Amended in Assembly May 17, 2016

Amended in Assembly May 2, 2016

Amended in Assembly April 6, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 2625


Introduced by Assembly Member Lopez

February 19, 2016


An act to amend Sections 17935, 17941, 17948, and 23153 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 2625, as amended, Lopez. Corporation taxes: minimum franchise tax: annual tax: microbusiness.

Existing law imposes an annual minimum franchise tax, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state or doing business in this state. Existing law exempts a corporation that incorporates or qualifies to do business in this state from the payment of the minimum franchise tax in its first taxable year.

Existing law imposes an annual tax in an amount equal to the minimum franchise tax on every limited partnership, limited liability company, and limited liability partnership that is doing business in this state or that has filed or registered with the Secretary of State.

The minimum franchise tax imposed on a corporation, and the annual tax imposed on a limited liability company, must be paid by the 15th day of the 4th month of the taxable year. The annual tax imposed on a limited partnership or on a limited liabilitybegin delete partnership,end deletebegin insert partnershipend insert must be paid by the original due date of the partnership return.

This bill, for taxable years beginning on or after January 1, 2017,begin insert and on or before January 1, 2020,end insert would reduce that minimum franchise taxbegin insert of a new microbusiness, as defined,end insert to specifiedbegin delete amounts, in the 2nd, 3rd, 4th, and 5th taxable years,end deletebegin insert amounts for the taxable years immediately following its first taxable year that begin on or before January 1, 2020,end insertbegin delete for a corporation that is a new microbusiness,end delete or that annual tax, for each of thebegin delete first 5end deletebegin insert initialend insert taxable years of itsbegin delete existence,end deletebegin insert existence that begin on or before January 1, 2020,end insertbegin delete for a limited liability company, limited partnership, or limited liability partnership that is a new microbusiness, as defined.end deletebegin insert as specified.end insert

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:

P2    1

SECTION 1.  

Section 17935 of the Revenue and Taxation Code
2 is amended to read:

3

17935.  

(a) For each taxable year beginning on or after January
41, 1997, every limited partnership doing business in this state, as
5defined by Section 23101, and required to file a return under
6Section 18633 shall pay annually to this state a tax for the privilege
7of doing business in this state in an amount equal to the applicable
8amount specified in paragraph (1) of subdivision (d) of Section
923153.

10(b) (1) In addition to any limited partnership that is doing
11business in this state and therefore is subject to the tax imposed
12by subdivision (a), for each taxable year beginning on or after
13January 1, 1997, every limited partnership that has executed,
14acknowledged, and filed a certificate of limited partnership with
15the Secretary of State pursuant to Section 15621 or 15902.01 of
16the Corporations Code, and every foreign limited partnership that
17has registered with the Secretary of State pursuant to Section 15692
18or 15909.01 of the Corporations Code, shall pay annually the tax
19prescribed in subdivision (a). The tax shall be paid for each taxable
20year, or part thereof, until a certificate of cancellation is filed on
21behalf of the limited partnership with the office of the Secretary
P3    1of State pursuant to Section 15902.03 or 15909.07 of the
2Corporations Code.

3(2) If a taxpayer files a return with the Franchise Tax Board that
4is designated its final return, that board shall notify the taxpayer
5that the tax imposed by this chapter is due annually until a
6certificate of cancellation is filed with the Secretary of State
7pursuant to Section 15902.03 or 15909.07 of the Corporations
8Code.

9(c) The tax imposed by this chapter shall be due and payable
10on the date the return is required to be filed under former Section
1118432 or 18633.

12(d) For purposes of this section, “limited partnership” means
13any partnership formed by two or more persons under the laws of
14this state or any other jurisdiction and having one or more general
15partners and one or more limited partners.

16(e) Notwithstanding subdivision (b), any limited partnership
17that ceased doing business prior to January 1, 1997, filed a final
18return with the Franchise Tax Board for a taxable year ending
19before January 1, 1997, and filed a certificate of dissolution with
20the Secretary of State pursuant to Section 15623 of the
21Corporations Code prior to January 1, 1997, shall not be subject
22to the tax imposed by this chapter for any period following the
23date the certificate of dissolution was filed with the Secretary of
24State, but only if the limited partnership files a certificate of
25cancellation with the Secretary of State pursuant to Section 15623
26of the Corporations Code. In the case where a notice of proposed
27deficiency assessment of tax or a notice of tax due (whichever is
28applicable) is mailed after January 1, 2001, the first sentence of
29this subdivision shall not apply unless the certificate of cancellation
30is filed with the Secretary of State not later than 60 days after the
31date of the mailing of the notice.

