BILL NUMBER: AB 2640 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Arambula
FEBRUARY 19, 2010
An act to amend Sections 17149, 18037, 18041.5, 18042, 24941,
24942, 24943, 24944, 24950, 24951, 24952, 24954, 24954.1, and 24955
of, and to add Sections 6377, 18036.7, 18036.8, 18037.2, 18037.3,
18037.5, 18037.7, 18038.1, 18038.2, 18045, 24943.5, 24951.5, 24952.3,
24953, 24955.5, 24957, and 24958 to, the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2640, as introduced, Arambula. Sales and use taxes: exemption:
manufacturing equipment: income taxes: subsidized parking: nontaxable
exchanges.
The Sales and Use Tax Law imposes a tax on retailers measured by
the gross receipts from the sale of tangible personal property sold
at retail in this state, or on the storage, use, or other consumption
in this state of tangible personal property purchased from a
retailer for storage, use, or other consumption in this state.
This bill would exempt from sales and use taxes the gross receipts
from the sale of, and the storage, use, or other consumption of,
manufacturing equipment that is purchased by specified purchasers in
a specified amount. This bill would cap the amount of exemption
allowed to those specified purchasers at a particular amount, as
annually adjusted.
This bill would specify that this exemption does not apply to
local sales and use taxes, transactions and use taxes, and specified
state sales and use taxes.
The Personal Income Tax Law and the Corporation Tax Law, in
modified conformity to federal income tax laws, exclude from taxation
any gain from certain exchanges of property.
This bill would, under both laws, remove the exclusion from
taxation any gain from those exchanges.
The Personal Income Tax Law provides an exclusion from gross
income for compensation or the fair market value of any benefit,
except salary or wages, that is received by an employee from an
employer for the use of various transportation methods or
arrangements, including free or subsidized parking.
This bill would, for taxable years beginning on or after January
1, 2010, remove the exclusion from gross income for free or
subsidized parking.
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 6377 is added to the Revenue and Taxation Code,
to read:
6377. (a) (1) Subject to paragraph (2), there are exempted from
the taxes imposed by this part the gross receipts from the sale of,
and the storage, use, or other consumption in this state of, tangible
personal property that is depreciable manufacturing equipment
purchased by a qualified purchaser.
(2) No exemption shall be allowed where the cutoff date, as
described in paragraph (2) of subdivision (c), for that calendar year
has been reached.
(b) For purposes of this section,"qualified purchaser" means a
purchaser engaged in any of those lines of business described in
Codes 311111 to 339999, inclusive, of the North American Industrial
Classification System (NAICS) Manual published by the United States
Office of Management and Budget, 2007 edition.
(c) (1) No exemption shall be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instruction or regulation as the
board may prescribe, and the retailer subsequently furnishes the
board with a copy of the exemption certificate. The exemption
certificate shall contain the purchase price of the depreciable
manufacturing equipment, the sale or storage, use, or other
consumption of which is exempt from taxes pursuant to subdivision
(a).
(2) Exemptions under this section shall be allowed on or before
the cutoff date established by the Franchise Tax Board and shall be
granted on a first-come-first-served basis.
(A) For the first calendar year in which this exemption is in
effect, the cutoff date shall be the last day of the calendar quarter
within which the Franchise Tax Board estimates that the aggregate
revenue increase generated from the amendments and additions made to
Chapter 13 (commencing with Section 18031) of Part 10 and Article 3
(commencing with Section 24941) of Chapter 15 of Part 11 by the act
adding this subdivision has reached the baseline amount. For purposes
of this subparagraph, "baseline amount" means four hundred fifty
million dollars ($450,000,000).
(B) For each subsequent calendar year, the cutoff date shall be
the last day of the calendar quarter within which the Franchise Tax
Board estimates that the baseline amount has been reached, or that
amount is adjusted each calendar year to reflect the rate of
inflation or deflation from the previous date that the baseline
amount was established, as measured by the Consumer Price Index or
other method of measuring the rate of inflation or deflation which
the Franchise Tax Board determines is reliable and generally
accepted.
(d) (1) Notwithstanding any provision of the Bradley-Burns Uniform
Local Sales and Use Tax Law (Part 1.5 (commencing with Section
7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with
Section 7251)), the exemption provided by this section shall not
apply with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws.
(2) The exemption provided by this section shall not apply with
respect to any tax levied pursuant to Sections 6051.2, 6051.5,
6201.2, and 6201.5 or pursuant to Section 35 of Article XIII of the
California Constitution.
