BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2671
                                                                  Page  1

          Date of Hearing:   May 12, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 2671 (Cook) - As Amended:  April 27, 2010 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          As proposed to be amended, this bill exempts a corporation and  
          limited liability company (LLC) from the $800 minimum franchise  
          tax when its owner is deployed by the U.S. armed forces.  
          Specifically, the bill:

          1)Allows the exemption if the company is (a) a small business  
            (income of $250,000 or less), (b) owned solely by a member of  
            the U.S. armed forces who is deployed on active duty, and (c)  
            operates at a loss or has ceased to operate during the taxable  
            year.

          2)Sunsets for taxable years beginning on or after January 1,  
            2018.

           FISCAL EFFECT
           
          According to the Franchise Tax Board, the bill would result in  
          minor revenue of less than $100,000 per year. Administrative  
          costs would be absorbable.

           COMMENTS
           
           1)Rationale  . The purpose of this bill is to provide tax relief  
            to members of the U.S. Armed Forces called to service to  
            defend the nation.

           2)Background  . Corporations and LLCs must annually pay to the  
            state a minimum franchise tax of $800. This liability exists  
            regardless of whether the corporation is earning income.  
            Businesses incorporating after January 1, 2000 are not subject  








                                                                  AB 2671
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            to the minimum franchise tax for their first taxable year.

           3)Amendments  . The proposed amendments delete legislative  
            reporting and informational hearing requirements.

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081