxable years
beginning on or after
January 1, 1998, and on or
before December
31, 2001....................... January 1, 1998
(M) For taxable years
beginning on or after
January 1, 2002, and on or
before December
31, 2004....................... January 1, 2001
(N) For taxable years
beginning on or after
January 1, 2005, and on or
before December
31, 2009....................... January 1, 2005
(O) For taxable years
beginning on or after
January 1, 2010
January 1, 2010, and on or
before December
January 1, 2009
31, 2014....................... January 1, 2009
(P) For taxable years
beginning on or after
January 1, 2015................ January 1, 2015
(2) (A) Unless otherwise specifically provided, for federal laws
enacted on or after January 1, 1987, and on or before the specified
date for the taxable year, uncodified provisions that relate to
provisions of the Internal Revenue Code that are incorporated for
purposes of this part shall be applicable to the same taxable years
as the incorporated provisions.
(B) In the case where Section 901 of the Economic Growth and Tax
Relief Act of 2001 (Public Law 107-16) applies to any provision of
the Internal Revenue Code that is incorporated for purposes of this
part, Section 901 of the Economic Growth and Tax Relief Act of 2001
shall apply for purposes of this part in the same manner and to the
same taxable years as it applies for federal income tax purposes.
(3) Subtitle G (Tax Technical Corrections) and Part I of Subtitle
H (Repeal of Expired or Obsolete Provisions) of the Revenue
Reconciliation Act of 1990 (Public Law 101-508) modified numerous
provisions of the Internal Revenue Code and provisions of prior
federal acts, some of which are incorporated by reference into this
part. Unless otherwise provided, the provisions described in the
preceding sentence, to the extent that they modify provisions that
are incorporated into this part, are declaratory of existing law and
shall be applied in the same manner and for the same periods as
specified in the Revenue Reconciliation Act of 1990.
(b) Unless otherwise specifically provided, when applying any
provision of the Internal Revenue Code for purposes of this part, a
reference to any of the following is not applicable for purposes of
this part:
(1) Except as provided in Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2, an electing small business
corporation, as defined in Section 1361(b) of the Internal Revenue
Code.
(2) Domestic international sales corporations (DISC), as defined
in Section 992(a) of the Internal Revenue Code.
(3) A personal holding company, as defined in Section 542 of the
Internal Revenue Code.
(4) A foreign personal holding company, as defined in Section 552
of the Internal Revenue Code.
(5) A foreign investment company, as defined in Section 1246(b) of
the Internal Revenue Code.
(6) A foreign trust, as defined in Section 679 of the Internal
Revenue Code.
(7) Foreign income taxes and foreign income tax credits.
(8) Section 911 of the Internal Revenue Code, relating to citizens
or residents of the United States living abroad.
(9) A foreign corporation, except that Section 367 of the Internal
Revenue Code shall be applicable.
(10) Federal tax credits and carryovers of federal tax credits.
(11) Nonresident aliens.
(12) Deduction for personal exemptions, as provided in Section 151
of the Internal Revenue Code.
(13) The tax on generation-skipping transfers imposed by Section
2601 of the Internal Revenue Code.
(14) The tax, relating to estates, imposed by Section 2001 or 2101
of the Internal Revenue Code.
(c) (1) The provisions contained in Sections 41 to 44, inclusive,
and Section 172 of the Tax Reform Act of 1984 (Public Law 98-369),
relating to treatment of debt instruments, is not applicable for
taxable years beginning before January 1, 1987.
(2) The provisions contained in Public Law 99-121, relating to the
treatment of debt instruments, is not applicable for taxable years
beginning before January 1, 1987.
(3) For each taxable year beginning on or after January 1, 1987,
the provisions referred to by paragraphs (1) and (2) shall be
applicable for purposes of this part in the same manner and with
respect to the same obligations as the federal provisions, except as
otherwise provided in this part.
(d) When applying the Internal Revenue Code for purposes of this
part, regulations promulgated in final form or issued as temporary
regulations by "the secretary" shall be applicable as regulations
under this part to the extent that they do not conflict with this
part or with regulations issued by the Franchise Tax Board.
(e) Whenever this part allows a taxpayer to make an election, the
following rules shall apply:
(1) A proper election filed with the Internal Revenue Service in
accordance with the Internal Revenue Code or regulations issued by
"the secretary" shall be deemed to be a proper election for purposes
of this part, unless otherwise provided in this part or in
regulations issued by the Franchise Tax Board.
(2) A copy of that election shall be furnished to the Franchise
Tax Board upon request.
(3) (A) Except as provided in subparagraph (B), in order to obtain
treatment other than that elected for federal purposes, a separate
election shall be filed at the time and in the manner required by the
Franchise Tax Board.
(B) (i) If a taxpayer makes a proper election for federal income
tax purposes prior to the time that taxpayer becomes subject to the
tax imposed under this part or Part 11 (commencing with Section
23001), that taxpayer is deemed to have made the same election for
purposes of the tax imposed by this part, Part 10.2 (commencing with
Section 18401), and Part 11 (commencing with Section 23001), as
applicable, and that taxpayer may not make a separate election for
California tax purposes unless that separate election is expressly
authorized by this part, Part 10.2 (commencing with Section 18401),
or Part 11 (commencing with Section 23001), or by regulations issued
by the Franchise Tax Board.
(ii) If a taxpayer has not made a proper election for federal
income tax purposes prior to the time that taxpayer becomes subject
to tax under this part or Part 11 (commencing with Section 23001),
that taxpayer may not make a separate California election for
purposes of this part, Part 10.2 (commencing with Section 18401), or
Part 11 (commencing with Section 23001), unless that separate
election is expressly authorized by this part, Part 10.2 (commencing
with Section 18401), or Part 11 (commencing with Section 23001), or
by regulations issued by the Franchise Tax Board.
(iii) This subparagraph applies only to the extent that the
provisions of the Internal Revenue Code or the regulation issued by
"the secretary" authorizing an election for federal income tax
purposes apply for purposes of this part, Part 10.2 (commencing with
Section 18401) or Part 11 (commencing with Section 23001).
(f) Whenever this part allows or requires a taxpayer to file an
application or seek consent, the rules set forth in subdivision (e)
shall be applicable with respect to that application or consent.
(g) When applying the Internal Revenue Code for purposes of
determining the statute of limitations under this part, any reference
to a period of three years shall be modified to read four years for
purposes of this part.
(h) When applying, for purposes of this part, any section of the
Internal Revenue Code or any applicable regulation thereunder, all of
the following shall apply:
(1) References to "adjusted gross income" shall mean the amount
computed in accordance with Section 17072, except as provided in
paragraph (2).
(2) (A) Except as provided in subparagraph (B), references to
"adjusted gross income" for purposes of computing limitations based
upon adjusted gross income, shall mean the amount required to be
shown as adjusted gross income on the federal tax return for the same
taxable year.
(B) In the case of registered domestic partners and former
registered domestic partners, adjusted gross income, for the purposes
of computing limitations based upon adjusted gross income, shall
mean the adjusted gross income on a federal tax return computed as if
the registered domestic partner or former registered domestic
partner was treated as a spouse or former spouse, respectively, for
federal income tax purposes, and used the same filing status that was
used on the state tax return for the same taxable year.
(3) Any reference to "subtitle" or "chapter" shall mean this part.
(4) The provisions of Section 7806 of the Internal Revenue Code,
relating to construction of title, shall apply.
(5) Any provision of the Internal Revenue Code that becomes
operative on or after the specified date for that taxable year shall
become operative on the same date for purposes of this part.
