Amended in Assembly May 12, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2544

Introduced by Assembly Members Travis Allen and Quirk

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

February 19, 2016

An act to amend Section 17941 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 2544, as amended, Travis Allen. Income taxes: limited liability company: qualified investment partnership.

Existing law 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. 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.

This begin delete bill end delete begin insert bill, for each taxable year beginning before January 1, 2020, end insert 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.

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:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert This act shall be known, and may be cited end insert begin insert , as end insert begin insert the
Access to Angel Investors Act. end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert It is the intent of the Legislature that this act end insert begin insert improve
access to capital. end insert

begin delete SECTION 1. end delete

begin insert SEC. 3. end insert   

Section 17941 of the Revenue and Taxation Code is
amended to read:

17941.  

(a) For each taxable year beginning on or after January
1, 1997, a limited liability company doing business in this state,
as defined in Section 23101, shall pay annually to this state a tax
for the privilege of doing business in this state in an amount equal
to the applicable amount specified in paragraph (1) of subdivision
(d) of Section 23153 for the taxable year.

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

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

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

(d) (1) Except as provided in paragraph (2), for purposes of
this section, a “limited liability company” means an organization
that is formed by one or more persons under the law of this state,
any other country, or any other state, as a “limited liability
company” and that is not taxable as a corporation for California
tax purposes.

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

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

(B) (i)  begin delete The end delete begin insert For each taxable year beginning before January 1,
2020, the end insert limited liability company is a qualified investment
partnership.

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

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

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

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

(iii) For purposes of this subparagraph, “qualifying investment
securities” has the same meaning as that term is described in
subparagraph (A) of paragraph (3) of subdivision (c) of Section
17955.

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

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

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

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

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

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

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

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

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

(ii) A permanent change of station.

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

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

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

begin delete SEC. 2. end delete

begin insert SEC. 4. end insert   

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