SEC. 2. Section 17149 of the Revenue and Taxation Code is amended
to read:
17149. (a) Gross income does not include compensation or the fair
market value of any other benefit, except salary or wages, received
by an employee from an employer for participation in any ridesharing
arrangement in California, including those specified in subdivision
(b).
(b) For purposes of this section, compensation or the fair market
value of any other benefit received for participation in a
ridesharing arrangement in California includes compensation or other
benefit received for:
(1) Commuting in a vanpool.
(2) Commuting in a private commuter bus or buspool.
(3) A transit pass for use by the employee or his or her
dependents, other than transit passes for use by elementary and
secondary school students who are dependents of the employee.
(4) Commuting in a subscription taxipool.
(5) Commuting in a carpool.
(6) Free or subsidized parking.
(7)
(6) An employee's bicycling to or from his or her place
of employment.
(8)
(7) Commuting by ferry.
(9)
(8) The use of an alternative transportation method,
other than a method otherwise specified in this subdivision, that
reduces the use of a motor vehicle by a single occupant to travel to
or from that individual's place of employment.
(10)
(9) Travel to or from a telecommuting facility.
(c) For purposes of this section:
(1) "Vanpool" means seven or more persons commuting on a daily
basis to and from work by means of a vehicle with a seating
arrangement designed to carry 7 to 15 adults, including the driver,
that is used to transport those persons who commute to and from work
on a regular basis.
(2) "Transit pass" means any purchase of transit rides that
entitles the holder to any number of transit rides to and from the
workplace, whether at a discount rate or the base fare rate.
(3) "Transit" means transportation service for use by the general
public that utilizes buses, railcars, or ferries with a seating
capacity of 16 or more persons.
(4) "Subscription taxipool" means a type of service in which
employers or groups of employees contract with a public or private
taxi operator to provide daily commuter service for a group of
preassembled subscribers on a prepaid or daily fare basis following a
relatively fixed route and schedule tailored to meet the needs of
the subscribers.
(5) "Ridesharing arrangement" means the transportation of persons
in a motor vehicle where that transportation is incidental to another
purpose of the driver. The term includes ridesharing arrangements
known as carpools, vanpools, and buspools.
(6) "Carpool" means two or more persons commuting on a daily basis
to and from work by means of a vehicle with a seating arrangement
designed to carry less than seven adults, including the driver.
(7) "Buspool" means 16 or more persons commuting on a daily basis
to and from work by means of a vehicle with a seating arrangement
designed to carry more than 15 adult passengers.
(8) "Private commuter bus" means a highway vehicle which meets all
of the following criteria:
(A) Has a seating capacity of at least seven adults, including the
driver.
(B) At least 50 percent of the mileage of which can be reasonably
expected to be used for the purpose of transporting employees to and
from work.
(C) Is acquired by the taxpayer on or after the date of enactment
of this section.
(D) With respect to which the taxpayer makes an election under
this paragraph on his or her return for the taxable year in which the
vehicle is placed in service.
(9) "Free or subsidized parking" means the benefit received from
an employer for parking while participating in a ridesharing
arrangement within California.
(10)
(9) "Alternative commute program" means any alternative
transportation method or program the purpose of which is to reduce
the use of a motor vehicle by a single occupant to travel to and from
that individual's place of employment.
(d) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2010.
SEC. 3. Section 18036.7 is added to the Revenue and Taxation Code,
to read:
18036.7. (a) For taxable years beginning on or after January 1,
2010, Section 1031(a) of the Internal Revenue Code, relating to
nonrecognition of gain or loss from exchanges solely in kind shall
not apply.
(b) For taxable years beginning on or after January 1, 2010,
Section 1031(f)(1) of the Internal Revenue Code, relating to special
rules for exchanges between related persons shall not apply.
(c) For taxable years beginning on or after January 1, 2010,
Section 1031(i) of the Internal Revenue Code, relating to special
rules for mutual ditch, reservoir, or irrigation company stock shall
not apply.
SEC. 4. Section 18036.8 is added to the Revenue and Taxation Code,
to read:
18036.8. For taxable years beginning on or after January 1, 2010,
Section 1032 of the Internal Revenue Code, relating to exchange of
stock for property shall not apply.
SEC. 5. Section 18037 of the Revenue and Taxation Code is amended
to read:
18037. (a) An election made by a taxpayer
pursuant to Section 1033(g)(3) of the Internal Revenue Code, relating
to the election to treat outdoor advertising displays as real
property, may not be denied because the taxpayer has, on his or her
federal return, elected to expense the asset.
(b) For taxable years beginning on or after January 1, 2010,
Section 1033(a)(1) of the Internal Revenue Code, relating to
involuntary conversions into similar property shall not apply.