(6) Any provision of the Internal Revenue Code that becomes
inoperative on or after the specified date for that taxable year
shall become inoperative on the same date for purposes of this part.
(7) Due account shall be made for differences in federal and state
terminology, effective dates, substitution of "Franchise Tax Board"
for "secretary" when appropriate, and other obvious differences.
(8) Except as otherwise provided, any reference to Section 501 of
the Internal Revenue Code shall be interpreted to also refer to
Section 23701.
(i) Any reference to a specific provision of the Internal Revenue
Code shall include modifications of that provision, if any, in this
part.
SEC. 2. Section 17088 of the Revenue
and Taxation Code is amended to read:
17088. (a) (1) Subchapter M
of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to
regulated investment companies and real estate investment trusts,
shall apply, except as otherwise provided.
(2) Part 1 of Subchapter M of Chapter 1 of Subtitle A of the
Internal Revenue Code, relating to regulated investment companies, as
amended by the Regulated Investment Company Modernization Act of
2010 (Public Law 111-325), shall apply, except as otherwise provided.
(b) Section 17145 shall apply in lieu of Section 852(b)(5) of the
Internal Revenue Code, relating to exempt-interest dividends.
(c) (1) Section 852(b)(3)(D) of the Internal Revenue Code,
relating to treatment by shareholders of undistributed capital gains,
shall not apply.
(2) Section 852(g)(1)(A) of the Internal Revenue Code is modified
by substituting the phrase "subdivision (a) of Section 17145" for the
phrase "the first sentence of subsection (b)(5)" contained therein.
(d) (1) Except as provided in paragraph (2), the amendments made
to this section by the act adding this paragraph shall apply to
taxable years beginning on or after December 23, 2010.
(2) (A) Section 851 of the Internal Revenue Code, relating to
definition of regulated investment company, as amended by Section 201
of the Regulated Investment Company Modernization Act of 2010
(Public Law 111-325), and Section 852(b)(2)(G) of the Internal
Revenue Code, as amended by Section 201 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply
to taxable years with respect to which the due date (determined with
regard to any extensions) of the return of tax for such taxable year
is on or after December 23, 2010.
(B) Section 852(b)(4) of the Internal Revenue Code, relating to
loss on sale or exchange of stock held six months or less, as amended
by Section 309 of the Regulated Investment Company Modernization Act
of 2010 (Public Law 111-325), shall apply to losses incurred on
shares of stock for which the taxpayer's holding period begins on or
after December 23, 2010.
(C) Section 852(f)(1)(C) of the Internal Revenue Code, as amended
by Section 502 of the Regulated Investment Company Modernization Act
of 2010 (Public Law 111-325), shall apply to charges incurred in
taxable years beginning on or after December 23, 2010.
(D) Section 855(a) of the Internal Revenue Code, relating to
general rule, as amended by Section 304 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply
to distributions in taxable years beginning on or after December 23,
2010.
SEC. 3. Section 17131.7 of the Revenue
and Taxation Code is repealed.
17131.7. (a) Section 105(b) of the Internal Revenue Code,
relating to amounts expended for medical care, as amended by Section
1004(d)(1) of the Health Care and Education Reconciliation Act of
2010 (Public Law 111-152), shall apply, except as otherwise provided.
(b) This section shall apply in the same manner and to the same
periods as the federal amendments referred to in subdivision (a)
apply for federal purposes, except as otherwise provided.
SEC. 4. Section 17131.12 of the Revenue
and Taxation Code is repealed.
17131.12. (a) Section 139D of the Internal Revenue Code, relating
to Indian health care benefits, as added by Section 9021 of the
Patient Protection and Affordable Care Act (Public Law 111-148),
shall apply, except as otherwise provided.
(b) This section shall apply to benefits and coverage provided
after March 23, 2010.
(c) This section shall not be construed to create an inference
with respect to the exclusion from gross income of either of the
following:
(1) Benefits provided by an Indian tribe or tribal organization
that are not within the scope of this section.
(2) Benefits provided prior to the effective date of the act
adding this section.
SEC. 5. Section 17131.14 of the Revenue
and Taxation Code is repealed.
17131.14. (a) For taxable years beginning on or after January 1,
2011, Section 125(j) of the Internal Revenue Code, relating to simple
cafeteria plans for small businesses, as added by Section 9022 of
the federal Patient Protection and Affordable Care Act (P.L.
111-148), shall apply, except as otherwise provided.
(b) For taxable years beginning on or after January 1, 2014,
Section 125(f) of the Internal Revenue Code, relating to qualified
benefits defined, as amended by Section 1515 of the federal Patient
Protection and Affordable Care Act (P.L. 111-148), shall apply,
except as otherwise provided.
SEC. 6. Section 17134.1 of the Revenue
and Taxation Code is repealed.
17134.1. For taxable years beginning on or after January 1, 2010,
Section 108(f)(4) of the Internal Revenue Code, relating to payments
under the National Health Service Corps loan repayment program and
certain state loan repayment programs, as amended by Section 10908 of
the Patient Protection and Affordable Care Act (Public Law 111-148),
shall apply, except as otherwise provided.
SEC. 7. Section 17144 of the Revenue
and Taxation Code is amended to read:
17144. (a) Section 108(b)(2)(B) of the Internal Revenue Code,
relating to general business credit, is modified by substituting
"this part" in lieu of "Section 38 (relating to general business
credit)."
(b) Section 108(b)(2)(G) of the Internal Revenue Code, relating to
foreign tax credit carryovers, shall not apply.
(c) Section 108(b)(3)(B) of the Internal Revenue Code, relating to
credit carryover reduction, is modified by substituting "11.1 cents"
in lieu of "331/3 cents" in each place in which it appears. In the
case where more than one credit is allowable under this part, the
credits shall be reduced on a pro rata basis.
(d) Section 108(g)(3)(B) of the Internal Revenue Code, relating to
adjusted tax attributes, is modified by substituting "($9)" in lieu
of "($3)."
(e) (1) If a taxpayer makes an election for federal income tax
purposes under Section 108(c) of the Internal Revenue Code, relating
to treatment of discharge of qualified real property business
indebtedness, a separate election shall not be allowed under
paragraph (3) of subdivision (e) of Section 17024.5 and the federal
election shall be binding for purposes of this part.
(2) If a taxpayer has not made an election for federal income tax
purposes under Section 108(c) of the Internal Revenue Code, relating
to treatment of discharge of qualified real property business
indebtedness, then the taxpayer shall not be allowed to make that
election for purposes of this part.
(f) Section 108(i) of the Internal Revenue Code, relating to
deferral and ratable inclusion of income arising from business
indebtedness discharged by the reacquisition of a debt instrument,
shall not apply.
SEC. 8. Section 17201.1 of the Revenue
and Taxation Code is repealed.
17201.1. (a) Section 162( l )(1) of the
Internal Revenue Code, relating to allowance of deduction, as amended
by Section 1004(d)(2) of the Health Care and Education
Reconciliation Act of 2010 (Public Law 111-152), shall apply, except
as otherwise provided.
(b) Section 162( l )(2)(B) of the Internal Revenue
Code, relating to other coverage, as amended by Section 1004(d)(3) of
the Health Care and Education Reconciliation Act of 2010 (Public Law
111-152), shall apply, except as otherwise provided.
(c) This section shall apply in the same manner and to the same
periods as the federal amendments referred to in subdivision (a) or
subdivision (b), respectively, apply for federal purposes, except as
otherwise provided.
