BILL ANALYSIS
AB 697
Page 1
Date of Hearing: May 11, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 697 (Charles Calderon) - As Amended: April 14, 2009
Majority vote.
SUBJECT : Income taxes: underpayments: hiring credit.
SUMMARY : Corrects erroneous cross-references in Revenue and
Taxation Code (R&TC) Section 19136.8 relating to a penalty for
the underpayment of estimated tax. Specifically, this bil l:
1)Corrects erroneous cross-references in R&TC Section 19136.8
that waives a penalty for the underpayment of estimated tax if
the underpayment was due to the disallowance of the hiring tax
credit, otherwise allowed under R&TC Section 17053.80 or
Section 23623.
2)Changes the reference from subdivision (f) to subdivision (g)
of R&TC Section 17053.80, relating to the hiring tax credit
allowed to a taxpayer under the Personal Income Tax (PIT) Law.
3)Changes the reference from subdivision (f) to subdivision (g)
of R&TC Section 23623, relating to the new hiring tax credit
allowed to a taxpayer under the Corporation Tax (CT) Law.
EXISTING LAW :
1)Provides a temporary tax incentive to small businesses to hire
full-time employees by allowing a qualified employer, for
taxable years beginning on or after January 1, 2009, to claim
an income tax credit of $3,000 for each additional full-time
employee hired by the employer during the taxable year. The
temporary tax credit is available only to businesses with 20
or fewer employees. (R&TC Sections 17053.80 and 23623).
2)Imposes an overall cap of $400 million on the aggregate amount
of hiring credit that could be claimed by qualified employers.
3)Specifies that the hiring credit is allowed only if it is
claimed by the employer on a timely filed original return
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received by the Franchise Tax Board (FTB) on or before any
cut-off date established by the FTB. The cut-off date for
claiming the credit will be the last day of the calendar
quarter within which the FTB estimates that the aggregate
amount of credit claimed pursuant to this bill, under both the
PIT and the CT Laws, will have reached $400 million. The FTB
is required to notify taxpayers periodically by posting a
notice on its website regarding the amount of the credit
claimed on returns received by FTB.
4)Requires individual and corporate taxpayers to make quarterly
payments of their estimated full-year tax liability.
5)Imposes a penalty on a taxpayer for any underpayment of
estimated tax. The penalty is an amount equal to the
underpayment rate multiplied by the amount of the
underpayment. The underpayment rate is the same as the
interest rate charged for tax delinquencies, currently at 5%.
The penalty is calculated by comparing the required amount for
each estimated tax payment, determined under either the
regular method (30%, 30%, 20%, and 20%) or the "annualized
income installment method", with the amount paid by the due
date of that installment. (R&TC Section 19136).
6)Provides that a penalty for the underpayment of an installment
of estimated tax is not imposed if the underpayment was
created or increased by the disallowance of the new hiring tax
credit because the allocated credit limit had been exceeded.
(R&TC Section 19136.8).
FISCAL EFFECT : None
COMMENTS :
1)The purpose of this bill is to correct an erroneous
cross-reference in the provision of the recently enacted
budget trailer bill.
2)SBx3 15 (Calderon), Chapter 17, Statutes of 2009 authorizes a
new temporary tax credit of $3,000 for each new full-time job
created by a business with 20 or fewer employees. SBx3 15
also provides for a waiver of the estimated tax underpayment
penalty if the underpayment was due to the disallowance of the
new hiring tax credit because the allocated credit limit has
been exceeded. SBx3 15, however, includes erroneous
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cross-references to the wrong subdivisions of the R&TC
sections that grant the new hiring credit. AB 697 corrects
those erroneous cross-references.
3)Related Legislation.
AB 1580 (Assembly Revenue and Taxation Committee), introduced in
the 2009-10 Legislative Session, includes a provision that is
identical to AB 697. AB 1580 passed out of this Committee on
April 27, 2009, with a vote of 8-0, and was re-referred to the
Assembly Committee on Appropriations.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098