(c) For taxable years beginning on or after January 1, 2010,
Section (a)(2)(A) of the Internal Revenue Code, relating to
involuntary conversions into money shall not apply.
SEC. 6. Section 18037.2 is added to the Revenue and Taxation Code,
to read:
18037.2. For taxable years beginning on or after January 1, 2010,
Section 1035 of the Internal Revenue Code, relating to certain
exchanges of insurance policies shall not apply.
SEC. 7. Section 18037.3 is added to the Revenue and Taxation Code,
to read:
18037.3. For taxable years beginning on or after January 1, 2010,
Section 1036 of the Internal Revenue Code, relating to stock for
stock of the same corporation shall not apply.
SEC. 8. Section 18037.5 is added to the Revenue and Taxation Code,
to read:
18037.5. For taxable years beginning on or after January 1, 2010,
Section 1037 of the Internal Revenue Code, relating to certain
exchanges of United States obligation shall not apply.
SEC. 9. Section 18037.7 is added to the Revenue and Taxation Code,
to read:
18037.7. For taxable years beginning on or after January 1, 2010,
Section 1038(a) of the Internal Revenue Code, relating to general
rule for certain acquisitions of property shall not apply.
SEC. 10. Section 18038.1 is added to the Revenue and Taxation
Code, to read:
18038.1. For taxable years beginning on or after January 1, 2010,
Section 1041(a) of the Internal Revenue Code, relating to transfers
of property between spouses or incident to divorce shall not apply.
SEC. 11. Section 18038.2 is added to the Revenue and Taxation
Code, to read:
18038.2. For taxable years beginning on or after January 1, 2010,
Section 1043 of the Internal Revenue Code, relating to sale of
property to comply with conflict-of-interest requirements shall not
apply.
SEC. 12. Section 18041.5 of the Revenue and Taxation Code is
amended to read:
18041.5. (a) No gain shall be recognized with respect to a sale
of an assisted housing development to a tenant association, nonprofit
organization, profit-motivated organization or individual, or public
agency which obligates itself and any successors in interest to
maintain the assisted housing development affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, whichever is greater, provided that
all of the proceeds from the sale are reinvested in residential real
property, other than a personal residence, in this state within two
years after the sale. This obligation shall be recorded at the time
of sale in the office of the county recorder of the county in which
the development is located.
(b) No gain shall be recognized with respect to a sale of a
majority or more of units in an assisted housing development
converted to condominium interests, to a tenant association,
nonprofit organization, profit-motivated organization or individual,
or public agency which obligates itself and any successors in
interest to maintain the condominiums affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
This obligation shall be recorded at the time of sale in the office
of the county recorder of the county in which the development is
located.
(c) No gain shall be recognized with respect to a sale of real
property to a majority or more of existing lower income and very low
income residents of that property, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
(d) No gain shall be recognized with respect to a sale of a
majority or more of units converted to condominium interests to the
existing lower income or very low income residents of that property,
provided that all of the proceeds from the sale are reinvested in
residential real property, other than a personal residence, in this
state within two years after the sale.
(e) For purposes of this section:
(1) "Assisted housing development" means a multifamily rental
housing development that receives federal government assistance,
appearing of record and containing a legal description of the
property, as defined in subdivision (a) of Section 65863.10 of the
Government Code.
(2) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization; or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development, real property, or condominium and which
represents the interests of at least a majority of the tenants in the
assisted housing development, real property, or condominium.
(3) "Nonprofit organization" means a not-for-profit corporation
organized pursuant to Division 2 (commencing with Section 5000) of
Title 1 of the Corporations Code, which has as its principal purpose
the ownership, development, or management of housing or community
development projects for persons and families of lower income and
very low income, and which has a broadly representative board, a
majority of whose members are community-based and has a proven track
record of community service.
(4) "Public agency" means a housing authority, redevelopment
agency, or any other agency of a city, county, or city and county,
whether general law or chartered, which is authorized to own,
develop, or manage housing or community development projects for
persons and families of lower income and very low income.
(5) "Regional or national organization" means a not-for-profit,
charitable corporation organized on a multicounty, state, or
multistate basis which has as its principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of lower income and very low
income.
(6) "Regional or national agency" means a multicounty, state, or
multistate agency which is authorized to own, develop, or manage
housing or community development projects for persons and families of
lower income and very low income.
(7) "Profit-motivated organization or individual" means an
individual or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, which carries on
as a business for profit.
(8) "Lower income" means those residents having an income as
defined by Section 50079.5 of the Health and Safety Code.
(9) "Very low income" means those residents having an income as
defined by Section 50105 of the Health and Safety Code.
