BILL ANALYSIS Ó
AB 1775
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Date of Hearing: April 18, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
AB 1775
(Obernolte) - As Amended April 13, 2016
Majority vote. Fiscal committee.
SUBJECT: Income taxes: returns: due dates
SUMMARY: Conforms with federal law, for taxable years beginning
on or after January 1, 2016, the tax return due dates for
partnerships, limited liability companies (LLCs), "C"
corporations, and "S" corporations under the Personal Income Tax
(PIT) Law and Corporation Tax (CT) Law. Specifically, this
bill:
1)Requires a "C" corporation or a LLC classified as a
corporation to file a return by the fifteenth day of the
fourth month following the close of its taxable year.
2)Provides that a "S" corporation must file a return by the
fifteenth day of the third month following the close of its
taxable year.
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3)Requires a partnership or a LLC classified as a partnership to
file a return by the fifteenth day of the third month
following the close of its taxable year.
4)Requires a LLC doing business in the state that is disregarded
to file a return on the schedule required by the owner entity.
5)Requires that the taxes for a corporation ceasing to do
business within the state during any taxable year, that does
not dissolve or withdraw from the state nor resume doing
business during the following table year, are due and payable
upon the latter date:
a) At the time the corporation resumes doing business; or,
b) On or before the due date of the return for its taxable
year.
EXISTING LAW:
1)Requires "C" corporations, "S" corporations, and LLCs
classified as a corporation to file returns by the fifteenth
day of the third month following the close of its taxable
year, in conformity with federal law for taxable years
beginning before January 1, 2016.
2)Requires a partnership or LLC classified as a partnership to
file a return by the fifteenth day of the fourth month
following the close of its taxable year, in conformity with
federal law for taxable years beginning before January 1,
2016.
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FISCAL EFFECT: The FTB estimates this bill would not impact
state income or franchise tax revenues, and would result in
undetermined administrative costs.
COMMENTS:
1)Author's Statement : The Author has provided the following
statement in support of this bill: "AB 1775 would conform
state and federal tax law to streamline the preparation
process and reduce complexity for taxpayers and businesses."
2)Changes at the Federal Level : In 2015, Congress enacted
legislation to shorten the tax return due date for
partnerships by one month, and extend the due date for "C"
corporations by one month so that the filing deadline for
partnerships would precede the due dates of their individual
and corporate investors. These new federal due dates are
intended to alleviate timing pressures and provide a more
logical flow of information for a more efficient tax
preparation process.
3)The Importance of Federal Conformity : Changed federal tax
return due dates means that California tax return due dates
for similar filings are currently out of conformity, impacting
many California taxpayers that would then need to comply with
multiple tax deadlines for similar returns. When changes are
made to the federal income tax law, California does not
automatically adopt such provisions. Instead, state
legislation is needed to conform to most of those changes.
Maintaining conformity with federal law reduces taxpayer
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errors and eases tax filing and administration.
4)Special Rule for "C" Corporations : Federal law now requires
"C" corporations to file a return by the fifteenth day of the
fourth month following the close of its taxable year.
However, a special rule applies to "C" corporations with a
fiscal year (FY) ending June 30; the new law will not apply
for these taxpayers until returns for tax years beginning
after 2025. Thus, these specific "C" corporations will be
required to file federal returns one month earlier than their
"C" corporation counterparts, on September 15 instead of
October 15, until the 2026 tax year.
This bill does not make a similar distinction between "C"
corporations, and requires all "C" corporations to file state
tax returns by the fifteenth day of the fourth month following
the close of its taxable year - October 15 for "C"
corporations with a FY ending June 30 and April 15 for all
others. Thus, the state tax return due date for "C"
corporations with a FY ending June 30 will be one month later
than the federal tax return due date until the 2026 tax year.
Although this provision is technically out of conformity, it
is considered to be taxpayer friendly since taxpayers
generally file all their taxes at once, and any corporation
filing in accordance will federal law will also meet the
requirements of state law.
5)Related Legislation : AB 2338 (Chavez) would similarly conform
state tax return due dates with federal law, but also makes
other changes regarding due dates for certain taxes. This
bill is pending hearing by this Committee.
REGISTERED SUPPORT / OPPOSITION:
AB 1775
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Support
California Taxpayers Association
Opposition
None on file
Analysis Prepared by:Irene Ho / REV. & TAX. / (916) 319-2098