BILL ANALYSIS
AB 2458
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Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2458 (Saldana) - As Amended: April 5, 2010
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends the due date for the payment of certain
penalties imposed on small businesses, which are currently due
and payable immediately upon notification by the Franchise Tax
Board (FTB). Specifically, the bill:
1)Allows a small business to pay the 10% penalty for the
underpayment of the estimated Limited Liability Company (LLC)
fee within 60 days from the date on which the small business
is notified of the penalty.
2)Allows a small business to pay the penalty assessed for the
failure to file the Statement of Information with the
Secretary of State (SOS) within 60 days from the date on which
the small business is notified of the penalty.
3)Defines the phrase "small business" as a business whose total
California income for the taxable years is $1 million or less.
4)Applies to penalties imposed or assessed on or after January
1, 2011 and before January 1, 2016.
FISCAL EFFECT
1)According to the FTB, the delay in penalty payments will
result in a one-time loss of less than $150,000 in 2010-11 and
annual losses of less than $10,000 in 2011-12 and through
2015-16.
AB 2458
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2)The FTB also indicates the bill will result in significant
one-time costs of several hundreds of thousands of dollars for
the reprogramming of its computerized collection and business
entity billing systems.
COMMENTS
1)Purpose . This bill is intended to provide some relief to
small companies that have been adversely affected by the
economic downturn and acceleration of fee payment due dates.
The author indicates that many small businesses are
experiencing financial hardship and, if those companies go out
of business, the state would lose revenue from employment and
personal income taxes.
2)Background . SB 469 (Beverly), Chapter 1100, Statutes of 1994,
authorized formation of LLCs in California. These entities
are subject to both a minimum tax and an annual fee (based on
total income received by the LLC). Currently, the annual fees
range from zero for LLCs with total income California income
of less than $250,000, to a maximum of $11,790 for LLCs with
total California income of $5 million or more.
Through 2008, the LLC fee was due on the filing date for the
LLC's final return for the prior taxable year. However, the
2009-10 budget included a provision requiring the LLC fee to
be estimated and paid by the 15th day of the 6th month of the
current taxable year. If the company fails to pay the full
fee, it is subject to a penalty equal to 10% of the
underpayment of the estimated fee.
Current law also requires LLCs and corporations to file a
Statement of Information with the Secretary of State within 90
days after the filing of its original Articles of Organization
or Application for Registration, and biennially thereafter. It
also imposes a penalty for failure to file the Statement of
Information by the due date. Upon receiving the name of the
corporation from the Secretary of State, the FTB assesses a
penalty of either $250, in the case of LLCs and corporations,
or $50, in the case of nonprofit public benefit corporations
and nonprofit mutual benefit corporations.
These penalties are due and payable by the companies
immediately upon notification by the FTB.
AB 2458
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Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081