(10) "Resident" means a tenant or other person who lawfully
occupies a unit located in a qualified low-income housing project as
defined under Section 17058, and whose income qualifies as lower
income or very low income.
(11) "Condominium" means the interest in real property defined in
Section 783 of the Civil Code.
(f) If the purchase of residential real property results in the
nonrecognition of gain on the sale of an assisted housing
development, real property, or condominium under subdivision (a),
(b), (c), or (d), in determining the adjusted basis of the purchased
residential real property as of any time following the sale of the
assisted housing development, real property, or condominium, the
adjustments to the basis shall include a reduction by an amount equal
to the amount of the gain not so recognized on the sale of the
assisted housing development, real property, or condominium. If more
than one parcel of residential real property has been purchased, the
nonrecognized gain from the sale of the assisted housing development,
real property, or condominium shall be attributed to the parcels of
residential real property on a pro rata basis based upon the purchase
prices of those parcels.
(g) In accordance with subdivision (a), (b), (c), or (d), if the
sale of an assisted housing development, real property, or
condominium results in a gain during the taxable year, then all of
the following shall apply:
(1) The statutory period for the assessment of any deficiency
attributable to any part of the gain shall not expire before the
expiration of four years from the date the Franchise Tax Board is
notified (on the form as the Franchise Tax Board may provide) of one
of the following:
(A) The cost of purchasing the residential real property which
satisfies the requirement of subdivision (a), (b), (c), or (d), and
results in the nonrecognition of gain.
(B) The intention not to reinvest all of the proceeds from the
sale in residential real property within the period specified in
subdivision (a), (b), (c), or (d).
(C) The failure to reinvest all of the proceeds from the sale in
residential real property within the period specified in subdivision
(a), (b), (c), or (d).
(2) The deficiency may be assessed before the expiration of the
period specified in paragraph (1), notwithstanding the provisions of
any other law or rule of law which would otherwise prevent the
assessment.
(3) All information regarding the sale of an assisted housing
development, real property, or condominium, at a gain in accordance
with subdivision (a), (b), (c), or (d), shall be disclosed in the
return for the taxable year in which the sale took place in order to
determine if the sale qualifies and the amount of nonrecognition of
gain qualifies under subdivision (a), (b), (c), or (d).
(h) The Department of Housing and Community Development shall do
all of the following:
(1) Certify that the lower income or very low income resident
meets the definitions provided in paragraphs (8) and (9) of
subdivision (e).
(2) Provide an annual listing to the Franchise Tax Board, in a
form and manner agreed upon by the Franchise Tax Board and the
Department of Housing and Community Development, of the names and
identification numbers of the persons who are members of the group of
purchasers who are lower income or very low income residents that
were issued a certification, and the names and identification numbers
of the sellers of the property.
(3) Provide the group of purchasers who are lower income or very
low income residents a copy of the certification.
(i) The group of purchasers who are lower income or very low
income residents shall do all of the following:
(1) Provide the Department of Housing and Community Development
with documents, as deemed necessary by the department, verifying the
income of each member of the group.
(2) Provide a copy of the certification to the seller of the
assisted housing development, real property, or condominium.
(3) Retain a copy of the certification.
(j) The seller of the assisted housing development, real property,
or condominium shall do all of the following:
(1) Obtain a copy of the certification from the group of
purchasers who are lower income or very low income residents of the
assisted housing development, real property, or condominium.
(2) Retain a copy of the group's lower income or very low income
certification for tax purposes.
(k) This section shall cease to be operative for taxable years
beginning on or after January 1, 2010.
SEC. 13. Section 18042 of the Revenue and Taxation Code is amended
to read:
18042. (a) Section 1042 of the Internal Revenue Code, relating to
sales of stock to employee stock ownership plans or certain
cooperatives, shall apply to taxable years beginning on or after
January 1, 1995 , and before January 1, 2010 .
(b) For taxable years beginning on or after January 1, 1998,
and before January 1, 2010, Section 1042 of the Internal
Revenue Code, relating to sales of stock to employee stock ownership
plans or certain cooperatives, is modified to provide that the term
"domestic corporation" shall instead mean "domestic C corporation."
(c) Section 1042(g) of the Internal Revenue Code, relating to
application of section to sales of stock in agricultural refiners and
processors to eligible farm cooperatives, shall not apply.
(d) For taxable years beginning on or after January 1, 2010,
Section 1042(a) of the Internal Revenue Code, relating to sales of
stock to employee stock ownership plans or certain cooperatives shall
not apply.
(e) For taxable years beginning on or after January 1, 2010,
Section 1042(e)(3) of the Internal Revenue Code, relating to
application of recapture to qualified replacement property shall not
apply.
