California Legislature—2015–16 Regular Session

Assembly Bill No. 2497

Introduced by Assembly Member Wagner

February 19, 2016

An act to amend Section 23701 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 2497, as introduced, Wagner. Corporation Tax Law.

The Corporation Tax Law exempts various types of organizations from taxes imposed by that law. Existing law establishes a method by which an organization that has obtained a ruling or determination from the Internal Revenue Service that it is exempt from federal income taxes as an organization described in Section 501(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue Code may obtain exemption from state taxes, as provided.

This bill would make nonsubstantive changes to that provision.

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

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

SECTION 1.  

Section 23701 of the Revenue and Taxation Code
is amended to read:

23701.  

begin insert (a) end insert begin insert   end insert Organizations begin delete which end delete begin insert that end insert are organized and
operated for nonprofit purposes within the provisions of a specific
section of this article, or are defined in Section 23701h begin delete (relating end delete begin insert ,
relating end insert to certain title-holding begin delete companies) end delete begin insert companies, end insert or Section
begin delete 23701x (relating end delete begin insert 23701x, relating end insert to certain title-holding
begin delete companies), end delete begin insert companies, end insert are exempt from taxes imposed under this
part, except as provided in this article or in Article 2 (commencing
with Section 23731) of this chapter, begin delete if: end delete begin insert if all of the following occur: end insert

begin delete

(a)

end delete

begin insert (1) end insert  An application for exemption is submitted in the form
prescribed by the Franchise Tax begin delete Board; and end delete begin insert Board. end insert

begin delete

(b)

end delete

begin insert (2) end insert  A filing fee of twenty-five dollars ($25) is paid with each
application for exemption filed with the Franchise Tax Board after
December 31, begin delete 1969; and end delete begin insert 1969. end insert

begin delete

(c)

end delete

begin insert (3) end insert  The Franchise Tax Board issues a determination exempting
the organization from tax.

begin delete

(d)

end delete

begin insert (b) end insert  (1) Notwithstanding begin delete subdivisions (a), (b), and (c) end delete begin insert subdivision
(a) end insert , an organization organized and operated for nonprofit purposes
in accordance with Section 23701a, 23701d, 23701e, 23701f, or
23701g shall be exempt from taxes imposed by this part, except
as provided in this article or in Article 2 (commencing with Section
23731), upon its submission to the Franchise Tax Board of one of
the following:

(A) A copy of the determination letter or ruling issued by the
Internal Revenue Service recognizing the organization’s exemption
from federal income tax under Section 501(a) of the Internal
Revenue Code, as an organization described in Section 501(c)(3),
(c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue Code.

(B) A copy of the group exemption letter issued by the Internal
Revenue Service that states that both the central organization and
all of its subordinates are tax-exempt under Section 501(c)(3),
(c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue Code and
substantiation that the organization is included in the federal group
exemption letter as a subordinate organization.

(2) (A) Upon receipt of the documents required in subparagraph
(A) or (B) of paragraph (1), the Franchise Tax Board shall issue
an acknowledgment that the organization is exempt from taxes
imposed by this part, except as provided in this article or in Article
2 (commencing with Section 23731). The acknowledgment may
refer to the organization’s recognition by the Internal Revenue
Service of exemption from federal income tax as an organization
described in Section 501(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7) of
the Internal Revenue Code and, if applicable, the organization’s
subordinate organization status under a federal group exemption
letter. The effective date of an organization’s exemption from state
income tax pursuant to this subdivision shall be no later than the
effective date of the organization’s recognition of exemption from
federal income tax as an organization described in Section
501(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue
Code, or its status as a subordinate organization under a federal
group exemption letter, as applicable.

(B) Notwithstanding any other provision of this subdivision, an
organization formed as a California corporation or qualified to do
business in California that, as of the date of receipt by the Franchise
Tax Board of the documents required under paragraph (1), is listed
by the Secretary of the State or Franchise Tax Board as
“suspended” or “forfeited” may not establish its exemption under
paragraph (1) and shall not receive an acknowledgment referred
to under subparagraph (A) from the Franchise Tax Board until that
corporation is listed by the Secretary of State and the Franchise
Tax Board as an “active” corporation.

(3) If, for federal income tax purposes, an organization’s
exemption from tax as an organization described in Section
501(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue
Code is suspended or revoked, the organization shall notify the
Franchise Tax Board of the suspension or revocation, in the form
and manner prescribed by the Franchise Tax Board. Upon
notification, the board shall suspend or revoke, whichever is
applicable, for state income tax purposes, the organization’s
exemption under paragraph (1).

(4) This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an
organization that is not organized or operated in accordance with
California law, this chapter, or Section 501(c)(3), (c)(4), (c)(5),
(c)(6), or (c)(7) of the Internal Revenue Code.

(5) If the Franchise Tax Board suspends or revokes the
exemption of an organization pursuant to paragraph (3) or (4), the
exemption shall be reinstated only upon compliance with this
section, regardless of whether the organization can establish
exemption under paragraph (1).

begin delete

(e)

end delete

begin insert (c) end insert  This section shall not prevent a determination from having
retroactive effect and does not prevent the issuance of a
determination with respect to a domestic organization which was
in existence prior to January 1, 1970, and exempt under prior law
without the submission of a formal application or payment of a
filing fee. For the purpose of this section, the term “domestic”
means created or organized under the laws of this state.

begin delete

(f)

end delete

begin insert (d) end insert  The Franchise Tax Board may prescribe rules and regulations
to implement the provisions of this article.