SEC. 9. Section 17215 of the Revenue
and Taxation Code is amended to read:
17215. (a) Section 220(a) of the Internal Revenue Code, relating
to deduction allowed, is modified to provide that the amount allowed
as a deduction shall be an amount equal to the amount allowed to that
individual as a deduction under Section 220 of the Internal Revenue
Code, relating to medical savings accounts, on the federal income tax
return filed for the same taxable year by that individual.
(b) Section 220(f)(4) of the Internal Revenue Code, relating to
additional tax on distributions not used for qualified medical
expenses, is modified by substituting "10
"12.5 percent" in lieu of "15 percent."
"20 percent."
(c) The amendments made to this section by the act adding this
subdivision shall apply to disbursements made during taxable years
beginning on or after January 1, 2016.
SEC. 10. Section 17240 is added to the
Revenue and Taxation Code , to read:
17240. The fee imposed by Section 9008 of the Patient Protection
and Affordable Care Act (Public Law 111-148), shall not be considered
a tax described in Section 275(a)(6) of the Internal Revenue Code.
SEC. 11. Section 17241 is added to the
Revenue and Taxation Code , to read:
17241. (a) Section 213(a) of the Internal Revenue Code, relating
to allowance of deduction, is modified by substituting "7.5 percent"
for "10 percent."
(b) Section 213(f) of the Internal Revenue Code, relating to
special rule for 2013, 2014, 2015, and 2016, shall not apply.
SEC. 12. Section 17280.1 of the Revenue
and Taxation Code is repealed.
17280.1. (a) Section 267(f)(3) of the Internal Revenue Code,
relating to loss deferral rules not to apply in certain cases, as
amended by Section 306 of the Regulated Investment Company
Modernization Act of 2010 (Public Law 111-325), shall apply, except
as otherwise provided.
(b) This section shall apply to distributions on or after December
23, 2010.
SEC. 13. Section 17322.1 of the Revenue
and Taxation Code is repealed.
17322.1. (a) Section 302 of the Internal Revenue Code, relating
to distributions in redemption of stock, as amended by Section 306 of
the Regulated Investment Company Modernization Act of 2010 (Public
Law 111-325), shall apply, except as otherwise provided.
(b) Section 316 of the Internal Revenue Code, relating to dividend
defined, as amended by Section 305 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply,
except as otherwise provided.
(c) (1) Subdivision (a) shall apply to distributions on or after
December 23, 2010.
(2) Subdivision (b) shall apply to distributions made in taxable
years beginning on or after December 23, 2010.
SEC. 14. Section 17323 is added to the
Revenue and Taxation Code , to read:
17323. Section 382(n) of the Internal Revenue Code, relating to
special rule for certain ownership changes, shall not apply.
SEC. 15. Section 18155 of the Revenue
and Taxation Code is amended to read:
18155. (a) A deduction
shall not be allowed for capital loss carrybacks provided by Section
1212 of the Internal Revenue Code, relating to capital loss
carrybacks and carryovers.
(b) Section 1212(a)(1)(C) of the Internal Revenue Code, as amended
by Section 101 of the Regulated Investment Company Modernization Act
of 2010 (Public Law 111-325), shall apply, except as otherwise
provided.
(c) Section 1212(a)(3) of the Internal Revenue Code, relating to
regulated investment companies, as amended by Section 101 of the
Regulated Investment Company Modernization Act of 2010 (Public Law
111-325), shall apply, except as otherwise provided.
(d) Section 1222(10) of the Internal Revenue Code, relating to net
capital loss, as amended by Section 101 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply,
except as otherwise provided.
(e) (1) Except as provided in paragraph (2), the amendments made
to this section by the act adding this paragraph shall apply to net
capital losses for taxable years beginning on or after December 23,
2010.
(2) Section 1212(a)(3)(B) of the Internal Revenue Code, relating
to coordination with general rule, as added by Section 101 of the
Regulated Investment Company Modernization Act of 2010 (Public Law
111-325), shall apply to taxable years beginning on or after December
23, 2010.
SEC. 16. Section 19131.5 is added to the
Revenue and Taxation Code , to read:
19131.5. (a) Section 6164 of the Internal Revenue Code, relating
to extension of time for payment of taxes by corporations expecting
carrybacks, shall apply, except as otherwise provided.
(b) (1) Section 6164 of the Internal Revenue Code is modified by
substituting the phrase "Secretary or the Franchise Tax Board" for
the word "Secretary" in each place it appears.
(2) Section 6164(a) of the Internal Revenue Code is modified by
substituting the phrase "Part 11 (commencing with Section 23001)" in
lieu of the phrase "subtitle A."
(3) Section 6164(b) of the Internal Revenue Code, relating to
contents of statement, is modified by substituting the phrase
"Section 24416.20" in lieu of the phrase "Section 172(b)."
(4) Section 6164(d)(2) of the Internal Revenue Code is modified by
substituting the phrase "Section 19307.5" in lieu of the phrase
"Section 6411."
(5) Section 6164(h) of the Internal Revenue Code, relating to
jeopardy, is modified as follows:
(A) By substituting the phrase "he or the Franchise Tax Board" for
the word "he" in each place it appears.
(B) By
substituting the phrase "him or the Franchise Tax Board" for the word
"him" in each place it appears.
(6) Section 6164(i) of the Internal Revenue Code, relating to
consolidated returns, is modified by substituting the phrase
"combined report" in lieu of the phrase "consolidated return" in each
place it appears.
SEC. 17. Section 19141.5 of the Revenue
and Taxation Code is amended to read:
19141.5. (a) (1) Section 6038A of the Internal Revenue Code,
relating to information with respect to certain foreign-owned
corporations, shall apply.
(2) A penalty shall be imposed under this part for failure to
furnish information or maintain records and that penalty shall be
determined in accordance with Section 6038A of the Internal Revenue
Code.
(3) Section 11314 of Public Law 101-508, relating to application
of amendments made by Section 7403 of the Revenue Reconciliation Act
of 1989 to taxable years beginning on or before July 10, 1989, shall
apply.
(4) Section 6038A(e) of the Internal Revenue Code, relating to
enforcement of requests for certain records, is modified as follows:
(A) Each reference to Section 7602, 7603, or 7604 of the Internal
Revenue Code shall instead refer to Section 19504.
(B) Each reference to "summons" shall instead refer to "subpoena
duces tecum."
(C) Section 6038A(e)(4)(C) of the Internal Revenue Code shall
refer to "superior courts of the State of California for the Counties
of Los Angeles, Sacramento, and San Diego, and for the City and
County of San Francisco," instead of "United States district court
for the district in which the person (to whom the summons is issued)
resides or is found."
(b) In the case of a corporation, each of the following shall
apply:
(1) Section 6038B of the Internal Revenue Code, relating to notice
of certain transfers to foreign persons, shall apply, except as
otherwise provided.
(2) The information required to be filed with the Franchise Tax
Board under this subdivision shall be a copy of the information
required to be filed with the Internal Revenue Service.
(3) (A) A penalty shall be imposed under this part for failure to
furnish information and that penalty shall be determined in
accordance with Section 6038B of the Internal Revenue Code, except as
otherwise provided.
(B) Subparagraph (A) shall not apply to any transfer described in
Section 6038B(a)(1)(B) of the Internal Revenue Code.
(c) (1) Section 6038C of the Internal Revenue Code, relating to
information with respect to foreign corporations engaged in United
States business, shall apply.
(2) A penalty shall be imposed under this part for failure to
furnish information or maintain records and that penalty shall be
determined in accordance with Section 6038C of the Internal Revenue
Code.
