BILL NUMBER: SB 1391 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 2, 2010
AMENDED IN SENATE MAY 19, 2010
AMENDED IN SENATE APRIL 6, 2010
INTRODUCED BY Senator Yee
FEBRUARY 19, 2010
An act to add Sections 17060 and 23603 to the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 1391, as amended, Yee. Tax credits
Income taxes: business tax incentives : reporting information
and recapture.
The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against , deductions,
exclusions, exemptions, and other tax benefits with respect to
the taxes imposed by those laws.
This bill would require a taxpayer , as described,
doing business in California that claims a business tax
credit incentive, as provided, to
submit to the Franchise Tax Board on the original return specified
information, including the number of employees employed by the
taxpayer in the state and the number of jobs created by the
tax credit .
The bill would also require, in cases in which a taxpayer has a
net decrease in the number of full-time employees for a
credit business tax incentive added by statute
on or after January 1, 2011, the credit
business tax incentive to be disallowed and the entire amount
of any credit business tax incentives
previously allowed to be recaptured or the tax liability to be
recomputed and the taxpayer to be liable for any credits on
previous tax returns, as specified.
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 17060 is added to the Revenue and Taxation
Code, to read:
17060. (a) Notwithstanding any other provision of this part, for
taxable years beginning on or after January 1, 2011, a taxpayer doing
business in this state that claims any business credit
against the "net tax," as defined in Section 17039, shall annually
include tax incentive shall annually include on
the timely filed original return the following information
return, in the form and manner as required by
forms and instructions prescribed by the Franchise Tax
Board:
(1) The
by the Franchise Tax Board, the number of full-time,
part-time, and temporary employees, as defined, employed by the
taxpayer in the state for the current and preceding taxable years.
(2) The number of full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
(b) (1) Notwithstanding any other law, for
any business credit against the "net tax," as defined in
Section 17039, that is allowed tax incentive that is
allowed by an act that takes effect on or after the
effective date of the act adding this section January
1, 2011 , both of the following shall apply if the taxpayer has
a net decrease, as determined under subdivision (c), in the number
of full-time equivalent employees in the state according
to the information provided pursuant to subdivision (a):
(1)
(A) The entire amount of the credits
business tax incentives for all taxable years shall be
disallowed.
(2)
(B) Any previously allowed credits
business tax incentives shall be recaptured or the
tax liability shall be recomputed and the taxpayer shall be
liable for the entire amount of any credits
tax from disallowed business tax incentives on previous tax
returns.
(2) For purposes of this subdivision, a "business tax incentive"
means a credit, deduction, exclusion, exemption, or any other tax
benefit provided by the state added to this part on or after January
1, 2011, enacted with the principal purpose of creating new jobs in
the state, and allowed to taxpayers engaged in or carrying on any
trade, business, profession, vocation or calling, or commercial
activity in the state, including activities in the state that benefit
an affiliated entity of the taxpayer, with respect to the income
attributable to the taxpayer's trade, business, profession, vocation
or calling, or commercial activity.
(c) (1) The net decrease in full-time equivalent employees in
the state shall be determined, on and after January 1, 2014,
on a full-time equivalent basis by subtracting from the amount
determined in subparagraph (A) the amount determined in subparagraph
(B).
(A) The total number of full-time equivalent employees in the
state employed in the three preceding taxable years by the
taxpayer and by any trade or business acquired by the taxpayer during
the current taxable year, divided by three.
(B) The total number of full-time equivalent employees employed
in the state in the current taxable year by the taxpayer
and by any trade or business acquired by the taxpayer during the
current taxable year.
(2) "Full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "full-time equivalent" means the total number of hours worked
for the taxpayer by the employee (not to exceed 2,000 hours per
employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "full-time
equivalent" means the total number of weeks worked for the taxpayer
by the employee divided by 52.
(3) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(4) The amount of business credits recaptured pursuant to
subdivision (b) shall include the business credits reported on
previous tax returns and interest computed using the adjusted annual
rate established in Section 19521 from the due date of the return for
each taxable year in which the business credit was claimed to the
date of the payment of the additional tax resulting from the
application of this section.
(d)
(5)
(e) Section 19521, related to
computation of interest, shall apply to any tax from disallowed
business tax incentives. For purposes of this section, all of
the following definitions apply:
(A) "Business credit" means a credit added to this part on or
after January 1, 2011, and allowed to taxpayers engaged in or
carrying on any trade, business, profession, vocation or calling, or
commercial activity in the state, including activities in the state
that benefit an affiliated entity of the taxpayer.
(B)
(1) "Full-time employee" means an employee who works an
average of 35 hours in a week, calculated monthly.
(C)
(2) "Part-time employee" means an employee who works
less than an average of 35 hours in a week, calculated monthly.
(D)
(3) "Temporary employee" means an employee who works
less than 120 days per year.