32(f) (1) Notwithstanding subdivision (a) or (b), for taxable years
33beginning on or after January 1, 2017,begin insert and on or before January
341, 2020,end insert
every limited partnership that is a new microbusiness
35shall, for each of thebegin delete first fiveend deletebegin insert initialend insert taxable years of its existence
36begin insert that begin on or before January 1, 2020, not to exceed five taxable
37years,end insert
for which it qualifies as a new microbusiness, pay to the
38state an annual tax of:

39(A) Two hundred dollars ($200) for a new microbusiness that
40has gross receipts, less returns and allowances, derived from or
P4    1attributable to this state for the taxable year of fifty thousand dollars
2($50,000) or less.

3(B) Four hundred dollars ($400) for a new microbusiness that
4has gross receipts, less returns and allowances, derived from or
5attributable to this state for the taxable year of one hundred
6thousand dollars ($100,000) or less, but more than fifty thousand
7dollars ($50,000).

8(C) Six hundred dollars ($600) for a new microbusiness that
9has gross receipts, less returns and allowances, derived from or
10attributable to this state for the taxable year of one hundred fifty
11thousand dollars ($150,000) or less, but more than one hundred
12thousand dollars ($100,000).

13(2) For purposes of this subdivision, the following definitions
14shall apply:

15(A) (i) “Gross receipts, less returns and allowances,” means
16the sum of the gross receipts from the production of business
17income, as defined in subdivision (a) of Section 25120, and the
18gross receipts from the production of nonbusiness income, as
19defined in subdivision (d) of Section 25120.

20(ii) “Gross receipts, less returns and allowances, derived from
21or attributable to this state” shall be determined using the rules for
22assigning sales under Sections 25135 and 25136 and the regulations
23thereunder, as modified by the regulations under Section 25137,
24other than those provisions that exclude receipts from the sales
25factor.

26(B) “New microbusiness” means a limited partnership that on
27or after January 1, 2017, is organized under the laws of this state
28or has qualified to transact intrastate business in this state and has
29first commenced doing business in this state on or after the time
30of its organization. In determining whether the taxpayer has first
31commenced doing business in this state during the taxable year,
32subdivision (f) of Section 17276, without application of paragraph
33(7) of that subdivision, shall apply, except that “new
34microbusiness” shall be substituted for “new business.”

35(3) For purposes of this subdivision, the gross receipts derived
36from or attributable to the state of any other business, in whatever
37form conducted, that is owned, directly or indirectly, by persons,
38within the meaning of Section 17007, that are treated as related,
39within the meaning of Section 267, 318, or 707 of the Internal
40Revenue Code, to the new microbusiness, shall be aggregated with
P5    1the gross receipts derived from or attributable to the state of the
2new microbusiness to determine whether the new microbusiness
3qualifies for the reduced annual tax under this subdivision.

4

SEC. 2.  

Section 17941 of the Revenue and Taxation Code is
5amended to read:

6

17941.  

(a) For each taxable year beginning on or after January
71, 1997, a limited liability company doing business in this state,
8as defined in Section 23101, shall pay annually to this state a tax
9for the privilege of doing business in this state in an amount equal
10to the applicable amount specified in paragraph (1) of subdivision
11(d) of Section 23153 for the taxable year.

12(b) (1) In addition to any limited liability company that is doing
13business in this state and is therefore subject to the tax imposed
14by subdivision (a), for each taxable year beginning on or after
15January 1, 1997, a limited liability company shall pay annually
16the tax prescribed in subdivision (a) if articles of organization have
17been accepted, or a certificate of registration has been issued, by
18the office of the Secretary of State. The tax shall be paid for each
19taxable year, or part thereof, until a certificate of cancellation of
20registration or of articles of organization is filed on behalf of the
21limited liability company with the office of the Secretary of State.

22(2) If a taxpayer files a return with the Franchise Tax Board that
23is designated as its final return, the Franchise Tax Board shall
24notify the taxpayer that the annual tax shall continue to be due
25annually until a certificate of dissolution is filed with the Secretary
26of State pursuant to Section 17707.08 of the Corporations Code
27or a certificate of cancellation is filed with the Secretary of State
28pursuant to Section 17708.06 of the Corporations Code.