(3) Section 6038C(d) of the Internal Revenue Code, relating to
enforcement of requests for certain records, is modified as follows:
(A) Each reference to Section 7602, 7603, or 7604 of the Internal
Revenue Code shall instead refer to Section 19504.
(B) Each reference to "summons" shall instead refer to "subpoena
duces tecum."
(d) (1) Section 6038D of the Internal Revenue Code, relating to
information with respect to foreign financial assets, shall apply.
(2) A penalty shall be imposed under this part for failure to
furnish information and that penalty shall be determined in
accordance with Section 6038D of the Internal Revenue Code.
(d)
(e) For purposes of this part, the information required
to be filed with the Franchise Tax Board pursuant to this section
shall be a copy of the information filed with the Internal Revenue
Service.
(e)
(f) For purposes of this section, each of the following
shall apply:
(1) Section 7701(a)(4) of the Internal Revenue Code, relating to
the term "domestic," shall apply.
(2) Section 7701(a)(5) of the Internal Revenue Code, relating to
the term "foreign," shall apply.
(3) Section 7701(a)(30) of the Internal Revenue Code, relating to
the term "United States person," shall apply. However, the term
"United States person" shall not include any corporation that is not
subject to the tax imposed under Chapter 2 (commencing with Section
23101), Chapter 2.5 (commencing with Section 23400), or Chapter 3
(commencing with Section 23501), of Part 11.
(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2016.
SEC. 18. Section 19164 of the Revenue
and Taxation Code is amended to read:
19164. (a) (1) (A) An accuracy-related penalty shall be imposed
under this part and shall be determined in accordance with Section
6662 of the Internal Revenue Code, relating to imposition of
accuracy-related penalty on underpayments, as amended by
Section 1409(b) of the Health Care and Education Reconciliation Act
of 2010 (Public Law 111-152), except as otherwise provided.
(B) (i) Except for understatements relating to reportable
transactions to which Section 19164.5 applies, in the case of any
proposed deficiency assessment issued after the last date of the
amnesty period specified in Chapter 9.1 (commencing with Section
19730) for any taxable year beginning prior to January 1, 2003, the
penalty specified in Section 6662(a) of the Internal Revenue Code
shall be computed by substituting "40 percent" for "20 percent."
(ii) Clause (i) shall not apply to any taxable year of a taxpayer
beginning prior to January 1, 2003, if, as of the start date of the
amnesty program period specified in Section 19731, the taxpayer is
then under audit by the Franchise Tax Board, or the taxpayer has
filed a protest under Section 19041, or the taxpayer has filed an
appeal under Section 19045, or the taxpayer is engaged in settlement
negotiations under Section 19442, or the taxpayer has a pending
judicial proceeding in any court of this state or in any federal
court relating to the tax liability of the taxpayer for that taxable
year.
(2) With respect to corporations, this subdivision
applies shall apply to all of the following:
(A) All taxable years beginning on or after January 1, 1990.
(B) Any other taxable year for which an assessment is made after
July 16, 1991.
(C) For purposes of this section, references in Section 6662(e) of
the Internal Revenue Code and the regulations thereunder, relating
to treatment of an affiliated group that files a consolidated federal
return, are modified to apply to those entities required to be
included in a combined report under Section 25101 or 25110. For these
purposes, entities included in a combined report pursuant to
paragraph (4) or (6) of subdivision (a) of Section 25110 shall be
considered only to the extent required to be included in the combined
report.
(3) Section 6662(d)(1)(B) of the Internal Revenue Code is modified
to provide that in the case of a corporation, other than an "S"
corporation, there is a substantial understatement of tax for any
taxable year if the amount of the understatement for the taxable year
exceeds the lesser of:
(A) Ten percent of the tax required to be shown on the return for
the taxable year (or, if greater, two thousand five hundred dollars
($2,500)).
(B) Five million dollars ($5,000,000).
(4) Section 6662(d)(2)(A) of the Internal Revenue Code is modified
to additionally provide that the excess determined under Section
6662(d)(2)(A) of the Internal Revenue Code shall be determined
without regard to items to which Section 19164.5 applies and without
regard to items with respect to which a penalty is imposed by Section
19774.
(5) The provisions of Sections 6662(e)(1) and 6662(h)(2) of the
Internal Revenue Code shall apply to returns filed on or after
January 1, 2010.
(b) For purposes of Section 6662(d) of the Internal Revenue Code,
Section 6664 of the Internal Revenue Code, Section 6694(a)(1) of the
Internal Revenue Code, and this part, the Franchise Tax Board may
prescribe a list of positions for which the Franchise Tax Board
believes there is not substantial authority or there is no reasonable
belief that the tax treatment is more likely than not the proper tax
treatment. That list (and any revisions thereof) shall be published
through the use of Franchise Tax Board Notices or other published
positions. In addition, the "listed transactions" identified and
published pursuant to the preceding sentence shall be published on
the Internet Web site of the Franchise Tax Board.
(c) A fraud penalty shall be imposed under this part and shall be
determined in accordance with Section 6663 of the Internal Revenue
Code, relating to imposition of fraud penalty, except as otherwise
provided.
(d) (1) Section 6664 of the Internal Revenue Code, relating to
definitions and special rules, applies, shall
apply, except as otherwise provided.
(2) Section 6664(c)(2) 6664(c)(3) of
the Internal Revenue Code applies shall
apply to returns filed on or after January 1, 2010.
(3) Section 6664(c)(3) 6664(c)(4) of
the Internal Revenue Code applies shall
apply to appraisals prepared with respect to returns or
submissions filed on or after January 1, 2010.
(e) Except for purposes of subdivision (e) of Section 19774,
Section 6662(b)(6) of the Internal Revenue Code does
shall not apply.
(f) Except for purposes of subdivision (e) of Section 19774,
Section 6662(i) of the Internal Revenue Code, relating to increase in
penalty in case of nondisclosed noneconomic substance transactions,
does shall not apply.
(g) Section 6665 of the Internal Revenue Code, relating to
applicable rules, shall apply, except as otherwise provided.
(h) The amendments made to this section by the act adding
this subdivision Chapter 14 of the Statutes of 2011
shall apply to notices mailed on or after January 1, 2012.
SEC. 19. Section 19167 of the Revenue
and Taxation Code is amended to read:
19167. A penalty shall be imposed under this section for any of
the following:
(a) In accordance with Section 6695(a) of the Internal Revenue
Code, for relating to failure to
furnish a copy of the return to the
taxpayer, as required by Section 18625 , except as
otherwise provided .
(b) In accordance with Section 6695(c) of the Internal Revenue
Code, for relating to failure to
furnish an identifying number, as required by
Section 18624 , except as otherwise provided .
(c) In accordance with Section 6695(d) of the Internal Revenue
Code, for relating to failure to retain
a copy or list, as required by Section 18625 or for failure to
retain an electronic filing declaration, as required by Section
18621.5 , except as otherwise provided .
(d) Section 6695(h) of the Internal Revenue Code, relating to
adjustment for inflation, shall not apply.
(d)
(e) Failure to register as a tax preparer with the
California Tax Education Council, as required by Section 22253 of the
Business and Professions Code, unless it is shown that the failure
was due to reasonable cause and not due to willful neglect.
(1) The amount of the penalty under this subdivision for the first
failure to register is two thousand five hundred dollars ($2,500).
This penalty shall be waived if proof of registration is provided to
the Franchise Tax Board within 90 days from the date notice of the
penalty is mailed to the tax preparer.
(2) The amount of the penalty under this subdivision for a failure
to register, other than the first failure to register, is five
thousand dollars ($5,000).
