BILL NUMBER: AB 765	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 11, 2009

INTRODUCED BY   Assembly Members Caballero and Ruskin

                        FEBRUARY 26, 2009

   An act to amend  Sections 17052.12 and 23609 
 Section 17059  of the Revenue and Taxation Code, relating
to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 765, as amended, Caballero.  Income and corporation
taxes: credits: research.   Income tax credit: purchase:
principal residence.  
   The Personal Income Tax Law authorizes a credit against the taxes
imposed by that law in an amount equal to the lesser of 5% of the
purchase price or $10,000 in the case of the purchase of a qualified
principal residence on and after March 1, 2009, and before March 1,
2010, but not to exceed an aggregate limitation of $100,000,000 for
all credits allowable.  
   This bill would extend the credit to purchases made on or after
March 1, 2009, and before December 1, 2010, would specify that the
purchases are required to be pursuant to an enforceable contract, and
would increase the aggregate credit limitation to $300,000,000, as
provided.  
   This bill would take effect immediately as a tax levy. 

   The Personal Income Tax Law and the Corporation Tax Law, by
reference to a specified federal statute, allow a credit against
taxes imposed by those laws for increasing research expenses, as
defined. In general, the amount of the credit under both laws is
equal to 15% of the excess of the qualified research expenses, as
defined, for the taxable year over the base amount, as defined, and,
in addition, for purposes of the Corporation Tax Law, 24% of the
basic research payments, as defined. The term "base amount" means the
product of the average annual gross receipts of the taxpayer for
each of the specified years preceding the taxable year and the
fixed-base percentage, as defined, but in no event less than 50% of
the qualified research expenses for the taxable year. 

   This bill would increase those credits, as provided. 

   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 17059 of the   Revenue
and Taxation Code   is amended to read: 
   17059.  (a) (1) In the case of any taxpayer who purchases a
qualified principal residence on and after March 1, 2009, and before
 March   December  1, 2010, there shall be
allowed as a credit against the "net tax," as defined in Section
17039, an amount equal to the lesser of 5 percent of the purchase
price of the qualified principal residence or ten thousand dollars
($10,000).  Purchases occurring after March 1, 2010, and prior to
December 1, 2010, must be pursuant to an enforceable contract to
purchase the qualified principal residence executed   prior
to March 1, 2010. 
   (2) The amount of any credit allowed under paragraph (1) shall be
applied in equal amounts over the three successive taxable years
beginning with the taxable year in which the purchase of the
qualified principal residence is made.
   (3) The credit under this section shall be allowed for the
purchase of only one qualified principal residence with respect to
any taxpayer. 
   (4) A taxpayer may, but is not required to, reserve a credit prior
to close of escrow. To reserve a credit, the taxpayer and seller
shall jointly sign and submit to the Franchise Tax Board a
certification that they have entered into the agreement on or after
March 1, 2009, and before March 1, 2010. Upon receipt of the joint
certification, the Franchise Tax Board shall notify the taxpayer that
the board has conditionally reserved the credit for the taxpayer.