29(c) The tax assessed under this section shall be due and payable
30on or before the 15th day of the fourth month of the taxable year.

31(d) For purposes of this section, “limited liability company”
32means an organization, other than a limited liability company that
33is exempt from the tax and fees imposed under this chapter
34pursuant to Section 23701h or 23701x, that is formed by one or
35more persons under the law of this state, any other country, or any
36other state, as a “limited liability company” and that is not taxable
37as a corporation for California tax purposes.

38(e) Notwithstanding anything in this section to the contrary, if
39the office of the Secretary of State files a certificate of cancellation
40pursuant to Section 17707.02 of the Corporations Code for any
P6    1limited liability company, then paragraph (1) of subdivision (f) of
2Section 23153 shall apply to that limited liability company as if
3the limited liability company were properly treated as a corporation
4for that limited purpose only, and paragraph (2) of subdivision (f)
5of Section 23153 shall not apply. Nothing in this subdivision
6entitles a limited liability company to receive a reimbursement for
7any annual taxes or fees already paid.

8(f) (1) Notwithstanding any provision of this section to the
9contrary, a limited liability company that is a small business solely
10owned by a deployed member of the United States Armed Forces
11shall not be subject to the tax imposed under this section for any
12taxable year the owner is deployed and the limited liability
13company operates at a loss or ceases operation.

14(2) The Franchise Tax Board may promulgate regulations as
15necessary or appropriate to carry out the purposes of this
16subdivision, including a definition for “ceases operation.”

17(3) For the purposes of this subdivision, all of the following
18definitions apply:

19(A) “Deployed” means being called to active duty or active
20service during a period when a Presidential Executive order
21specifies that the United States is engaged in combat or homeland
22defense. “Deployed” does not include either of the following:

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

24(ii) A permanent change of station.

25(B) “Operates at a loss” means a limited liability company’s
26expenses exceed its receipts.

27(C) “Small business” means a limited liability company with
28total income from all sources derived from, or attributable, to the
29state of two hundred fifty thousand dollars ($250,000) or less.

30(4) This subdivision shall become inoperative for taxable years
31beginning on or after January 1, 2018.

32(g) (1) Notwithstanding subdivision (a), (b), or (f), for taxable
33years beginning on or after January 1, 2017,begin insert and on or before
34January 1, 2020,end insert
every limited liability company that is a new
35microbusiness shall, for each of thebegin delete first fiveend deletebegin insert initialend insert taxable years
36of its existencebegin insert that begin on or before January 1, 2020, not to
37exceed five taxable years,end insert
for which it qualifies as a new
38microbusiness, pay to the state an annual tax of:

39(A) Two hundred dollars ($200) for a new microbusiness that
40reasonably estimates it will have gross receipts, less returns and
P7    1allowances, derived from or attributable to this state for the taxable
2year of fifty thousand dollars ($50,000) or less.

3(B) Four hundred dollars ($400) for a new microbusiness that
4reasonably estimates it will have gross receipts, less returns and
5allowances, derived from or attributable to this state for the taxable
6year of one hundred thousand dollars ($100,000) or less, but more
7than fifty thousand dollars ($50,000).

8(C) Six hundred dollars ($600) for a new microbusiness that
9reasonably estimates it will have gross receipts, less returns and
10allowances, derived from or attributable to this state for the taxable
11year of one hundred fifty thousand dollars ($150,000) or less, but
12more than one hundred thousand dollars ($100,000).

13(2) For purposes of this subdivision, the following definitions
14shall apply:

15(A) (i) “Gross receipts, less returns and allowances” means the
16sum of the gross receipts from the production of business income,
17as defined in subdivision (a) of Section 25120, and the gross
18receipts from the production of nonbusiness income, as defined in
19subdivision (d) of Section 25120.

20(ii) “Gross receipts, less returns and allowances, derived from
21or attributable to this state” shall be determined using the rules for
22assigning sales under Sections 25135 and 25136 and the regulations
23thereunder, as modified by the regulations under Section 25137,
24other than those provisions that exclude receipts from the sales
25factor.

26(B) “New microbusiness” means a limited liability company
27that on or after January 1, 2017, is organized under the laws of
28this state or has qualified to transact intrastate business in this state
29and has first commenced doing business in this state on or after
30the time of its organization. In determining whether the taxpayer
31has first commenced doing business in this state during the taxable
32year, subdivision (f) of Section 17276, without application of
33paragraph (7) of that subdivision, shall apply, except that “new
34microbusiness” shall be substituted for “new business.”