SEC. 14. Section 18045 is added to the Revenue and Taxation Code,
to read:
18045. For taxable years beginning on or after January 1, 2010,
Section 1058 of the Internal Revenue Code, relating to special rules
for transfers of securities under certain agreements shall not apply.
SEC. 15. Section 24941 of the Revenue and Taxation Code is amended
to read:
24941. Section (a)
For taxable years beginning before January 1, 2010, Section 1031
of the Internal Revenue Code, relating to exchange of property held
for productive use or investment, shall apply, except as otherwise
provided.
(b) For taxable years beginning on or after January 1, 2010,
Section 1031(a) of the Internal Revenue Code, relating to
nonrecognition of gain or loss from exchanges solely in kind shall
not apply.
(c) For taxable years beginning on or after January 1, 2010,
Section 1031(f)(1) of the Internal Revenue Code, relating to special
rules for exchanges between related persons shall not apply.
(d) For taxable years beginning on or after January 1, 2010,
Section 1031(i) of the Internal Revenue Code, relating to special
rules for mutual ditch, reservoir, or irrigation company stock shall
not apply.
SEC. 16. Section 24942 of the Revenue and Taxation Code is amended
to read:
24942. (a) No gain or loss shall be recognized to a corporation
on the receipt of money or other property in exchange for stock
(including treasury stock) of that corporation. No gain or loss shall
be recognized by a corporation with respect to any lapse or
acquisition of an option, or with respect to a securities futures
contract (as defined in Section 1234B of the Internal Revenue Code,
to buy or sell its stock (including treasury stock).
(b) For basis of property acquired by a corporation in certain
exchanges for its stock, see Sections 24552 to 24554, inclusive.
(c) This section shall cease to be operative for taxable years
beginning on or after January 1, 2010.
SEC. 17. Section 24943 of the Revenue and Taxation Code is amended
to read:
24943. If property (as a result of its destruction in whole or in
part, theft, seizure, or requisition or condemnation or threat or
imminence thereof) is compulsorily or involuntarily converted--
(a) Into property similar or related in service or use to the
property so converted, no gain shall be recognized.
(b) Into money, and the disposition of the converted property
occurred before January 1, 1953, no gain shall be recognized if such
money is forthwith in good faith, under regulations prescribed by the
Franchise Tax Board, expended in the acquisition of other property
similar or related in service or use to the property so converted, or
in the acquisition of control of a corporation owning such other
property, or in the establishment of a replacement fund. If any part
of the money is not so expended, the gain shall be recognized to the
extent of the money which is not so expended (regardless of whether
such money is received in one or more taxable years and regardless of
whether or not the money which is not so expended constitutes gain).
For purposes of this subsection and Section 24944, the term
"disposition of the converted property" means the destruction, theft,
seizure, requisition, or condemnation of the converted property, or
the sale or exchange of such property under threat or imminence of
requisition or condemnation.
For purposes of this section and Section 24944, the term "control"
means the ownership of stock possessing at least 80 percent of the
total combined voting power of all classes of stock entitled to vote
and at least 80 percent of the total number of shares of all other
classes of stock of the corporation.
(c) This section shall cease to be operative for taxable years
beginning on or after January 1, 2010.
SEC. 18. Section 24943.5 is added to the Revenue and Taxation
Code, to read:
24943.5. (a) For taxable years beginning on or after January 1,
2010, Section 1033(a)(1) of the Internal Revenue Code, relating to
involuntary conversions into similar property shall not apply.
(b) For taxable years beginning on or after January 1, 2010,
Section (a)(2)(A) of the Internal Revenue Code, relating to
involuntary conversions into money shall not apply.
SEC. 19. Section 24944 of the Revenue and Taxation Code is amended
to read:
24944. If (a)
For taxable years beginning before January 1, 2010, if
property (as a result of its destruction in whole or in part, theft,
seizure, or requisition or condemnation or threat or imminence
thereof) is compulsorily or involuntarily converted into money or
into property not similar or related in service or use to the
converted property, and the disposition of the converted property (as
defined in subdivision (b) of Section 24943) occurred after December
31, 1952, the gain (if any) shall be recognized except to the extent
hereinafter provided in this section:
(a)
(b) If the taxpayer during the period specified in
subdivision (b), for the purpose of replacing the property so
converted, purchases other property similar or related in service or
use to the property so converted, or purchases stock in the
acquisition of control of a corporation owning such other property,
at the election of the taxpayer the gain shall be recognized only to
the extent that the amount realized upon such conversion (regardless
of whether such amount is received in one or more taxable years)
exceeds the cost of such other property or such stock. Such election
shall be made at such time and in such manner as the Franchise Tax
Board may by regulations prescribe. For purposes of this
subdivision--
(1) No property or stock acquired before the disposition of the
converted property shall be considered to have been acquired for the
purpose of replacing such converted property unless held by the
taxpayer on the date of such disposition; and
(2) The taxpayer shall be considered to have purchased property or
stock only if, but for the provisions of Section 24947, the
unadjusted basis of such property or stock would be its cost within
the meaning of Section 24912.
