Amended in Assembly June 19, 2015

Amended in Assembly March 26, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 799


Introduced by Assemblybegin delete Memberend deletebegin insert Membersend insert Travis Allenbegin insert and Quirkend insert

begin insert

(Coauthors: Assembly Members Chang, Mullin, and Obernolte)

end insert
begin insert

(Coauthor: Senator Runner)

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February 26, 2015


An act to amendbegin delete Section 23102end deletebegin insert Sectionend insertbegin insert 17941end insert of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 799, as amended, Travis Allen. Income taxes:begin delete annual tax:end delete limited liabilitybegin delete company.end deletebegin insert company: qualified investment partnership.end insert

Existingbegin delete law,end deletebegin insert lawend insert imposes a minimum franchise tax of $800, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state, or doing business, as defined, in this state, and an annual tax in an amount equal to the minimum franchise tax on every limited liability company registered, qualified to transact business, or doing business in this state, as specified.begin delete Existing law provides that certain corporations, the activities of which are limited to the receipt and disbursement of dividends and interest on securities, are not considered as doing business in this state.end deletebegin insert Existing law requires every limited liability company subject to that annual tax to pay annually to this state a fee equal to specified amounts based upon total income from all sources attributable to this state. Existing law requires every partnership to file a return that includes specified information, verified by a written declaration made under the penalty of perjury and signed by one of the partners, within a specified time period. end insert

begin delete

This bill, under those same circumstances related to the receipt and disbursement of dividends and interest on securities, would additionally provide that such a limited liability company is not considered as doing business in this state.

end delete
begin insert

This bill would exempt a limited liability company that is a qualified investment partnership, as defined, from that annual tax and fee by excluding it from the definition of a limited liability company. The bill would require that entity to submit a return under the conditions applicable to a partnership.

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This bill would take effect immediately as a tax levy.

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

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

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P2    1

SECTION 1.  

Section 23102 of the Revenue and Taxation Code
2 is amended to read:

3

23102.  

Any corporation or limited liability company holding
4or organized to hold stock or bonds of any other corporation or
5corporations, and not trading in stock or bonds or other securities
6held, and engaging in no activities other than the receipt and
7disbursement of dividends from stock or interest from bonds, and
8no activities other than those exempted under subdivision (c) of
9Section 191 of the Corporations Code, is not a corporation or
10limited liability company doing business in this State for the
11purposes of this chapter or Chapter 10.6.

end delete
12begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 17941 of the end insertbegin insertRevenue and Taxation Codeend insert
13begin insert is amended to read:end insert

14

17941.  

(a) For each taxable year beginning on or after January
151, 1997, a limited liability company doing business in thisbegin delete state
16(asend delete
begin insert state, asend insert defined in Sectionbegin delete 23101)end deletebegin insert 23101,end insert shall pay annually
17to this state a tax for the privilege of doing business in this state
18in an amount equal to the applicable amount specified inbegin insert paragraph
19(1) ofend insert
subdivision (d) of Section 23153 for the taxable year.

20(b) (1) In addition to any limited liability company that is doing
21business in this state and is therefore subject to the tax imposed
22by subdivision (a), for each taxable year beginning on or after
23January 1, 1997, a limited liability company shall pay annually
P3    1the tax prescribed in subdivision (a) if articles of organization have
2been accepted, or a certificate of registration has been issued, by
3the office of the Secretary of State. The tax shall be paid for each
4taxable year, or part thereof, until a certificate of cancellation of
5registration or of articles of organization is filed on behalf of the
6limited liability company with the office of the Secretary of State.

7(2) If a taxpayer files a return with the Franchise Tax Board that
8is designated as its final return, the Franchise Tax Board shall
9notify the taxpayer that the annual tax shall continue to be due
10annually until a certificate of dissolution is filed with the Secretary
11of State pursuant to Section 17707.08 of the Corporations Code
12or a certificate of cancellation is filed with the Secretary of State
13pursuant to Section 17708.06 of the Corporations Code.

14(c) The tax assessed under this section shall be due and payable
15on or before the 15th day of the fourth month of the taxable year.