35(3) For purposes of this subdivision, the gross receipts derived
36from or attributable to the state of any other business, in whatever
37form conducted, that is owned, directly or indirectly, by persons,
38within the meaning of Section 17007, that are treated as related,
39within the meaning of Section 267, 318, or 707 of the Internal
40Revenue Code, to the new microbusiness, shall be aggregated with
P8    1the gross receipts derived from or attributable to the state of the
2new microbusiness to determine whether the new microbusiness
3qualifies for the reduced annual tax under this subdivision.

4(4) For any taxable year beginning on or after January 1, 2017,
5if a limited liability company has qualified to pay a reduced annual
6tax under this subdivision for any taxable year, but in that taxable
7year, the limited liability company’s gross receipts, less returns
8and allowances, derived from or attributable to this state, exceed
9the amount specified for that reduced amount, an additional tax in
10an amount equal to six hundred dollars ($600), four hundred dollars
11($400), or two hundred dollars ($200), as applicable, for that
12taxable year shall be due and payable by the limited liability
13company on the due date of its return, without regard to extension,
14for that taxable year.

15

SEC. 3.  

Section 17948 of the Revenue and Taxation Code is
16amended to read:

17

17948.  

(a) For each taxable year beginning on or after January
181, 1997, every limited liability partnership doing business in this
19state, as defined in Section 23101, and required to file a return
20under Section 18633 shall pay annually to the Franchise Tax Board
21a tax for the privilege of doing business in this state in an amount
22equal to the applicable amount specified in paragraph (1) of
23subdivision (d) of Section 23153 for the taxable year.

24(b) In addition to any limited liability partnership that is doing
25business in this state and therefore is subject to the tax imposed
26by subdivision (a), for each taxable year beginning on or after
27January 1, 1997, every registered limited liability partnership that
28has registered with the Secretary of State pursuant to Section 16953
29of the Corporations Code and every foreign limited liability
30partnership that has registered with the Secretary of State pursuant
31to Section 16959 of the Corporations Code shall pay annually the
32tax prescribed in subdivision (a). The tax shall be paid for each
33taxable year, or part thereof, until any of the following occurs:

34(1) A notice of cessation is filed with the Secretary of State
35pursuant to subdivision (b) of Section 16954 or 16960 of the
36Corporations Code.

37(2) A foreign limited liability partnership withdraws its
38registration pursuant to subdivision (a) of Section 16960 of the
39Corporations Code.

P9    1(3) The registered limited liability partnership or foreign limited
2liability partnership has been dissolved and finally wound up.

3(c) The tax assessed under this section shall be due and payable
4on the date the return is required to be filed under Section 18633.

5(d) If a taxpayer files a return with the Franchise Tax Board that
6is designated as its final return, the Franchise Tax Board shall
7notify the taxpayer that the annual tax shall continue to be due
8annually until a certificate of cancellation is filed with the Secretary
9of State pursuant to Section 16954 or 16960 of the Corporations
10Code.

11(e) (1) Notwithstanding subdivision (a) or (b), for taxable years
12beginning on or after January 1, 2017,begin insert and on or before January
131, 2020,end insert
every limited liability partnership that is a new
14microbusiness shall, for each year of thebegin delete first fiveend deletebegin insert initialend insert taxable
15years of its existencebegin insert that begin on or before January 1, 2020, not
16to exceed five taxable years,end insert
for which it qualifies as a new
17microbusiness, pay annually to the state an annual tax of:

18(A) Two hundred dollars ($200) for a new microbusiness that
19has gross receipts, less returns and allowances, derived from or
20attributable to this state for the taxable year of fifty thousand dollars
21($50,000) or less.

22(B) Four hundred dollars ($400) for a new microbusiness that
23has gross receipts, less returns and allowances, derived from or
24attributable to this state for the taxable year of one hundred
25thousand dollars ($100,000) or less, but more than fifty thousand
26dollars ($50,000).

27(C) Six hundred dollars ($600) for a new microbusiness that
28has gross receipts, less returns and allowances, derived from or
29attributable to this state for the taxable year of one hundred fifty
30thousand dollars ($150,000) or less, but more than one hundred
31thousand dollars ($100,000).

