Amended in Senate July 16, 2015

Amended in Senate June 29, 2015

Amended in Senate June 3, 2015

Amended in Senate May 5, 2015

Senate BillNo. 681


Introduced by Senator Hill

(Principal coauthor: Assembly Member Mullin)

February 27, 2015


An act to add Section 24446 to the Revenue and Taxation Code, relating to income taxation, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 681, as amended, Hill. Corporation taxes: deduction: public utilities.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations.

The Corporation Tax Law allows various deductions in computing the income that is subject to the taxes imposed by those laws, and in modified conformity with federal law, allows a deduction for ordinary and necessary expenses carrying on a trade or business. Existing law provides that no deduction is allowed for any fine or similar penalty paid to a government for the violation of any law.

This bill would not allow a deduction under the Corporation Tax Law for expenses or expendituresbegin delete for plant and equipmentend delete by Pacific Gas and Electric Company that the Public Utilities Commissionbegin delete determined in a specific decision should be borne by the shareholders of the utility, and not the utility’s ratepayers, because of the utility’s numerous violations of law relating to the public safety. The bill would additionally not allow a deduction for amounts that the Public Utilities Commission ordered Pacific Gas and Electric Company to pay to reimburse the commission for its costs incurred in investigating and enforcing violations of law by the utility relating to public safety.end deletebegin insert identified in a specific decision relative to the operation of its natural gas transmission system pipelines. For any taxable year for which those expenses or expenditures are paid or incurred, the bill would require Pacific Gas and Electric Company to provide with the return a certification, under penalty of perjury, that none of those expenses or expenditures were taken into account, directly or indirectly, in determining the amount of income of the company, or any other related taxpayer, that is subject to tax under the Corporation Tax Law, for that taxable year. By expanding the scope of the crime of perjury, this bill would impose a state-mandated local program.end insert

begin insert

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

end insert
begin insert

This bill would provide that no reimbursement is required by this act for a specified reason.

end insert

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: 23. Appropriation: no. Fiscal committee: yes. State-mandated local program: begin deleteno end deletebegin insertyesend insert.

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

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 24446 is added to the end insertbegin insertRevenue and
2Taxation Code
end insert
begin insert, to read:end insert

begin insert
3

begin insert24446.end insert  

(a) No deduction shall be allowed for any amount paid
4or incurred by Pacific Gas and Electric Company for expenses or
5expenditures identified by the Public Utilities Commission in
6Decision 15-04-024 (April 9, 2015), “Decision on Fines and
7Remedies to be Imposed on Pacific Gas and Electric Company for
8Specific Violations in Connection with the Operation and Practices
9of its Natural Gas Transmission System Pipelines,” relating to
10any of the following:

11(1) Up to eight hundred fifty million dollars ($850,000,000) in
12future gas infrastructure improvements related to transmission
P3    1pipeline safety to be paid for by Pacific Gas and Electric Company
2shareholders.

3(2) Four hundred million dollars ($400,000,000) in bill credits
4for the gas ratepayers of Pacific Gas and Electric Company.

5(3) Approximately fifty million dollars ($50,000,000) to
6implement 75 remedies, including, but not limited to,
7implementation of pipeline safety remedies and reimbursement of
8the Public Utilities Commission for its costs incurred in
9investigating and enforcing violations of law relating to the public
10safety by Pacific Gas and Electric Company.

11(b) For any taxable year for which expenses or expenditures
12identified in subdivision (a) are paid or incurred, Pacific Gas and
13Electric Company shall provide with the return, for that taxable
14year, a certification, under penalty of perjury, that none of those
15expenses or expenditures were taken into account, directly or
16indirectly, in determining the amount of income of Pacific Gas
17and Electric Company, or any other related taxpayer, that is
18 subject to tax under this part, for that taxable year.

end insert
19begin insert

begin insertSEC. 2.end insert  

end insert
begin insert

No reimbursement is required by this act pursuant to
20Section 6 of Article XIII B of the California Constitution because
21the only costs that may be incurred by a local agency or school
22district will be incurred because this act creates a new crime or
23infraction, eliminates a crime or infraction, or changes the penalty
24for a crime or infraction, within the meaning of Section 17556 of
25the Government Code, or changes the definition of a crime within
26the meaning of Section 6 of Article XIII B of the California
27Constitution.

end insert
28begin insert

begin insertSEC. 3.end insert  

end insert
begin insert

This act is an urgency statute necessary for the
29immediate preservation of the public peace, health, or safety within
30the meaning of Article IV of the Constitution and shall go into
31immediate effect. The facts constituting the necessity are:

end insert
begin insert

32In order for the provisions of this act to be applicable to the
33current tax year and to better ensure the effectiveness of decisions
34of the Public Utilities Commission protecting the public safety, it
35is necessary that this act take effect immediately.

end insert
begin delete
36

SECTION 1.  

Section 24446 is added to the Revenue and
37Taxation Code
, to read:

38

24446.  

Section 162(a) of the Internal Revenue Code, relating
39to trade or business expenses, in general, shall not apply to the
40following:

P4    1(a) Expenses or expenditures for plant and equipment by Pacific
2Gas and Electric Company that the Public Utilities Commission
3determined in Decision 15-04-024 (April 9, 2015), “Decision on
4Fines and Remedies to be Imposed on Pacific Gas and Electric
5Company for Specific Violations in Connection with the Operation
6and Practices of its Natural Gas Transmission System Pipelines,”
7should be borne by the shareholders of the utility, and not the
8utility’s ratepayers, because of the utility’s numerous violations
9of law relating to public safety.

10(b) Amounts that the Public Utilities Commission, in Decision
1115-04-024, ordered Pacific Gas and Electric Company to pay to
12reimburse the commission for its costs incurred in investigating
13and enforcing a violation of law relating to public safety by the
14utility.

15

SEC. 2.  

This act is an urgency statute necessary for the
16immediate preservation of the public peace, health, or safety within
17the meaning of Article IV of the Constitution and shall go into
18immediate effect. The facts constituting the necessity are:

19In order for the provisions of this act to be applicable to the
20current tax year and to better ensure the effectiveness of decisions
21of the Public Utilities Commission protecting the public safety, it
22is necessary that this act take effect immediately.

end delete


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