(e)
(f) The Franchise Tax Board shall not impose the
penalties authorized by subdivision (d) (e)
until either one of the following has occurred:
(1) Commencing January 1, 2006, and continuing each year
thereafter, there is an appropriation in the Franchise Tax Board's
annual budget to fund the costs associated with the penalty
authorized by subdivision (d) (e) .
(2) (A) An agreement has been executed between the California Tax
Education Council and the Franchise Tax Board that provides that an
amount equal to all first year costs associated with the penalty
authorized by subdivision (d) (e) shall
be received by the Franchise Tax Board. For purposes of this
subparagraph, first year costs include, but are not limited to, costs
associated with the development of processes or systems changes, if
necessary, and labor.
(B) An agreement has been executed between the California Tax
Education Council and the Franchise Tax Board that provides that the
annual costs incurred by the Franchise Tax Board associated with the
penalty authorized by subdivision (d) (e)
shall be reimbursed by the California Tax Education Council to
the Franchise Tax Board.
(C) Pursuant to the agreement described in subparagraph (A), the
Franchise Tax Board has received an amount equal to the first year
costs described in that subparagraph.
SEC. 20. Section 19172 of the Revenue
and Taxation Code is amended to read:
19172. (a) In addition to the penalty imposed by Section 19706
(relating to willful failure to file return, supply information, or
pay tax), if any partnership required to file a return under Section
18633 or 18633.5 for any taxable year does either of the following:
(1) Fails to file the return at the time prescribed therefor
(determined with regard to any extension of time for filing).
(2) Files a return which fails to show the information required
under Section 18633 or 18633.5, that partnership shall be liable for
a penalty determined under subdivision (b) for each month (or
fraction thereof) during which that failure continues (but not to
exceed 12 months), unless it is shown that the failure is due to
reasonable cause.
(b) For purposes of subdivision (a), the amount determined under
this subdivision for any month is the product of the following:
(1) Eighteen dollars ($18), Thirty-nine
dollars ($39), multiplied by
(2) The number of persons who were partners in the partnership
during any part of the taxable year.
(c) The penalty imposed by subdivision (a) shall be assessed
against the partnership.
(d) Article 3 (commencing with Section 19031) of this chapter
(relating to deficiency assessments) shall not apply with respect to
the assessment or collection of any penalty imposed by subdivision
(a).
(e) The amendments made to this section by the act adding
this subdivision Chapter 14 of the Statutes of 2010
shall apply to returns required to be filed after the
effective date of the act adding this subdivision
January 1, 2011 .
(f) The amendments made to this section by the act adding this
subdivision shall apply for taxable years beginning on or after
January 1, 2016.
SEC. 21. Section 19172.5 of the Revenue
and Taxation Code is amended to read:
19172.5. (a) In addition to the penalty imposed by Section 19706,
if any "S" corporation required to file a return under Section 18601
for any taxable year fails to file the return at the time prescribed
therefor (determined with regard to any extension of time for
filing), or files a return that fails to show the information
required under Section 18601, then that "S" corporation shall be
liable for a penalty determined under subdivision (b) for each month
(or fraction thereof) during which that failure continues (but not to
exceed 12 months), unless that failure is due to reasonable cause.
(b) (1) For purposes of subdivision (a), the amount determined
under this subdivision for any month is the product of the following:
(2) Eighteen Thirty-nine dollars
($18), ($39), multiplied by the number
of persons who were shareholders in the "S" corporation during any
part of the taxable year.
(c) The penalty imposed by subdivision (a) shall be assessed
against the "S" corporation.
(d) Article 3 (commencing with Section 19031), relating to
deficiency assessments, shall not apply with respect to the
assessment or collection of any penalty imposed by subdivision (a).
(e) This section shall apply to returns required to be filed after
the effective date of the act adding this section.
January 1, 2011.
(f) The amendments made to this section by the act adding this
subdivision shall apply to returns for taxable years beginning on or
after January 1, 2016.
SEC. 22. Section 19183 of the Revenue
and Taxation Code is amended to read:
19183. (a) (1) A penalty shall be imposed for failure to file
correct information returns, as required by this part, and that
penalty shall be determined in accordance with Section 6721 of the
Internal Revenue Code. Code, relating to
failure to file correct information returns.
(2) Section 6721(e) of the Internal Revenue Code
Code, relating to penalty in case of intentional
disregard, is modified to the extent that the reference to
Section 6041A(b) of the Internal Revenue Code
Code, relating to direct sales of $5,000 or
more, shall not apply.
(3) Section 6721(f)(1) of the Internal Revenue Code is modified to
substitute the phrase "For each fifth calendar year beginning after
2014" for the phrase "In the case of any failure relating to a return
required to be filed in a calendar year beginning after 2014."
(b) (1) A penalty shall be imposed for failure to furnish correct
payee statements as required by this part, and that penalty shall be
determined in accordance with Section 6722 of the Internal Revenue
Code. Code, relating to failure to furnish
correct payee statements.
(2) Section 6722(c) of the Internal Revenue Code
Code, relating to exception for de minimus failures,
is modified to the extent that the references to Sections 6041A
(b) and 6041A(e) of the Internal Revenue Code
Code, relating to direct sales of $5,000 or
more, and statements to be furnished to persons with respect to whom
information is required to be furnished, shall not apply.
(3) Section 6722(f)(1) of the Internal Revenue Code is modified to
substitute the phrase "For each fifth calendar year beginning after
2014" for the phrase "In the case of any failure relating to a return
required to be filed in a calendar year beginning after 2014."
(c) A penalty shall be imposed for failure to comply with other
information reporting requirements under this part, and that penalty
shall be determined in accordance with Section 6723 of the Internal
Revenue Code. Code, relating to failure to
comply with other information reporting requirements.
(d) (1) The provisions of Section 6724 of the Internal Revenue
Code Code, relating to waiver,
waiver; definitions, and special rules, shall
apply, except as otherwise provided.
(2) Section 6724(d)(1) of the Internal Revenue Code
Code, relating to information return, is
modified as follows:
(A) The following references are substituted:
(i) Subdivision (a) of Section 18640, in lieu of Section 6044(a)
(1) of the Internal Revenue Code.
(ii) Subdivision (a) of Section 18644, in lieu of Section 6050A(a)
of the Internal Revenue Code. Code, relating
to reports.
(B) References to Sections 4093(c)(4), 4093(e),
4101(d), 6041(b), 6041A(b), 6045(d), 6051(d), and 6053(c)(1) of the
Internal Revenue Code shall not apply.
(C) The term "information return" shall also include both of the
following:
(i) The return required by paragraph (1) of subdivision (i) of
Section 18662.
(ii) The return required by subdivision (a) of Section 18631.7.
(3) Section 6724(d)(2) of the Internal Revenue Code
Code, relating to payee statement, is modified
as follows:
(A) The following references are substituted:
(i) Subdivision (b) of Section 18640, in lieu of Section 6044(e)
of the Internal Revenue Code. Code, relating
to statements to be furnished to persons with respect to whom
information is required.
(ii) Subdivision (b) of Section 18644, in lieu of Section 6050A(b)
of the Internal Revenue Code. Code, relating
to written statement.
(B) References to Sections 4093(c)(4)(B), 6031
(b), 6037(b), 6041A(e), 6045(d), 6051(d), 6053(b), and 6053(c) of the
Internal Revenue Code shall not apply.
(C) The term "payee statement" shall also include the statement
required by paragraph (2) of subdivision (i) of Section 18662.