32(2) For purposes of this subdivision, the following definitions
33shall apply:

34(A) (i) “Gross receipts, less returns and allowances,” means
35the sum of the gross receipts from the production of business
36income, as defined in subdivision (a) of Section 25120, and the
37gross receipts from the production of nonbusiness income, as
38defined in subdivision (d) of Section 25120.

39(ii) “Gross receipts, less returns and allowances, derived from
40or attributable to this state” shall be determined using the rules for
P10   1assigning sales under Sections 25135 and 25136 and the regulations
2thereunder, as modified by the regulations under Section 25137,
3other than those provisions that exclude receipts from the sales
4factor.

5(B) “New microbusiness” means a limited liability partnership
6that on or after January 1, 2017, is organized under the laws of
7this state or has qualified to transact intrastate business in this state
8and has first commenced doing business in this state on or after
9the time of its organization. In determining whether the taxpayer
10has first commenced doing business in this state during the taxable
11year, subdivision (f) of Section 17276, without application of
12paragraph (7) of that subdivision, shall apply, except that “new
13microbusiness” shall be substituted for “new business.”

14(3) For purposes of this subdivision, the gross receipts derived
15from or attributable to the state of any other business, in whatever
16form conducted, that is owned, directly or indirectly, by persons,
17within the meaning of Section 17007, that are treated as related,
18within the meaning of Section 267, 318, or 707 of the Internal
19Revenue Code, to the new microbusiness, shall be aggregated with
20the gross receipts derived from or attributable to the state of the
21new microbusiness to determine whether the new microbusiness
22qualifies for the reduced annual tax under this subdivision.

23

SEC. 4.  

Section 23153 of the Revenue and Taxation Code is
24amended to read:

25

23153.  

(a) Every corporation described in subdivision (b) shall
26be subject to the minimum franchise tax specified in subdivision
27(d) from the earlier of the date of incorporation, qualification, or
28commencing to do business within this state, until the effective
29date of dissolution or withdrawal as provided in Section 23331 or,
30if later, the date the corporation ceases to do business within the
31limits of this state.

32(b) Unless expressly exempted by this part or the California
33Constitution, subdivision (a) shall apply to each of the following:

34(1) Every corporation that is incorporated under the laws of this
35state.

36(2) Every corporation that is qualified to transact intrastate
37business in this state pursuant to Chapter 21 (commencing with
38Section 2100) of Division 1 of Title 1 of the Corporations Code.

39(3) Every corporation that is doing business in this state.

P11   1(c) The following entities are not subject to the minimum
2franchise tax specified in this section:

3(1) Credit unions.

4(2) Nonprofit cooperative associations organized pursuant to
5Chapter 1 (commencing with Section 54001) of Division 20 of the
6Food and Agricultural Code that have been issued the certificate
7of the board of supervisors prepared pursuant to Section 54042 of
8the Food and Agricultural Code. The association shall be exempt
9from the minimum franchise tax for five consecutive taxable years,
10commencing with the first taxable year for which the certificate
11is issued pursuant to subdivision (b) of Section 54042 of the Food
12and Agricultural Code. This paragraph only applies to nonprofit
13cooperative associations organized on or after January 1, 1994.

14(d) (1) Except as provided in paragraph (2), paragraph (1) of
15subdivision (f) of Section 23151, paragraph (1) of subdivision (f)
16of Section 23181, and paragraph (1) of subdivision (c) of Section
1723183, corporations subject to the minimum franchise tax shall
18pay annually to the state a minimum franchise tax of eight hundred
19dollars ($800).

20(2) The minimum franchise tax shall be twenty-five dollars
21($25) for each of the following:

22(A) A corporation formed under the laws of this state whose
23principal business when formed was gold mining, which is inactive
24and has not done business within the limits of the state since 1950.

25(B) A corporation formed under the laws of this state whose
26principal business when formed was quicksilver mining, which is
27inactive and has not done business within the limits of the state
28since 1971, or has been inactive for a period of 24 consecutive
29months or more.

30(3) For purposes of paragraph (2), a corporation shall not be
31considered to have done business if it engages in business other
32than mining.

33(e) Notwithstanding subdivision (a), for taxable years beginning
34on or after January 1, 1999, and before January 1, 2000, every
35“qualified new corporation” shall pay annually to the state a
36minimum franchise tax of five hundred dollars ($500) for the
37second taxable year. This subdivision shall apply to any corporation
38that is a qualified new corporation and is incorporated on or after
39January 1, 1999, and before January 1, 2000.