(f) This section shall not apply to a taxpayer with 50 or fewer
employees and with net business income of less than five hundred
thousand dollars ($500,000) for the taxable year. For purposes of
this subdivision, business income means:
(1) Income from a trade or business, whether conducted by the
taxpayer or by a passthrough entity owned directly or indirectly by
the taxpayer. For purposes of this paragraph, the term "passthrough
entity" means a partnership or an "S" corporation.
(2) Income from rental activity.
(3) Income attributable to a farming business.
(d)
(g) Nothing in this section shall limit the authority
of the Franchise Tax Board to audit the information provided by the
taxpayer pursuant to subdivision (a).
(e)
(h) Chapter 3.5 (commencing with Section 11340) of Part
1 of Division 3 of Title 2 of the Government Code shall not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to subdivision (a).
SEC. 2. Section 23603 is added to the Revenue and Taxation Code,
to read:
23603. (a) Notwithstanding any other provision of this part, for
taxable years on or after January 1, 2011, a taxpayer doing business
in the state that claims any business credit against the
"tax," as defined in Section 23036, tax incentive
shall annually include on the timely filed original
return the following information return, in the
form and manner as required by forms and instructions prescribed by
the Franchise Tax Board:
(1) The
the Franchise Tax Board, the number of full-time,
part-time, and temporary employees, as defined, employed by the
taxpayer in the state for the current and preceding taxable years.
(2) The number of full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
(b) (1) Notwithstanding any other law, for
any business credit against the "tax," as defined in Section
23036, that is allowed by tax incentive that is
allowed by an act that takes effect on or after the
effective date of the act adding this section January
1, 2011 , both of the following shall apply if the taxpayer has
a net decrease, as determined under subdivision (c), in the number
of full-time equivalent employees in the state according
to the information provided pursuant to subdivision (a):
(1)
(A) The entire amount of the credits
business tax incentives for all taxable years shall be
disallowed.
(2)
(B) Any previously allowed credits
business tax incentives shall be recaptured or the
tax liability shall be recomputed and the taxpayer
shall be liable for the entire amount of any credits
tax from disallowed business tax incentives on
previous tax returns.
(2) For purposes of this subdivision, a "business tax incentive"
means a credit, deduction, exclusion, exemption, or any other tax
benefit provided by the state added to this part on or after January
1, 2011, enacted with the principal purpose of creating new jobs in
the state, and allowed to taxpayers engaged in or carrying on any
trade, business, profession, vocation or calling, or commercial
activity in the state, including activities in the state that benefit
an affiliated entity of the taxpayer, with respect to the income
attributable to the taxpayer's trade, business, profession, vocation
or calling, or commercial activity.
(c) (1) The net decrease in full-time equivalent employees in
the state shall be determined, on and after January 1, 2014,
on a full-time equivalent basis by subtracting from the amount
determined in subparagraph (A) the amount determined in subparagraph
(B).
(A) The total number of full-time equivalent employees employed in
the three preceding taxable years by the taxpayer and by any trade
or business acquired by the taxpayer during the current taxable year,
divided by three.
(B) The total number of full-time equivalent employees employed
in the state in the current taxable year by the taxpayer
and by any trade or business acquired by the taxpayer during the
current taxable year.
(2) "Full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "full-time equivalent" means the total number of hours worked
for the taxpayer by the employee (not to exceed 2,000 hours per
employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "full-time
equivalent" means the total number of weeks worked for the taxpayer
by the employee divided by 52.
(3) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(4) The amount of business credits recaptured pursuant to
subdivision (b) shall include the business credits reported on
previous tax returns and interest computed using the adjusted annual
rate established in Section 19521 from the due date of the return for
each taxable year in which the business credit was claimed to the
date of the payment of the additional tax resulting from the
application of this section.
(d)
(5)
(e) 19521, relating to computation of
interest, shall apply to any tax from disallowed business tax
incentives. For purposes of this section, all of the following
definitions apply:
(A) "Business credit" means a credit added to this part on or
after January 1, 2011, and allowed to taxpayers engaged in or
carrying on any trade, business, profession, vocation or calling, or
commercial activity in the state, including activities in the state
that benefit an affiliated entity of the taxpayer.
(B)
(1) "Full-time employee" means an employee who works an
average of 35 hours in a week, calculated monthly.
(C)
(2) "Part-time employee" means an employee who works
less than an average of 35 hours in a week, calculated monthly.
(D)
(3) "Temporary employee" means an employee who works
less than 120 days per year.
(f) This section shall not apply to a taxpayer with 50 or fewer
employees and with income subject to tax under this part of less than
five hundred thousand dollars ($500,000) for the taxable year.
(d)
(g) Nothing in this section shall limit the authority of
the Franchise Tax Board to audit the information provided by the
taxpayer pursuant to subdivision (a).
(e)
(h) Chapter 3.5 (commencing with Section 11340) of Part
1 of Division 3 of Title 2 of the Government Code shall not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to subdivision (a).
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
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CORRECTIONS Text--Pages 3, 4 and 6.
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