(e) In the case of each failure to provide a written explanation
as required by Section 402(f) of the Internal Revenue Code,
relating to written explanation to recipients of distributions
eligible for rollover treatment, at the time prescribed
therefor, unless it is shown that the failure is due to reasonable
cause and not to willful neglect, there shall be paid, on notice and
demand of the Franchise Tax Board and in the same manner as tax, by
the person failing to provide that written explanation, an amount
equal to ten dollars ($10) for each failure, but the total amount
imposed on that person for all those failures during any calendar
year shall not exceed five thousand dollars ($5,000).
(f) Any penalty imposed by this part shall be paid on notice and
demand by the Franchise Tax Board and in the same manner as tax.
(g) The amendments made to this section by the act adding this
subdivision shall apply to information returns required to be filed
on or after January 1, 2016.
SEC. 23. Section 19772 of the Revenue
and Taxation Code is amended to read:
19772. (a) Section 6707A of the Internal Revenue Code, relating
to penalty for failure to include reportable transactions information
with a return, shall apply, except as otherwise provided.
(b) The penalty amounts in Section 6707A(b) of the Internal
Revenue Code shall not apply, and in lieu thereof, the following
shall apply:
(1) Except as provided in paragraph (2), the amount of the penalty
shall be fifteen thousand dollars ($15,000).
(2) The amount of the penalty with respect to a listed transaction
shall be thirty thousand dollars ($30,000).
(b) (1) Section 6707A(b)(1) of the Internal Revenue Code relating
to amount of penalty is modified by substituting the phrase "or which
would have resulted from such transaction if such transaction were
respected for state tax purposes" for the phrase "or which would have
resulted from such transaction if such transaction were respected
for Federal tax purposes."
(2) The penalty amounts in Section 6707A(b)(2)(A) of the Internal
Revenue Code are modified by substituting "$30,000 ($15,000" for
"$200,000 ($100,000."
(3) The penalty amounts in Section 6707A(b)(2)(B) of the Internal
Revenue Code are modified by substituting "$15,000 ($5,000" for
"$50,000 ($10,000."
(4) The penalty amounts in Section 6707A(b)(3) of the Internal
Revenue Code relating to minimum penalty are modified by substituting
"$2,500 ($1,250" for "$10,000 ($5,000."
(c) (1) Section 6707A(c)(1) of the Internal Revenue Code
relating to reportable transaction is modified to include
reportable transactions within the meaning of paragraph (3) of
subdivision (a) of Section 18407.
(2) Section 6707A(c)(2) of the Internal Revenue Code relating
to listed transaction is modified to include listed
transactions within the meaning of paragraph (4) of subdivision (a)
of Section 18407.
(d) The penalty under this section only applies to taxpayers with
taxable income greater than two hundred thousand dollars ($200,000).
(e) Section 6707A(e) of the Internal Revenue Code, relating to a
penalty reported to the Securities and Exchange Commission, shall not
apply.
(f) Section 6707A(d) of the Internal Revenue Code, relating to
the authority to rescind a
penalty, shall not apply, and in lieu thereof, the following shall
apply:
(1) The Chief Counsel of the Franchise Tax Board may rescind all
or any portion of any penalty imposed by this section with respect to
any violation if all of the following apply:
(A) The violation is with respect to a reportable transaction
other than a listed transaction.
(B) The person on whom the penalty is imposed has a history of
complying with the requirements of this part and Part 10 (commencing
with Section 17001) or Part 11 (commencing with Section 23001).
(C) It is shown that the violation is due to an unintentional
mistake of fact.
(D) Imposing the penalty would be against equity and good
conscience.
(E) Rescinding the penalty would promote compliance with the
requirements of this part and Part 10 (commencing with Section 17001)
or Part 11 (commencing with Section 23001) and effective tax
administration.
(2) The exercise of authority under paragraph (1) shall be at the
sole discretion of the Chief Counsel of the Franchise Tax Board and
may not be delegated.
(3) Notwithstanding any other law or rule of law, any
determination under this subdivision may not be reviewed in any
administrative or judicial proceeding.
(g) Article 3 (commencing with Section 19031) of Chapter 4
(relating to deficiency assessments) shall not apply with respect to
the assessment or collection of any penalty imposed under this
section.
(h) The penalty imposed by this section is in addition to any
penalty imposed under Part 10 (commencing with Section 17001), Part
11 (commencing with Section 23001), or this part.
(i) The amendments made to this section by the act adding this
subdivision shall apply to penalties assessed on or after January 1,
2016.
SEC. 24. Section 23701i of the Revenue
and Taxation Code is amended to read:
23701i. (a) A voluntary
employees' beneficiary association described in Section 501(c)(9) of
the Internal Revenue Code, as amended by Section 1004(d)(4)
of the Health Care and Education Reconciliation Act of 2010 (Public
Law 111-152). Code.
(b) The amendments made to this section by the act adding this
subdivision shall apply in the same manner and to the same periods
as the federal amendments
referred to in subdivision (a) apply for federal purposes.
SEC. 25. Section 24307 of the Revenue
and Taxation Code is amended to read:
24307. (a) Section 108 of the Internal Revenue Code, relating to
income from discharge of indebtedness, shall apply, except as
otherwise provided.
(b) Section 108(b)(2)(B) of the Internal Revenue Code, relating to
general business credit, is modified by substituting "this part" in
lieu of "Section 38 (relating to general business credit)."
(c) Section 108(b)(2)(G) of the Internal Revenue Code, relating to
foreign tax credit carryovers, shall not apply.
(d) Section 108(b)(3)(B) of the Internal Revenue Code, relating to
credit carryover reduction, is modified by substituting "11.1 cents"
in lieu of "331/3 cents" in each place in which it appears. In the
case where more than one credit is allowable under this part, the
credits shall be reduced on a pro rata basis.
(e) Section 108(g)(3)(B) of the Internal Revenue Code, relating to
adjusted tax attributes, is modified by substituting "$9" in lieu of
"$3."
(f) (1) The amendments to Section 108 of the Internal Revenue Code
made by Section 13150 of the Revenue Reconciliation Act of 1993
(Public Law 103-66), relating to exclusion from gross income for
income from discharge of qualified real property business
indebtedness, shall apply to discharges occurring on or after January
1, 1996, in taxable years beginning on or after January 1, 1996.
(2) If a taxpayer makes an election for federal income tax
purposes under Section 108(c) of the Internal Revenue Code, relating
to treatment of discharge of qualified real property business
indebtedness, a separate election shall not be allowed under
paragraph (3) of subdivision (e) of Section 23051.5 and the federal
election shall be binding for purposes of this part.
(3) If a taxpayer has not made an election for federal income tax
purposes under Section 108(c) of the Internal Revenue Code, relating
to treatment of discharge of qualified real property business
indebtedness, then the taxpayer shall not be allowed to make that
election for purposes of this part.
(g) The amendments to Section 108 of the Internal Revenue Code
made by Section 13226 of the Revenue Reconciliation Act of 1993
(Public Law 103-66), relating to modifications of discharge of
indebtedness provisions, shall apply to discharges occurring on or
after January 1, 1996, in taxable years beginning on or after January
1, 1996.
(h) The amendments made to Section 108(d)(7)(A) of the Internal
Revenue Code, relating to certain provisions to be applied at the
corporate level by Section 402 of the Job Creation and Worker
Assistance Act of 2002 (Public Law 107-147), shall apply to
discharges of indebtedness after December 31, 2001, in taxable years
ending after that date. This subdivision shall not apply to any
discharge of indebtedness made before March 1, 2002, pursuant to a
plan of reorganization filed with a bankruptcy court on or before
October 11, 2001.