P12   1(1) The determination of the gross receipts of a corporation, for
2purposes of this subdivision, shall be made by including the gross
3receipts of each member of the commonly controlled group, as
4defined in Section 25105, of which the corporation is a member.

5(2) “Gross receipts, less returns and allowances reportable to
6this state,” means the sum of the gross receipts from the production
7of business income, as defined in subdivision (a) of Section 25120,
8and the gross receipts from the production of nonbusiness income,
9as defined in subdivision (d) of Section 25120.

10(3) “Qualified new corporation” means a corporation that is
11incorporated under the laws of this state or has qualified to transact
12intrastate business in this state, that begins business operations at
13or after the time of its incorporation and that reasonably estimates
14that it will have gross receipts, less returns and allowances,
15reportable to this state for the taxable year of one million dollars
16($1,000,000) or less. “Qualified new corporation” does not include
17any corporation that began business operations as a sole
18proprietorship, a partnership, or any other form of business entity
19prior to its incorporation. This subdivision shall not apply to any
20corporation that reorganizes solely for the purpose of reducing its
21minimum franchise tax.

22(4) This subdivision shall not apply to limited partnerships, as
23defined in Section 17935, limited liability companies, as defined
24in Section 17941, limited liability partnerships, as described in
25Section 17948, charitable corporations, as described in Section
2623703, regulated investment companies, as defined in Section 851
27of the Internal Revenue Code, real estate investment trusts, as
28 defined in Section 856 of the Internal Revenue Code, real estate
29mortgage investment conduits, as defined in Section 860D of the
30Internal Revenue Code, qualified Subchapter S subsidiaries, as
31defined in Section 1361(b)(3)(B) of the Internal Revenue Code,
32or to the formation of any subsidiary corporation, to the extent
33applicable.

34(5) For any taxable year beginning on or after January 1, 1999,
35and before January 1, 2000, if a corporation has qualified to pay
36five hundred dollars ($500) for the second taxable year under this
37subdivision, but in its second taxable year, the corporation’s gross
38receipts, as determined under paragraphs (1) and (2), exceed one
39million dollars ($1,000,000), an additional tax in the amount equal
40to three hundred dollars ($300) for the second taxable year shall
P13   1be due and payable by the corporation on the due date of its return,
2without regard to extension, for that year.

3(f) (1) (A) Notwithstanding subdivision (a), every corporation
4that incorporates or qualifies to do business in this state on or after
5January 1, 2000, shall not be subject to the minimum franchise tax
6for its first taxable year.

7(B) Notwithstanding subdivision (a), for taxable years beginning
8on or after January 1, 2017,begin insert and on or before January 1, 2020,end insert
9 every corporation that is a new microbusinessbegin delete up to its first five
10taxable years shall annuallyend delete
begin insert shall, for each taxable year
11immediately following its first taxable year that begins on or before
12January 1, 2020, not to exceed four taxable years, for which it
13qualifies as a new microbusiness,end insert
pay to the statebegin delete aend deletebegin insert an annualend insert
14 minimum franchise tax in an amount specified in clausebegin delete (i) for its
15second, third, fourth, and fifth taxable years of its existence for
16which it qualifies as a new microbusiness.end delete
begin insert (i).end insert

17(i) (I) Two hundred dollars ($200) for a new microbusiness
18that reasonably estimates that it will have gross receipts, less
19returns and allowances, derived from or attributable to this state
20for the taxable year of fifty thousand dollars ($50,000) or less.

21(II) Four hundred dollars ($400) for a new microbusiness that
22reasonably estimates that it will have gross receipts, less returns
23and allowances, derived from or attributable to this state for the
24taxable year of one hundred thousand dollars ($100,000) or less,
25but more than fifty thousand dollars ($50,000).

26(III) Six hundred dollars ($600) for a new microbusiness that
27reasonably estimates that it will have gross receipts, less returns
28and allowances, derived from or attributable to this state for the
29taxable year of one hundred fifty thousand dollars ($150,000) or
30less, but more than one hundred thousand dollars ($100,000).

31(ii) For purposes of this subparagraph, the following definitions
32shall apply:

33(I) (ia) “Gross receipts, less returns and allowances,” means
34the sum of the gross receipts from the production of business
35income, as defined in subdivision (a) of Section 25120, and the
36gross receipts from the production of nonbusiness income, as
37defined in subdivision (d) of Section 25120.