   (b) (1) For purposes of this section, "qualified principal
residence" means a single-family residence, whether detached or
attached, that has never been occupied, that is purchased to be the
principal residence of the taxpayer for a minimum of two years and is
eligible for the homeowner's exemption under Section 218.
   (2) No credit shall be allowed under this section unless the
taxpayer submits with his or her tax return a certification by the
seller of the qualified principal residence that the residence has
never been previously occupied. The seller shall provide the
certification to the taxpayer and to the Franchise Tax Board within
one week of the  sale   close of escrow  of
the qualified principal residence.
   (3) If the taxpayer does not occupy the qualified principal
residence as his or her principal residence for at least two years
immediately following the purchase the credit shall be canceled, and
the taxpayer shall be liable for any credit allowed under this
section on previous tax returns.
   (c) (1) In the case of two married taxpayers filing separately,
the credit allowed under subdivision (a) shall be equally apportioned
between the two taxpayers.
   (2) If two or more taxpayers who are not married purchase a
qualified principal residence, the amount of the credit allowed under
subdivision (a) shall be allocated among the taxpayers in the same
manner as each taxpayer's percentage of ownership, except that the
total amount of the credits allowed to all of these taxpayers shall
not exceed ten thousand dollars ($10,000).
   (d) The total amount of credit that may be allowed pursuant to
this section shall not exceed  one   three 
hundred million dollars  ($100,000,000)  
($300,000,000)  .
   (e) (1) Upon receipt of the certification from the seller, as
described in paragraph (2) of subdivision (b), the Franchise Tax
Board shall allocate the credit to the taxpayer on a first-come,
first-served basis.
   (2) The taxpayer shall claim the credit on a timely filed original
return.
   (3) The date a certification is received shall be determined by
the Franchise Tax Board.
   (4) (A) The determinations of the Franchise Tax Board with respect
to the date a certification is received, and whether a return has
been timely filed for purposes of this subdivision, may not be
reviewed in any administrative or judicial proceeding.
   (B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from that
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
   (f) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code does not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
   (g) The credit allowed by this section is not a business credit
within the meaning of Section 17039.2.
   (h)  The amendments to this section by the act adding this
sentence shall apply to purchases occurring on or after March 1,
2009, and before December 1, 2010. 
    (i)    This section shall remain in effect only
until December 1, 2013, and as of that date is repealed.
   SEC. 2.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.    Section 17052.12 of the Revenue and
Taxation Code is amended to read:
   17052.12.  For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) for the taxable year an amount determined
in accordance with Section 41 of the Internal Revenue Code, except as
follows:
   (a) For each taxable year beginning before January 1, 1997, the
reference to "20 percent" in Section 41(a)(1) of the Internal Revenue
Code is modified to read "8 percent."
   (b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to "20 percent" in
Section 41(a)(1) of the Internal Revenue Code is modified to read "11
percent."
   (2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "12
percent."
   (3) For each taxable year beginning on or after January 1, 2000,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "15 percent."
   (4) For each taxable year beginning on or after January 1, 2011,
and before January 1, 2012, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "16.25 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (5) For each taxable year beginning on or after January 1, 2012,
and before January 1, 2013, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "17.50 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (6) For each taxable year beginning on or after January 1, 2013,
and before January 1, 2014, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "18.75 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (7) For each taxable year beginning on or after January 1, 2014,
both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code shall apply.
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (c) Section 41(a)(2) of the Internal Revenue Code, relating to
basic research payments, shall not apply.
   (d) "Qualified research" shall include only research conducted in
California.
   (e) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted.
   (f) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
   (2) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 11 (commencing with Section
23001)."
   (g) (1) For each taxable year beginning on or after January 1,
2000:
   (A) The reference to "2.65 percent" in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
   (B) The reference to "3.2 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
   (C) The reference to "3.75 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
   (2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998. That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
   (3) Section 41(c)(6) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
   (h) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
   (i) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
   (1) The last sentence shall not apply.
   (2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
 
  SEC. 2.    Section 23609 of the Revenue and
Taxation Code is amended to read:
   23609.  For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount determined in accordance with
Section 41 of the Internal Revenue Code, except as follows:
   (a) For each taxable year beginning before January 1, 1997, both
of the following modifications shall apply:
   (1) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "8 percent."
   (2) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "12 percent."
   (b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following modifications
shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "11 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "12 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (3) For each taxable year beginning on or after January 1, 2000,
both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (4) For each taxable year beginning on or after January 1, 2011,
and before January 1, 2012, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "16.25 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (5) For each taxable year beginning on or after January 1, 2012,
and before January 1, 2013, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "17.50 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (6) For each taxable year beginning on or after January 1, 2013,
and before January 1, 2014, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "18.75 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (7) For each taxable year beginning on or after January 1, 2014,
both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code shall apply.
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
   (2) "Qualified research" and "basic research" shall include only
research conducted in California.
   (d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code, shall be modified so that "basic research," for purposes of
this section, includes any basic or applied research including
scientific inquiry or original investigation for the advancement of
scientific or engineering knowledge or the improved effectiveness of
commercial products, except that the term does not include any of the
following:
   (1) Basic research conducted outside California.
   (2) Basic research in the social sciences, arts, or humanities.
   (3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
   (4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
   (e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code shall be modified to include both of
the following:
   (A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code.
   (B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, is not a private foundation, is designated a "specialized
laboratory cancer center," and has received Clinical Cancer Research
Center status from the National Cancer Institute.
   (2) For purposes of this subdivision:
   (A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
   (B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.

   (f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
   (g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
   (h) (1) For each taxable year beginning on or after January 1,
2000:
   (A) The reference to "2.65 percent" in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
   (B) The reference to "3.2 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
   (C) The reference to "3.75 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
   (2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998. That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
   (3) Section 41(c)(6) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
   (i) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
   (j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
   (1) The last sentence shall not apply.
   (2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
 
  SEC. 3.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.