(i) Section 108(i) of the Internal Revenue Code, relating to
deferral and ratable inclusion of income arising from business
indebtedness discharged by the reacquisition of a debt instrument,
shall not apply.
SEC. 26. Section 24427 of the Revenue
and Taxation Code is amended to read:
24427. (a) Section 267 of
the Internal Revenue Code, relating to losses, expenses, and interest
with respect to transactions between related taxpayers, shall apply,
except as otherwise provided.
(b) Section 267(f)(3) of the Internal Revenue Code, relating to
loss deferral rules not to apply in certain cases, as amended by
Section 306 of the Regulated Investment Company Modernization Act of
2010 (Public Law 111-325), shall apply, except as otherwise provided.
(c) The amendments made to this section by the act adding this
subdivision shall apply to distributions on or after December 23,
2010.
SEC. 27. Section 24439 of the Revenue
and Taxation Code is amended to read:
24439. (a) No deduction shall be allowed to the issuing
corporation for any premium paid or incurred upon the repurchase of a
bond, debenture, note, or certificate or other evidence of
indebtedness which is convertible into the stock of the issuing
corporation, or a corporation in control of, or
the same parent-subsidiary controlled by,
group, within the meaning of Section 1563
(a)(1) of the Internal Revenue Code, relating to parent-subsidiary
controlled group, as the issuing corporation, to the extent the
repurchase price exceeds an amount equal to the adjusted issue price
plus a normal call premium on bonds or other evidences of
indebtedness which are not convertible. The preceding sentence shall
not apply to the extent that the corporation can demonstrate to the
satisfaction of the Franchise Tax Board that such excess is
attributable to the cost of borrowing and is not attributable to the
conversion feature.
(b) (1) The
(b) For purposes of subdivision (a),
the adjusted issue price is the issue price (as
price, as defined in Sections 1273(b) and 1274
of the Internal Revenue Code) Code,
increased by any amount of discount deducted before repurchase, or,
in the case of bonds or other evidences of indebtedness issued after
February 28, 1913, decreased by any amount of premium included in
gross income before repurchase by the issuing corporation.
(2) The term "control" has the meaning assigned to such term by
Section 24564.
(c) The provisions of this section shall not apply to a
convertible bond or other convertible evidence of indebtedness
repurchased pursuant to a binding obligation incurred on or before
April 22, 1969, to repurchase such bond or other evidence of
indebtedness at a specified call premium, but no inference shall be
drawn from the fact that this section does not apply to the
repurchase of such convertible bond or other convertible evidence of
indebtedness.
(d) The amendments made to this section by the act adding this
subdivision shall apply to repurchases on or after January 1, 2015.
SEC. 28. Section 24452.1 of the Revenue
and Taxation Code is repealed.
24452.1. (a) Section 302 of the Internal Revenue Code, relating
to distributions in redemption of stock, as amended by Section 306 of
the Regulated Investment Company Modernization Act of 2010 (Public
Law 111-325), shall apply, except as otherwise provided.
(b) Section 316 of the Internal Revenue Code, relating to dividend
defined, as amended by Section 305 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply,
except as otherwise provided.
(c) (1) Subdivision (a) shall apply to distributions on or after
December 23, 2010.
(2) Subdivision (b) shall apply to distributions made in taxable
years beginning on or after December 23, 2010.
SEC. 29. Section 24454 is added to the
Revenue and Taxation Code , to read:
24454. Section 304(b)(5)(B) of the Internal Revenue Code,
relating to special rule in case of foreign acquiring corporation,
shall apply to acquisitions on or after January 1, 2015.
SEC. 30. Section 24459 is added to the
Revenue and Taxation Code , to read:
24459. Section 382(n) of the Internal Revenue Code, relating to
special rule for certain ownership changes, shall not apply.
SEC. 31. Section 24870 of the Revenue
and Taxation Code is amended to read:
24870. (a) (1)
Subchapter M of Chapter 1 of Subtitle A
of the Internal Revenue Code, relating to regulated investment
companies and real estate investment trusts, shall apply, except as
otherwise provided in this part.
(2) Part 1 of Subchapter M of Chapter 1 of Subtitle A of the
Internal Revenue Code, relating to regulated investment companies, as
amended by the Regulated Investment Company Modernization Act of
2010 (Public Law 111-325), shall apply, except as otherwise provided.
(b) (1) Except as provided in paragraph (2), the amendments made
to this section by the act adding this paragraph shall apply to
taxable years beginning on or after December 23, 2010.
(2) (A) Section 851 of the Internal Revenue Code, relating to
definition of regulated investment company, as amended by Section 201
of the Regulated Investment Company Modernization Act of 2010
(Public Law 111-325), and Section 852(b)(2)(G) of the Internal
Revenue Code, as amended by Section 201 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply
to taxable years with respect to which the due date (determined with
regard to any extensions) of the return of tax for such taxable year
is on or after December 23, 2010.
(B) Section 852(b)(4) of the Internal Revenue Code, relating to
loss on sale or exchange of stock held six months or less, as amended
by Section 309 of the Regulated Investment Company Modernization Act
of 2010 (Public Law 111-325), shall apply to losses incurred on
shares of stock for which the taxpayer's holding period begins on or
after December 23, 2010.
(C) Section 852(f)(1)(C) of the Internal Revenue Code, as amended
by Section 502 of the Regulated Investment Company Modernization Act
of 2010 (Public Law 111-325), shall apply to charges incurred in
taxable years beginning on or after December 23, 2010.
(D) Section 855(a) of the Internal Revenue Code, relating to
general rule, as amended by Section 304 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply
to distributions in taxable years beginning on or after December 23,
2010.
SEC. 32. Section 24871 of the Revenue
and Taxation Code is amended to read:
24871. (a) (1) Section 852(b)(1) of the Internal Revenue Code,
relating to imposition of tax on regulated investment companies,
does shall not apply.
(2) Every regulated investment company shall be subject to the
taxes imposed under Chapter 2 (commencing with Section 23101) and
Chapter 3 (commencing with Section 23501), except that its "net
income" shall be equal to its "investment company income," as defined
in subdivision (b).
(3) (A) Section 851(d)(2)(C)(i)(I) of the Internal Revenue Code is
modified by substituting "$12,500" for "$50,000."
(B) Section 851(d)(2)(C)(i)(II) of the Internal Revenue Code is
modified by substituting the phrase "the rate of tax specified in
Section 23151" for the phrase "the highest rate of tax specified in
section 11" contained therein.
(C) Section 851(d)(2)(C)(iii) of the Internal Revenue Code,
relating to administrative provisions, is modified by substituting
the phrase "Article 3 of Part 10.2 (commencing with Section 19031), a
tax imposed by this subparagraph shall be treated as a tax with
respect to which the deficiency procedures of such article apply" for
the phrase "subtitle F, a tax imposed by this subparagraph shall be
treated as an excise tax with respect to which the deficiency
procedures of such subtitle apply" contained therein.
(D) Section 851(i)(2) of the Internal Revenue Code, relating to
imposition of tax on failures, shall not apply.
(b) "Investment company income" means investment company taxable
income, as defined in Section 852(b)(2) of the Internal Revenue Code,
modified as follows:
(1) Section 852(b)(2)(A) of the Internal Revenue Code, relating to
an exclusion for net capital gain, does not apply.
(2) Section 852(b)(2)(B) of the Internal Revenue Code, relating to
net operating losses, is modified to deny the deduction allowed
under Sections 24416 and 24416.1, in lieu of denying the deduction
allowed by Section 172 of the Internal Revenue Code.