(b)
(c) The period referred to in subdivision (a) shall be
the period beginning with the date of the disposition of the
converted property, or the earliest date of the threat or imminence
of requisition or condemnation of the converted property, whichever
is the earlier, and ending--
(1) Two years after the close of the first taxable year in which
any part of the gain upon the conversion is realized; or
(2) Subject to such terms and conditions as may be specified by
the Franchise Tax Board, at the close of such later date as the
Franchise Tax Board may designate on application by the taxpayer.
Such application shall be made at such time and in such manner as the
Franchise Tax Board may by regulations prescribe.
(c)
(d) For purposes of this section and Section 24943,
replacement property "similar or related in service or use" shall
include, in the case of a nonprofit water utility corporation,
personal property used for the transmission or storage of water.
SEC. 20. Section 24950 of the Revenue and Taxation Code is amended
to read:
24950. (a) For taxable years beginning
before January 1, 2010, Section 1035 of the Internal Revenue
Code, relating to certain exchanges of insurance policies, shall
apply, except as otherwise provided.
(b) For taxable years beginning on or after January 1, 2010,
Section 1035 of the Internal Revenue Code, relating to certain
exchanges of insurance polies, shall not apply.
SEC. 21. Section 24951 of the Revenue and Taxation Code is amended
to read:
24951. (a) For taxable years beginning
before January 1, 2010, Section 1036 of the Internal Revenue
Code, relating to stock for stock of same corporation, shall apply,
except as otherwise provided.
(b) For taxable years beginning on or after January 1, 2010,
Section 1036 of the Internal Revenue Code, relating to stock for
stock of same corporation shall not apply.
SEC. 22. Section 24951.5 is added to the Revenue and Taxation
Code, to read:
24951.5. For taxable years beginning on or after January 1, 2010,
Section 1037 of the Internal Revenue Code, relating to certain
exchanges of United States obligation shall not apply.
SEC. 23. Section 24952 of the Revenue and Taxation Code is amended
to read:
24952. (a) If For taxable years beginning
before January 1, 2010, if --
(1) A sale of real property gives rise to indebtedness to the
seller which is secured by the real property sold, and
(2) The seller of such property reacquires such property in
partial or full satisfaction of such indebtedness,
then, except as provided in subdivisions (b) and (d), no gain or
loss shall result to the seller from such reacquisition, and no debt
shall become worthless or partially worthless as a result of such
reacquisition.
(b) (1) In the case of a reacquisition of real property to which
subdivision (a) applies, gain shall result from such reacquisition to
the extent that--
(A) The amount of money and the fair market value of other
property (other than obligations of the purchaser) received, prior to
such reacquisition, with respect to the sale of such property,
exceeds
(B) The amount of the gain on the sale of such property included
in the measure of tax or returned as income for periods prior to such
reacquisition.
(2) The amount of gain determined under paragraph (1) resulting
from a reacquisition during any taxable year beginning after December
31, 1964, shall not exceed the amount by which the price at which
the real property was sold exceeded its adjusted basis, reduced by
the sum of--
(A) The amount of the gain on the sale of such property included
in the measure of tax or returned as income for periods prior to the
reacquisition of such property, and
(B) The amount of money and the fair market value of other
property (other than obligations of the purchaser received with
respect to the sale of such property) paid or transferred by the
seller in connection with the reacquisition of such property.
For purposes of this paragraph, the price at which real property
is sold is the gross sales price reduced by the selling commissions,
legal fees, and other expenses incident to the sale of such property
which are properly taken into account in determining gain or loss on
such sale.
(3) Except as provided in this section, the gain determined under
this subdivision resulting from a reacquisition to which subdivision
(a) applies shall be recognized, notwithstanding any other provision
of this part.
(c) If subdivision (a) applies to the reacquisition of any real
property, the basis of such property upon such reacquisition shall be
the adjusted basis of the indebtedness to the seller secured by such
property (determined as of the date of reacquisition), increased by
the sum of--
(1) The amount of the gain determined under subdivision (b)
resulting from such reacquisition, and
(2) The amount described in subparagraph (B) of paragraph (2) of
subdivision (b).
If any indebtedness to the seller secured by such property is not
discharged upon the reacquisition of such property, the basis of such
indebtedness shall be zero.