16(d) begin deleteFor end deletebegin insert(1)end insertbegin insertend insertbegin insertExcept as provided in paragraph (2), for end insertpurposes
17of this section,begin insert aend insert “limited liability company” means an
18begin delete organization, other than a limited liability company that is exempt
19from the tax and fees imposed under this chapter pursuant to
20Section 23701h or Section 23701x,end delete
begin insert organizationend insert that is formed
21by one or more persons under the law of this state, any other
22country, or any other state, as a “limited liability company” and
23that is not taxable as a corporation for California tax purposes.

begin insert

24(2) Notwithstanding subdivisions (a) and (b), a limited liability
25company is not subject to the tax imposed under this section if it
26is either of the following:

end insert
begin insert

27(A) The limited liability company is exempt from the tax and
28fees imposed under this chapter pursuant to Section 23701h or
2923701x.

end insert
begin insert

30(B) (i) The limited liability company is a qualified investment
31partnership.

end insert
begin insert

32(ii) For purposes of this subparagraph, a qualified investment
33partnership means a limited liability company that meets all of
34the following requirements:

end insert
begin insert

35(I) It is classified as a partnership for California income tax
36purposes.

end insert
begin insert

37(II) No less than 90 percent of the costs of its total assets consist
38of qualifying investment securities, deposits at banks or other
39financial institutions, interest or investments in a partnership, or
P4    1office space and equipment reasonably necessary to carry on its
2activities as a qualified investment partnership.

end insert
begin insert

3(III) No less than 90 percent of its gross income consists of
4interest, dividends, and gains from the sale or exchange of
5qualifying investment securities or investments in a partnership.

end insert
begin insert

6(iii) For purposes of this subparagraph, “qualifying investment
7securities” has the same meaning as that term is described in
8subparagraph (A) of paragraph (3) of subdivision (c) of Section
917955.

end insert
begin insert

10(iv) Notwithstanding Section 18633.5, the following rules shall
11apply with respect to the filing requirements of a qualified
12investment partnership.

end insert
begin insert

13(I) A qualified investment partnership required to file a federal
14return pursuant to Section 6031 of the Internal Revenue Code,
15relating to return of partnership income, shall file a partnership
16return pursuant to Section 18633 for that taxable year.

end insert
begin insert

17(II) A qualified investment partnership that is not required to
18file a federal return pursuant to Section 6031 of the Internal
19Revenue Code, relating to return of partnership income, shall file
20an information return as prescribed by the Franchise Tax Board
21for that taxable year.

end insert

22(e) Notwithstanding anything in this section to the contrary, if
23the office of the Secretary of State files a certificate of cancellation
24pursuant to Section 17707.02 of the Corporations Code for any
25limited liability company, then paragraph (1) of subdivision (f) of
26Section 23153 shall apply to that limited liability company as if
27the limited liability company were properly treated as a corporation
28for that limited purpose only, and paragraph (2) of subdivision (f)
29of Section 23153 shall not apply. Nothing in this subdivision
30entitles a limited liability company to receive a reimbursement for
31any annual taxes or fees already paid.

32(f) (1) Notwithstanding any provision of this section to the
33contrary, a limited liability company that is a small business solely
34owned by a deployed member of the United States Armed Forces
35shall not be subject to the tax imposed under this section for any
36taxable year the owner is deployed and the limited liability
37company operates at a loss or ceases operation.

38(2) The Franchise Tax Board may promulgate regulations as
39necessary or appropriate to carry out the purposes of this
40subdivision, including a definition for “ceases operation.”

P5    1(3) For the purposes of this subdivision, all of the following
2definitions apply:

3(A) “Deployed” means being called to active duty or active
4service during a period when a Presidential Executive order
5specifies that the United States is engaged in combat or homeland
6defense. “Deployed” does not include either of the following:

7(i) Temporary duty for the sole purpose of training or processing.

8(ii) A permanent change of station.

9(B) “Operates at a loss” means a limited liability company’s
10expenses exceed its receipts.

11(C) “Small business” means a limited liability company with
12total income from all sources derived from, or attributable, to the
13state of two hundred fifty thousand dollars ($250,000) or less.

14(4) This subdivision shall become inoperative for taxable years
15beginning on or after January 1, 2018.

16

SEC. 2.  

This act provides for a tax levy within the meaning of
17Article IV of the Constitution and shall go into immediate effect.



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