BILL ANALYSIS
AB 1546
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1546 (Revenue & Taxation Committee)
As Amended August 17, 2009
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |50-29|(May 28, 2009) |SENATE: |22-15|(September 2, |
| | | | | |2009) |
-----------------------------------------------------------------
Original Committee Reference: REV. & TAX.
SUMMARY : Requires a canceled domestic limited partnership (LP),
which is seeking to revive its active status, to pay outstanding
fees, file missing tax returns, and pay a service fee for any
expedited revival requests. Makes several non-substantive,
technical changes to the Personal Income Tax Law and the
Corporation Tax Law, relating to the dependent exemption credit,
underpayment penalties, and business income apportionment
formulas.
The Senate amendments:
1)Clarify the operative date for the provision related to the
temporarily-reduced amount of the dependent exemption credit.
2)Correct erroneous cross-references in Revenue and Taxation
Code (R&TC) Section 19136.8, relating to a penalty for the
underpayment of estimated tax, and R&TC Section 25128,
relating to the business income apportionment formula.
3)Clarify that an annual election to use the single sales factor
apportionment formula may be made by an apportioning trade or
business only for taxable years beginning on or after January
1, 2011.
EXISTING LAW :
1)Provides that a domestic LP formed on or after January 1,
2008, is subject to the provisions of the Uniform Limited
Partnerships Act (ULPA) of 2008. A domestic LP that was
formed before January 1, 2008, may elect to be subject to
those provisions between January 1, 2008 and January 1, 2010.
As of January 1, 2010, all domestic LPs will be governed by
the ULPA, regardless of their date of formation.
AB 1546
Page 2
2)Defines "limited partnership" as an entity that has one or
more general partners and one or more limited partners and
formed by two or more persons.
3)Requires a domestic LP to file a certificate of cancellation
with the Secretary of State to complete the dissolution
process. A domestic LP that filed such a certificate may
decide later to revive its active status. Once it files the
certificate of revival, the domestic LP is treated as if it
had not been canceled.
4)Provides that the certificate of revival filed by a domestic
LP must be accompanied by the Franchise Tax Board (FTB)
written confirmation stating that the domestic LP has paid all
of the annual tax, penalties, and interest due, including
those amounts for each year between cancellation and revival.
5)Authorizes FTB to suspend a corporation's powers, rights, and
privileges for non-payment of fees due or non-filing of tax
returns. (R&TC Section 23301 and Section 23301.5).
6)Provides that a corporation suspended by the FTB may revive by
filing an Application for Certificate of Revivor, provided it
files all delinquent tax returns and pays any balance due,
including taxes, penalties, interest and fees. (R&TC Section
23305).
7)Requires a corporation that is looking to expedite processing
of its revivor request to pay a service fee, currently in the
amount of $100. (R&TC Section 19591). Does not contain a
similar requirement for the expedited processing requested by
domestic LPs.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required a domestic LP to pay all outstanding fees and to file
all required tax returns to receive the written confirmation
from the FTB needed for the domestic LP to revive its status.
2)Authorized FTB to assess, on or after January 1, 2010, and
before January 1, 2011, a $100 service fee for the expedited
processing of LP revival confirmation letter requests.
AB 1546
Page 3
3)Authorized FTB, after January 1, 2011, to establish, by
regulation adopted pursuant to Government Code Chapter 3.5
(commencing with Section 11340), the amount of the expedited
service fee.
4)Provided that the amount of the expedited service fee for
domestic LPs must be established in the manner and in the
amount necessary to reimburse the FTB for the costs of
administering the specialized services, including FTB's direct
and indirect costs of providing those services.
5)Applied to written confirmations made by FTB on or after
January 1, 2010.
6)Revised the percentages used to determine the amounts of
estimated tax payments under the "annualized income
installment method" to be consistent with SB 28 X1 (Budget
Committee), Chapter 1, Statutes of 2007-08.
FISCAL EFFECT : The FTB staff estimates that this bill will
result in a minor annual revenue gain (approximately $1,000) due
to the imposition of the LP revival fee.
COMMENTS : According to FTB, sponsor of this bill, the purpose
of this bill is to maintain equitable treatment among taxpayers
by ensuring that the revival requirements applicable to a
domestic LP are the same as those applicable to a corporation.
The Committee staff notes all of the following:
1)A domestic LP, whose certificate of LP has been canceled, may
revive its status by the filing of a "Certificate of Revival"
on a prescribed form that confirms certain items, such as
payment to the FTB of all taxes, penalties, and interest due
for each year, as well as other specified information. A
Certificate of Revival is deemed an amendment to the original
Certificate of LP, and no other amendments need be made to the
Certificate of LP. In effect, once the Certificate of Revival
is filed, the domestic LP is revived with the same force and
effect as if it were never dissolved, and the revival would
validate all contracts, acts, matters, and things done by the
LP and its partners, employees, and agents.
2)The FTB is authorized to impose specialized tax services fees
in connection with a number of listed services enumerated in
AB 1546
Page 4
R&TC Section 19591, including expedited services for
corporation revivor requests, tax clearance certificate
requests, and tax-exempt status requests. However, existing
law does not contain a similar requirement for the expedited
processing requested by domestic LPs. It is unclear to the
Committee staff why, currently, the same services requested by
a domestic LP are treated differently and are not subject to
the service fee.
3)Even though domestic LPs must pay all of the outstanding tax,
penalties, and interest prior to revival, they are not
required to pay any fees that are due, such as the collection
cost recovery fee, nor are they obligated to file the
delinquent tax returns. In contrast, a corporation seeking to
revive its active status must file all of the required tax
returns and pay all of the tax, additions to tax, penalties,
interest, and any other amounts due, including outstanding
fees, under the R&TC. By subjecting domestic LPs to the same
requirements that are currently applicable to corporate
taxpayers, this bill addresses the inequity of treating
similarly-situated taxpayers differently.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0002682