BILL NUMBER: AB 104 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 1, 2009
INTRODUCED BY Assembly Member Charles Calderon
JANUARY 8, 2009
An act to amend Sections 17085, 17504, and 17506
Section 17085 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 104, as amended, Charles Calderon. Income taxes: pensions.
The Personal Income Tax Law, in modified conformity to federal
income tax laws, provides for the specified tax
treatment with respect to certain annuities and
beneficiaries of employees' trusts proceeds of life
insurance .
This bill would provide further conformity to federal income tax
laws by conforming to provisions of the federal Pension Protection
Act of 2006 relating to waiver of the 10% early withdrawal penalty
tax on certain distributions of pension plans for public safety
employees and distributions from governmental retirement
plans for health and long-term care insurance for public safety
officers. This bill would also make a legislative finding and
declaration regarding the public purpose served by the bill
.
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:
SECTION 1. Section 17085 of the Revenue and Taxation Code is
amended to read:
17085. Section 72 of the Internal Revenue Code, relating to
annuities and certain proceeds of life insurance contracts, is
modified as follows:
(a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
(1) Any individual whose annuity starting date is after December
31, 1986.
(2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
(b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
(1) An amount equal to the amount includable in federal gross
income for the taxable year.
(2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
(c) (1) Except as provided in paragraph (2), the amount of the
penalty imposed under this part shall be computed in accordance with
Sections 72(m), (q), (t), and (v) of the Internal Revenue Code using
a rate of 21/2 percent, in lieu of the rate provided in those
sections.
(2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
(d) Section 72(f)(2) of the Internal Revenue Code, relating to
special rules for computing employees' contributions, shall be
applicable without applying the exceptions which immediately follow
that paragraph.
(e) The amendments to Section 72(t) of the Internal Revenue Code
made by Section 828 of Public Law 109-280 shall apply to
this part for the same transactions and the same years as they are
applicable for federal purposes. this part.
(f) The amendments to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2010.
SEC. 2. Section 17504 of the Revenue and
Taxation Code is amended to read:
17504. (a) The provisions of Section 402 of the Internal Revenue
Code, relating to taxability of beneficiaries of employees' trusts,
shall be modified as follows:
(1) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
as otherwise provided.
(2) The basis of any person in an employees' trust shall include
the amount of any contributions made prior to January 1, 1987, which
were not allowed as a deduction under former Sections 17503 and 17513
(including predecessor Section 17524 repealed by Chapter 488 of the
Statutes of 1983) relating to special limitations for self-employed
individuals.
(b) (1) There is hereby imposed a tax on lump-sum distributions
computed in accordance with the provisions of Section 402(d) of the
Internal Revenue Code using the rates and brackets prescribed in
subdivision (a) of Section 17041 (without regard to Section 17045) in
lieu of the rates and brackets in Section 1(c) of the Internal
Revenue Code. The recipient of the lump-sum distribution shall be
liable for the tax imposed by this paragraph.
(2) For purposes of this part, the provisions of Section 1122(h)
of Public Law 99-514, as modified by Section 1011A(b) of Public Law
100-647, shall apply, except as modified by each of the following:
(A) The provisions of Section 1122(h)(3)(B) of Public Law 99-514
shall be modified to refer to Section 17041 rather than Section 1 of
the Internal Revenue Code of 1986.
(B) The provisions of Section 1122(h)(3)(B)(ii) of Public Law
99-514 shall be modified to provide a tax rate of 5.5 percent rather
than a tax rate of 20 percent.
(C) The provisions of Section 1122(h)(5) of Public Law 99-514
shall be modified to refer to Section 17041 rather than Section 1 of
the Internal Revenue Code of 1954.
(3) For purposes of this section, a taxpayer shall elect the same
special lump-sum distribution averaging method for purposes of this
part as that elected for federal purposes under Section 402(d)(4)(B)
of the Internal Revenue Code.
(4) The provisions of Section 1124(a) of Public Law 99-514, as
amended by Section 1011A(d) of Public Law 100-647, shall apply.
(5) The provisions of Section 1124(c) of Public Law 99-514, as
added by Section 1011A(d) of Public Law 100-647, shall apply.
(c) The amendments to Section 402 of the Internal Revenue Code
made by Section 845 of Public Law 109-280 shall apply to this part
for the same transactions and the same years as they are applicable
for federal purposes.
SEC. 3. Section 17506 of the Revenue and
Taxation Code is amended to read:
17506. (a) The provisions of Section 403 of the Internal Revenue
Code, relating to taxation of employee annuities, shall be modified
to provide that the basis of any person in an employee annuity shall
include the amount of any contributions made prior to January 1,
1987, which were not allowed as a deduction under former Sections
17503 and 17513 of the Revenue and Taxation Code (including
predecessor Section 17524 repealed by Chapter 488 of the Statutes of
1983) relating to special limitations for self-employed individuals.
(b) The amendments to Section 72(t) of the Internal Revenue Code
made by Section 828 of Public Law 109-280 shall apply to this part
for the same transactions and the same years as they are applicable
for federal purposes.
SEC. 4. The Legislature finds and declares that
this act serves a public purpose by providing equitable treatment
for emergency service personnel that will ultimately benefit all of
the citizens of this state.
SEC. 5. SEC. 2. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.