(3) In lieu of the provision of Section 852(b)(2)(C) of the
Internal Revenue Code, relating to special deductions for
corporations, no deduction shall be allowed under Sections 24402,
24406, 24410, and 25106.
(4) (A) The deduction for
dividends paid, under Section 852(b)(2)(D) of the Internal Revenue
Code, is modified to allow capital gain dividends and exempt interest
dividends (to the extent that interest is included in gross income
under this part) to be included in the computation of the deduction.
(B) For purposes of this paragraph, Section 562(c) of the Internal
Revenue Code, relating to preferential dividends, as amended by
Section 307 of the Regulated Investment Company Modernization Act of
2010 (Public Law 111-325), shall apply.
(c) Section 852(b)(3)(A) of the Internal Revenue Code, relating to
capital gains, does imposition of tax, shall
not apply.
(d) (1) Section 852(b)(5) of the Internal Revenue Code, relating
to exempt-interest dividends, is modified by substituting the phrase
"that, when held by an individual, the interest therefrom is exempt
from taxation by this state" for the phrase "described in section 103
(a)" contained therein.
(2) Section 852(b)(5)(A)(iv)(V) of the Internal Revenue Code,
relating to exempt interest, is modified by substituting the phrase
"on obligations that, if held by an individual, is exempt from
taxation by this state, over the amounts disallowed as deductions
under subdivision (b) of Section 24360 or Section 24425" for the
phrase "excludable from gross income under section 103(a) over the
amounts disallowed as deductions under sections 265 and 171(a)(2)"
contained therein.
(3) Section 852(b)(5)(B) of the Internal Revenue Code, relating to
treatment of exempt-interest dividends by shareholders,
does shall not apply.
(e) Section 854 of the Internal Revenue Code, relating to
limitations applicable to dividends received from regulated
investment companies, is modified to refer to Sections 24402, 24406,
24410, and 25106, in lieu of Section 243 of the Internal Revenue
Code.
(f) Section 852(g)(1)(A) of the Internal Revenue Code is modified
by substituting the phrase "subdivision (a) of Section 17145" for the
phrase "the first sentence of subsection (b)(5)" contained therein.
(g) (1) Except as provided in paragraphs (2) and (3), the
amendments made to this section by the act adding this subdivision
shall apply to taxable years with respect to which the due date
(determined with regard to any extensions) of the return of tax for
such taxable year is on or after December 23, 2010.
(2) Subparagraph (B) of paragraph (4) of subdivision (b) shall
apply to distributions in taxable years beginning on or after
December 23, 2010.
(3) Subdivision (f) shall apply to taxable years beginning on or
after December 23, 2010.
SEC. 33. Section 24871.1 of the Revenue
and Taxation Code is repealed.
24871.1. (a) Section 860(f)(2)(B) of the Internal Revenue Code,
as amended by Section 301 of the Regulated Investment Company
Modernization Act of 2010 (Public Law 111-325), shall apply, except
as otherwise provided.
(b) This section shall apply to taxable years beginning on or
after December 23, 2010.
SEC. 34. Section 24990.5 of the Revenue
and Taxation Code is amended to read:
24990.5. (a) Section 1201 of the Internal Revenue Code, relating
to alternative tax for corporations, shall not be applicable.
(b) The provisions of Section 1212 of the Internal Revenue Code,
relating to capital loss carrybacks and carryovers, are modified
as amended by Section 101 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply,
except as otherwise provided. follows:
(1) Section 1212(a)(1)(A) of the Internal Revenue Code, relating
to capital loss carrybacks, shall not apply.
(2) Section 1212(a)(4) of the Internal Revenue Code, relating to
special rules on carrybacks, shall not apply.
(3) Sections 1212(b) and 1212(c) of the Internal Revenue Code,
relating to other taxpayers and carryback of losses from Section 1256
contracts to offset prior gains from such contracts, respectively,
shall not apply.
(c) Section 1222(10) of the Internal Revenue Code, relating to net
capital loss, as amended by Section 101 of the Regulated Investment
Company Modernization Act of 2010 (Public Law 111-325), shall apply,
except as otherwise provided.
(d) (1) Except as provided in paragraph (2), the amendments made
to this section by the act adding this paragraph shall apply to net
capital losses for taxable years beginning on or after December 23,
2010.
(2) Section 1212(a)(3)(B) of the Internal Revenue Code, relating
to coordination with general rule, as added by Section 101 of the
Regulated Investment Company Modernization Act of 2010 (Public Law
111-325), shall apply to taxable years beginning on or after December
23, 2010.
SEC. 35. (a) Except as otherwise provided, the
provisions of this act shall apply to taxable years beginning on or
after January 1, 2015.
(b) Sections 201 to 221, inclusive, of the Tax Technical
Corrections Act of 2014 (Title II of Division A of Public Law
113-295), enacted numerous technical corrections and clarifications
to provisions of the Internal Revenue Code, including technical
corrections and clarifications relating to the American Taxpayer
Relief Act of 2012 (Public Law 112-240), the Middle Class Tax Relief
and Job Creation Act of 2012 (Public Law 112-96), the FAA
Modernization and Reform Act of 2012 (Title IX of Public Law 112-95),
the Regulated Investment Company Modernization Act of 2010 (Public
Law 111-325), the Tax Relief, Unemployment Insurance Reauthorization,
and Job Creation Act of 2010 (Public Law 111-312), the Creating
Small Business Jobs Act of 2010 (Title II of Public Law 111-240), the
Hiring Incentives to Restore Employment Act (Public Law 111-147),
the American Recovery and Reinvestment Tax Act of 2009 (Public Law
111-5), the Economic Stimulus Act of 2008 (Division A of Public Law
110-343), the Energy Improvement and Extension Act of 2008 (Division
B of Public Law 110-343), the Tax Extenders and Alternative Minimum
Tax Relief Act of 2008 (Division C of Public Law 110-343), the
Housing Assistance Tax Act of 2008 (Division C of Public Law
110-289), the Heroes Earnings Assistance and Relief Tax Act of 2008
(Public Law 110-245), the Tax Technical Corrections Act of 2007
(Public Law 110-172), the Tax Relief and Health Care Act of 2006
(Public Law 109-432), the Safe, Accountable, Flexible, Efficient
Transportation Equity Act of 2005: A Legacy for Users (Public Law
109-59), the Energy Tax Incentives Act of 2005 (Title XIII of Public
Law 109-58), and the American Jobs Creation Act of 2004 (Public Law
108-357), some of which are incorporated by reference into Part 10
(commencing with Section 17001), Part 10.2 (commencing with Section
18401), and Part 11 (commencing with Section 23001) of Division 2 of
the Revenue and Taxation Code. Unless otherwise provided, the
technical corrections described in the preceding sentence, to the
extent that they correct provisions that are incorporated by
reference into the Revenue and Taxation Code, are declaratory of
existing law and shall be applied in the same manner and for the same
periods as specified for federal purposes, or if later, the
specified date of incorporation.
SEC. 36. It is the intent of the Legislature to
confirm the validity and ongoing effect of Senate Bill No. 401 of the
2009-10 Regular Session.
SEC. 37. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SECTION 1. Section 23037 of the Revenue and
Taxation Code is amended to read:
23037. "Taxpayer" means a person subject to the tax imposed under
Chapter 2 (commencing with Section 23101), Chapter 2.5 (commencing
with Section 23400), or Chapter 3 (commencing with Section 23501).