38(ib) “Gross receipts, less returns and allowances, derived from
39or attributable to this state” shall be determined using the rules for
40assigning sales under Sections 25135 and 25136 and the regulations
P14   1thereunder, as modified by the regulations under Section 25137,
2other than those provisions that exclude receipts from the sales
3factor.

4(II) “New microbusiness” means a limited liability company
5that on or after January 1, 2017, is organized under the laws of
6this state or has qualified to transact intrastate business in this state
7and has first commenced doing business in this state on or after
8the time of its organization. In determining whether the taxpayer
9has first commenced doing business in this state during the taxable
10year, subdivision (f) of Section 17276, without application of
11paragraph (7) of that subdivision, shall apply, except that “new
12microbusiness” shall be substituted for “new business.”

13(iii) For purposes of this subparagraph, the gross receipts derived
14from or attributable to the state of any other business, in whatever
15form conducted, that is owned, directly or indirectly, by persons,
16within the meaning of Section 17007, that are treated as related,
17within the meaning of Section 267, 318, or 707 of the Internal
18Revenue Code, to the new microbusiness, shall be aggregated with
19the gross receipts derived from or attributable to the state of the
20new microbusiness to determine whether the new microbusiness
21qualifies for the reduced minimum franchise tax under this
22subparagraph.

23(iv) For any taxable year beginning on or after January 1, 2017,
24if a corporation has qualified to pay a reduced minimum franchise
25tax under this subparagraph for any taxable year, but in that taxable
26year, the corporation’s gross receipts, less returns and allowances,
27derived from or attributable to this state, exceed the amount
28specified for that reduced amount, an additional tax in an amount
29equal to six hundred dollars ($600), four hundred dollars ($400),
30or two hundred dollars ($200), as applicable, for that taxable year
31shall be due and payable by the corporation on the due date of its
32return, without regard to extension, for that taxable year.

33(2) Subparagraph (A) of paragraph (1) shall not apply to limited
34partnerships, as defined in Section 17935, limited liability
35companies, as defined in Section 17941, limited liability
36partnerships, as described in Section 17948, charitable corporations,
37as described in Section 23703, regulated investment companies,
38as defined in Section 851 of the Internal Revenue Code, real estate
39investment trusts, as defined in Section 856 of the Internal Revenue
40Code, real estate mortgage investment conduits, as defined in
P15   1Section 860D of the Internal Revenue Code, and qualified
2Subchapter S subsidiaries, as defined in Section 1361(b)(3)(B) of
3the Internal Revenue Code, to the extent applicable.

4(3) Subparagraph (A) of paragraph (1) shall not apply to any
5corporation that reorganizes solely for the purpose of avoiding
6payment of its minimum franchise tax.

7(g) Notwithstanding subdivision (a), a domestic corporation, as
8defined in Section 167 of the Corporations Code, that files a
9certificate of dissolution in the office of the Secretary of State
10pursuant to subdivision (b) of Section 1905 of the Corporations
11Code, prior to its amendment by the act amending this subdivision,
12and that does not thereafter do business shall not be subject to the
13minimum franchise tax for taxable years beginning on or after the
14date of that filing.

15(h) The minimum franchise tax imposed by paragraph (1) of
16subdivision (d) shall not be increased by the Legislature by more
17than 10 percent during any calendar year.

18(i) (1) Notwithstanding subdivision (a) or (f), a corporation that
19is a small business solely owned by a deployed member of the
20United States Armed Forces shall not be subject to the minimum
21franchise tax for any taxable year the owner is deployed and the
22corporation operates at a loss or ceases operation.

23(2) The Franchise Tax Board may promulgate regulations as
24necessary or appropriate to carry out the purposes of this
25subdivision, including a definition for “ceases operation.”

26(3) For the purposes of this subdivision, all of the following
27definitions apply:

28(A) “Deployed” means being called to active duty or active
29service during a period when a Presidential Executive order
30specifies that the United States is engaged in combat or homeland
31defense. “Deployed” does not include either of the following:

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

33(ii) A permanent change of station.

34(B) “Operates at a loss” means negative net income as defined
35in Section 24341.

36(C) “Small business” means a corporation with total income
37from all sources derived from, or attributable to, the state of two
38hundred fifty thousand dollars ($250,000) or less.

39(4) This subdivision shall become inoperative for taxable years
40beginning on or after January 1, 2018.

P16   1

SEC. 5.  

This act provides for a tax levy within the meaning of
2Article IV of the Constitution and shall go into immediate effect.



O

    96