Amended in Senate August 31, 2015

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:begin delete public utilities.end deletebegin insert gas corporations.end insert

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.

begin deleteThis end deletebegin insertFor the taxable year beginning on January 1, 2015, this end insertbill would not allow a deduction under the Corporation Tax Law for expenses or expenditures bybegin delete Pacific Gas and Electric Companyend deletebegin insert a gas corporationend insert that the Public Utilities Commission identified in abegin delete specific decision relative to the operation of its natural gas transmission system pipelines.end deletebegin insert decision to penalize the gas corporation for a natural gas safety violation.end insert For any taxable year for which those expenses or expenditures are paid or incurred, the bill would requirebegin delete Pacific Gas and Electric Companyend deletebegin insert a gas corporationend insert 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 thebegin delete company,end deletebegin insert gas corporation,end insert 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.

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.

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

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: yes.

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

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertThe Legislature finds and declares both of the
2following:end insert

begin insert

3(a) A fine or similar penalty paid at the direction of the
4government, where the government has determined the fine or
5similar penalty to be punitive, is not an ordinary and necessary
6business expense and, therefore, no deduction shall be allowed
7for any fine or similar penalty paid at the direction of the
8government for the violation of any law.

end insert
begin insert

9(b) Subdivision (a) does not constitute a change in, but is
10declaratory of, existing law.

end insert
11

begin deleteSECTION 1.end delete
12begin insertSEC. 2.end insert  

Section 24446 is added to the Revenue and Taxation
13Code
, to read:

14

24446.  

(a) begin deleteNo end deletebegin insertFor the taxable year beginning January 1, 2015,
15no end insert
deduction shall be allowed for any amount paid or incurred by
16begin delete Pacific Gas and Electric Companyend deletebegin insert a gas corporation, as defined
P3    1in Section 222 of the Public Utilities Code,end insert
for expenses or
2expenditures identified by the Public Utilities Commission in
3begin delete Decision 15-04-024 (April 9, 2015), “Decision on Fines and
4Remedies to be Imposed on Pacific Gas and Electric Company for
5Specific Violations in Connection with the Operation and Practices
6of its Natural Gas Transmission System Pipelines,” relating toend delete
begin insert a
7decision to penalize the gas corporation for a natural gas safety
8violation, includingend insert
any of the following:

9(1) begin deleteUp to eight hundred fifty million dollars ($850,000,000) in
10future end delete
begin insertFuture end insertgas infrastructure improvements related to
11transmission pipeline safety to be paid for bybegin delete Pacific Gas and
12Electric Company shareholders.end delete
begin insert shareholders of the gas
13corporation.end insert

14(2)  begin deleteFour hundred million dollars ($400,000,000) in bill end delete begin insertBill end insert
15credits for the gas ratepayers ofbegin delete Pacific Gas and Electric Company.end delete
16begin insert the gas corporation.end insert

17(3) begin deleteApproximately fifty million dollars ($50,000,000) to
18implement 75 remedies, including, but not limited to, end delete
begin insertThend insertbegin inserte end insert
19implementation of pipeline safety remedies and reimbursement of
20the Public Utilities Commission for its costs incurred in
21investigating and enforcing violations of law relating to the public
22safety bybegin delete Pacific Gas and Electric Company.end deletebegin insert the gas corporation.end insert

23(b) For any taxable year for which expenses or expenditures
24identified in subdivision (a) are paid or incurred,begin delete Pacific Gas and
25Electric Companyend delete
begin insert the gas corporationend insert shall provide with the return,
26for that taxable year, a certification, under penalty of perjury, that
27none of those expenses or expenditures were taken into account,
28directly or indirectly, in determining the amount of income of
29begin delete Pacific Gas and Electric Company,end deletebegin insert the gas corporation,end insert or any
30other related taxpayer, that is subject to tax under this part, for that
31taxable year.

32

begin deleteSEC. 2.end delete
33begin insertSEC. 3.end insert  

No reimbursement is required by this act pursuant to
34Section 6 of Article XIII B of the California Constitution because
35the only costs that may be incurred by a local agency or school
36district will be incurred because this act creates a new crime or
37infraction, eliminates a crime or infraction, or changes the penalty
38for a crime or infraction, within the meaning of Section 17556 of
39the Government Code, or changes the definition of a crime within
P4    1the meaning of Section 6 of Article XIII B of the California
2Constitution.

3

begin deleteSEC. 3.end delete
4begin insertSEC. 4.end insert  

This act is an urgency statute necessary for the
5immediate preservation of the public peace, health, or safety within
6the meaning of Article IV of the Constitution and shall go into
7immediate effect. The facts constituting the necessity are:

8In order for the provisions of this act to be applicable to the
9current tax year and to better ensure the effectiveness of decisions
10of the Public Utilities Commission protecting the public safety, it
11is necessary that this act take effect immediately.



O

    94