(d) If, prior to a reacquisition of real property to which
subdivision (a) applies, the seller has treated indebtedness secured
by such property as having become worthless or partially worthless--
(1) Such seller shall be considered as receiving, upon the
reacquisition of such property, an amount equal to the amount of such
indebtedness treated by him as having become worthless, and
(2) The adjusted basis of such indebtedness shall be increased (as
of the date of reacquisition) by an amount equal to the amount so
considered as received by such seller.
(e) For taxable years beginning on or after January 1, 2010,
Section 1038(a) of the Internal Revenue Code, relating to general
rule for certain acquisitions of property shall not apply.
SEC. 24. Section 24952.3 is added to the Revenue and Taxation
Code, to read:
24952.3. For taxable years beginning on or after January 1, 2010,
Section 1040 of the Internal Revenue Code, relating to transfer of
certain real property shall not apply.
SEC. 25. Section 24953 is added to the Revenue and Taxation Code,
to read:
24953. For taxable years beginning on or after January 1, 2010,
Section 1043 of the Internal Revenue Code, relating to sale of
property to comply with conflict-of-interest requirements shall not
apply.
SEC. 26. Section 24954 of the Revenue and Taxation Code is amended
to read:
24954. (a) For taxable years beginning on
or after January 1, 1995, and before January 1, 2010,
Section 1042 of the Internal Revenue Code, relating to sales of stock
to employee stock ownership plans or certain cooperatives, shall
apply, except as otherwise provided.
(b) or taxable years beginning on or after January 1, 2010,
Section 1042 of the Internal Revenue Code, relating to sales of stock
to employee stock ownership plans or certain cooperatives, shall not
apply.
SEC. 27. Section 24954.1 of the Revenue and Taxation Code is
amended to read:
24954.1. For taxable years beginning before January 1, 2010,
Section 1042(g) of the Internal Revenue Code, relating to
application of section to sales of stock in agricultural refiners and
processors to eligible farm cooperatives, shall not apply.
SEC. 28. Section 24955 of the Revenue and Taxation Code is amended
to read:
24955. (a) No gain shall be recognized with respect to a sale of
an assisted housing development to a tenant association, nonprofit
organization, profit-motivated organization or individual, or public
agency which obligates itself and any successors in interest to
maintain the assisted housing development affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, whichever is greater, provided that
all of the proceeds from the sale are reinvested in residential real
property, other than a personal residence, in this state within two
years after the sale. This obligation shall be recorded at the time
of sale in the office of the county recorder of the county in which
the development is located.
(b) No gain shall be recognized with respect to a sale of a
majority or more of units in an assisted housing development
converted to condominium interests, to a tenant association,
nonprofit organization, profit-motivated organization or individual,
or public agency which obligates itself and any successors in
interest to maintain the condominiums affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
This obligation shall be recorded at the time of sale in the office
of the county recorder of the county in which the development is
located.
(c) No gain shall be recognized with respect to a sale of real
property to a majority or more of existing lower income and very low
income residents of that property, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
(d) No gain shall be recognized with respect to a sale of a
majority or more of units converted to condominium interests to the
existing lower income or very low income residents of that property,
provided that all of the proceeds from the sale are reinvested in
residential real property, other than a personal residence, in this
state within two years after the sale.
(e) For purposes of this section:
(1) "Assisted housing development" means a multifamily rental
housing development that receives federal government assistance,
appearing of record and containing a legal description of the
property, as defined in subdivision (a) of Section 65863.10 of the
Government Code.
(2) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization; or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development, real property, or condominium and which
represents the interests of at least a majority of the tenants in the
assisted housing development, real property, or condominium.
(3) "Nonprofit organization" means a not-for-profit corporation
organized pursuant to Division 2 (commencing with Section 5000) of
Title 1 of the Corporations Code, which has as its principal purpose
the ownership, development, or management of housing or community
development projects for persons and families of lower income and
very low income, and which has a broadly representative board, a
majority of whose members are community-based and has a proven track
record of community service.
(4) "Public agency" means a housing authority, redevelopment
agency, or any other agency of a city, county, or city and county,
whether general law or chartered, which is authorized to own,
develop, or manage housing or community development projects for
persons and families of lower income and very low income.
(5) "Regional or national organization" means a not-for-profit,
charitable corporation organized on a multicounty, state, or
multistate basis which has as its principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of lower income and very low
income.
(6) "Regional or national agency" means a multicounty, state, or
multistate agency which is authorized to own, develop, or manage
housing or community development projects for persons and families of
lower income and very low income.
