Senate Bill No. 394

Introduced by Senator Nguyen

February 25, 2015

An act to amend Section 23663 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 394, as introduced, Nguyen. Corporate taxes: credits: assignment.

The Corporation Tax Law allows various credits against the taxes imposed by that law. That law allows, for each taxable year beginning on or after July 1, 2008, any credit that is an eligible credit, as defined, to be assigned to any eligible assignee, as defined.

This bill would make technical, nonsubstantive changes to this 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 23663 of the Revenue and Taxation Code
is amended to read:

23663.  

(a) (1) Notwithstanding any other law begin delete to the contrary end delete ,
for each taxable year beginning on or after July 1, 2008, any credit
allowed to a taxpayer under this chapter that is an eligible credit
may be assigned by that taxpayer to any eligible assignee.

(2) A credit assigned under paragraph (1) may begin delete only end delete be applied
by the eligible assignee begin insert only end insert against the begin delete “tax” (as end delete begin insert “tax,” as end insert defined
in Section begin delete 23036) end delete begin insert 23036, end insert of the eligible assignee in a taxable year
beginning on or after January 1, 2010.

(3) Except as specifically provided in this section, following an
assignment of any eligible credit under this section, the eligible
assignee shall be treated as if it originally earned the assigned
credit.

(b) For purposes of this section, the following definitions shall
apply:

(1) “Affiliated corporation” means a corporation that is a
member of a commonly controlled group as defined in Section
25105.

(2) “Eligible credit” shall mean:

(A) Any credit earned by the taxpayer in a taxable year
beginning on or after July 1, 2008, or

(B) Any credit earned in any taxable year beginning before July
1, 2008, that is eligible to be carried forward to the taxpayer’s first
taxable year beginning on or after July 1, 2008, under the
provisions of this part.

(3) “Eligible assignee” shall mean any affiliated corporation
that is properly treated as a member of the same combined
reporting group pursuant to Section 25101 or 25110 as the taxpayer
assigning the eligible credit as of:

(A) In the case of credits earned in taxable years beginning
before July 1, 2008:

(i) June 30, 2008, and

(ii) The last day of the taxable year of the assigning taxpayer
in which the eligible credit is assigned.

(B) In the case of credits earned in taxable years beginning on
or after July 1, 2008.

(i) The last day of the first taxable year in which the credit was
allowed to the taxpayer, and

(ii) The last day of the taxable year of the assigning taxpayer
in which the eligible credit is assigned.

(c) (1) The election to assign any credit under subdivision (a)
shall be irrevocable once made, and shall be made by the taxpayer
allowed that credit on its original return for the taxable year in
which the assignment is made.

(2) The taxpayer assigning any credit under this section shall
reduce the amount of its unused credit by the face amount of any
credit assigned under this section, and the amount of the assigned
credit shall not be available for application against the assigning
taxpayer’s “tax” in any taxable year, nor shall it thereafter be
included in the amount of any credit carryover of the assigning
taxpayer.

(3) The eligible assignee of any credit under this section may
apply all or any portion of the assigned credits against the “tax”
of the eligible assignee for the taxable year in which the assignment
occurs, or any subsequent taxable year, subject to any carryover
period limitations that apply to the assigned credit and also subject
to the limitation in paragraph (2) of subdivision (a).

(4)  begin delete In no case may the end delete begin insert The end insert eligible assignee begin insert shall not end insert sell,
otherwise transfer, or thereafter assign the assigned credit to any
other taxpayer.

(d) (1)  begin delete No consideration end delete begin insert Consideration end insert shall begin insert not end insert be required
to be paid by the eligible assignee to the assigning taxpayer for
assignment of any credit under this section.

(2) In the event that any consideration is paid by the eligible
assignee to the assigning taxpayer for the transfer of an eligible
credit under this section, then:

(A)  begin delete No end delete begin insert A end insert deduction shall begin insert not end insert be allowed to the eligible assignee
under this part with respect to any amounts so paid, and

(B)  begin delete No amounts end delete begin insert Any amount end insert so received by the assigning
taxpayer shall begin insert not end insert be includable in gross income under this part.

(e) (1) The Franchise Tax Board shall specify the form and
manner in which the election required under this section shall be
made, as well as any necessary information that shall be required
to be provided by the taxpayer assigning the credit to the eligible
assignee.

(2) Any taxpayer who assigns any credit under this section shall
report any information, in the form and manner specified by the
Franchise Tax Board, necessary to substantiate any credit assigned
under this section and verify the assignment and subsequent
application of any assigned credit.

(3) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code shall not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to paragraphs (1) and (2).

(4) The Franchise Tax Board may issue any begin delete regulations end delete
begin insert regulation end insert necessary to implement the purposes of this section,
including any begin delete regulations end delete begin insert regulation end insert necessary to specify the
treatment of any assignment that does not comply with begin delete the
requirements of end delete this section (including, for example, begin delete where end delete begin insert if end insert the
taxpayer and eligible assignee are not properly treated as members
of the same combined reporting group on any of the dates specified
in paragraph (3) of subdivision (b).

(f) (1) The taxpayer and the eligible assignee shall be jointly
and severally liable for any tax, addition to tax, or penalty that
results from the disallowance, in whole or in part, of any eligible
credit assigned under this section.

(2)  begin delete Nothing in this end delete begin insert This end insert section shall begin insert not end insert limit the authority of
the Franchise Tax Board to audit either the assigning taxpayer or
the eligible assignee with respect to any eligible credit assigned
under this section.

(g) On or before June 30, 2013, the Franchise Tax Board shall
report to the Joint Legislative Budget Committee, the Legislative
Analyst, and the relevant policy committees of both houses on the
effects of this section. The report shall include, but need not be
limited to, the following:

(1) An estimate of use of credits in the 2010 and 2011 taxable
years by eligible taxpayers.

(2) An analysis of effect of this section on expanding business
activity in the state related to these credits.

(3) An estimate of the resulting tax revenue loss to the state.

(4) The report shall cover all credits covered in this section, but
focus on the credits related to research and development, economic
incentive areas, and low-income housing.