(7) "Profit-motivated organization or individual" means an
individual or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, which carries on
as a business for profit.
(8) "Lower income" means those residents having an income as
defined by Section 50079.5 of the Health and Safety Code.
(9) "Very low income" means those residents having an income as
defined by Section 50105 of the Health and Safety Code.
(10) "Resident" means a tenant or other person who lawfully
occupies a unit located in a qualified low-income housing project as
defined under Section 23610.5, and whose income qualifies as lower
income or very low income.
(11) "Condominium" means the interest in real property defined in
Section 783 of the Civil Code.
(f) If the purchase of residential real property results in the
nonrecognition of gain on the sale of an assisted housing
development, real property, or condominium under subdivision (a),
(b), (c), or (d), in determining the adjusted basis of the purchased
residential real property as of any time following the sale of the
assisted housing development, real property, or condominium, the
adjustments to the basis shall include a reduction by an amount equal
to the amount of the gain not so recognized on the sale of the
assisted housing development, real property, or condominium. If more
than one parcel of residential real property has been purchased, the
nonrecognized gain from the sale of the assisted housing development,
real property, or condominium shall be attributed to the parcels of
residential real property on a pro rata basis based upon the purchase
prices of those parcels.
(g) In accordance with subdivision (a), (b), (c), or (d), if the
sale of an assisted housing development, real property, or
condominium results in a gain during the taxable year, then all of
the following shall apply:
(1) The statutory period for the assessment of any deficiency
attributable to any part of the gain shall not expire before the
expiration of four years from the date the Franchise Tax Board is
notified (on the form as the Franchise Tax Board may provide) of one
of the following:
(A) The cost of purchasing the residential real property which
satisfies the requirement of subdivision (a), (b), (c), or (d), and
results in the nonrecognition of gain.
(B) The intention not to reinvest all of the proceeds from the
sale in residential real property within the period specified in
subdivision (a), (b), (c), or (d).
(C) The failure to reinvest all of the proceeds from the sale in
residential real property within the period specified in subdivision
(a), (b), (c), or (d).
(2) The deficiency may be assessed before the expiration of the
period specified in paragraph (1), notwithstanding the provisions of
any other law or rule of law which would otherwise prevent the
assessment.
(3) All information regarding the sale of an assisted housing
development, real property, or condominium, at a gain in accordance
with subdivision (a), (b), (c), or (d), shall be disclosed in the
return for the taxable year in which the sale took place in order to
determine if the sale qualifies and the amount of nonrecognition of
gain qualifies under subdivision (a), (b), (c), or (d).
(h) The Department of Housing and Community Development shall do
all of the following:
(1) Certify that the lower income or very low income resident
meets the definitions provided in paragraphs (8) and (9) of
subdivision (e).
(2) Provide an annual listing to the Franchise Tax Board, in a
form and manner agreed upon by the Franchise Tax Board and the
Department of Housing and Community Development, of the names and
identification numbers of the persons who are members of the group of
purchasers who are lower income or very low income residents that
were issued a certification, and the names and identification numbers
of the sellers of the property.
(3) Provide the group of purchasers who are lower income or very
low income residents a copy of the certification.
(i) The group of purchasers who are lower income or very low
income residents shall do all of the following:
(1) Provide the Department of Housing and Community Development
with documents, as deemed necessary by the department, verifying the
income of each member of the group.
(2) Provide a copy of the certification to the seller of the
assisted housing development, real property, or condominium.
(3) Retain a copy of the certification.
(j) The seller of the assisted housing development, real property,
or condominium shall do all of the following:
(1) Obtain a copy of the certification from the group of
purchasers who are lower income or very low income residents of the
assisted housing development, real property, or condominium.
(2) Retain a copy of the group's lower income or very low income
certification for tax purposes.
(k) This section shall cease to be operative for taxable years
beginning on or after January 1, 2010.
SEC. 29. Section 24955.5 is added to the Revenue and Taxation
Code, to read:
24955.5. For taxable years beginning on or after January 1, 2010,
Section 1043 of the Internal Revenue Code, relating to sale of
property to comply with conflict-of-interest requirements shall not
apply.
SEC. 30. Section 24957 is added to the Revenue and Taxation Code,
to read:
24957. For taxable years beginning on or after January 1, 2010,
Section 1045 of the Internal Revenue Code, relating to rollover gain
from qualified small business stock to another qualified small
business stock shall not apply.
SEC. 31. Section 24958 is added to the Revenue and Taxation Code,
to read:
24958. For taxable years beginning on or after January 1, 2010,
Section 1058 of the Internal Revenue Code, relating to special rules
for transfers of securities under certain agreements shall not apply.
SEC. 32. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.