BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1677|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 1677
Author: Nestande (R)
Amended: 6/4/12 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 6/20/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, Kehoe,
La Malfa, Liu, Yee
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/16/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 74-0, 4/26/12 (Consent) - See last page
for vote
SUBJECT : Corporation taxes: filing requirements:
tax-exempt
organizations
SOURCE : Navy League of the United States, Palm Springs
Council
DIGEST : This bill expands the exemption that relieves
specified tax-exempt organizations from the requirement to
file an annual return with the Franchise Tax Board (FTB)
for taxable years on or after January 1, 2012. This bill
increases the gross receipts threshold for filing an
informational return from $25,000 to $50,000.
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ANALYSIS :
1.Federal law . Certain corporations qualify for tax-exempt
status with the Internal Revenue Service (IRS). The
Internal Revenue Code Sections 501(c) and 501(d) list
categories of tax-exempt organizations, such as
religious, charitable, scientific, literary, or
educational organizations. Generally, tax-exempt
organizations file an annual information return, but some
small organizations are exempt from this annual filing
requirement. Prior to 2010, the IRS allowed tax-exempt
organizations with gross revenue or assets below $25,000
to file a simpler, online e-Postcard called Form 990-N.
In 2010, the IRS raised the filing threshold so that
tax-exempt organizations with gross revenue or assets
below $50,000 did not have to file the various 990 Forms,
only the e-Postcard.
2.California law . California's laws on tax-exempt
organizations generally conform to federal laws. The FTB
typically requires tax-exempt organizations to file a
two-page annual information return, FTB Form 199, and pay
a $10 filing fee, by the 15th day of the fifth full
calendar month following the close of the taxable year.
California law exempts some organizations, including
churches, their integrated auxiliaries, and conventions
or association of churches, from these annual filings.
Similar to the IRS's policy, tax-exempt organizations
with gross revenue or assets below $25,000 do not have to
file the FTB Form 199. They can choose to file the
simpler, online e-Postcard called Form 199-N. When the
IRS raised its filing threshold in 2010 to $50,000,
California's filing threshold remained at $25,000.
This bill exempts tax-exempt organizations, as specified,
with gross receipts not more than $50,000 in each taxable
year from filing an annual return with the FTB.
This amendment applies to taxable years beginning on or
after January 1, 2012.
Comments
This bill conforms state tax laws to federal tax laws and
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relieves the annual filing burden for some small tax-exempt
organizations. When the IRS raised its filing threshold
to $50,000, California's tax-exempt organizations with
gross revenue or assets between $25,000 and $50,000 found
they no longer had to file the extensive 990 Forms with the
IRS but still had to file the complicated 199 Forms with
the FTB. The IRS recognizes that tax-exempt organizations
with gross revenue or assets below $50,000 should not be
burdened with certain filing requirements. This bill will
allow the same treatment for CA's tax-exempt organizations,
allowing these charities to use their resources on charity
related purposes instead of expending their finances to
meet FTB filing requirements.
Related Legislation
SB 1526 (LaMalfa, 2012) is identical to this bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, FTB
estimates an annual revenue loss of $90,000 in 2012-13 and
$100,000 annually thereafter (General Fund).
FTB estimates that this bill will impact approximately
10,000 tax-exempt organizations annually. This bill will
not only ease the reporting burden on these organizations,
it will save FTB staff's time and resources because they
can review more of the simpler 199-N Forms.
SUPPORT : (Verified 8/17/12)
Navy League of the United States, Palm Springs Council
(source)
Blindness Support Services, Inc.
Coachella Valley Economic Partnership
Coachella Valley Rescue Mission
General Patton Memorial Museum
Navy League of the United States
ARGUMENTS IN SUPPORT : According to the author's office,
"?the Navy League of the United States Palm Springs
Council, in their previous tax filing year their gross
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receipts were under $25,000, however, the "requirement to
average the last three years" put them "over the $25,000
limit."
The State of California Franchise Tax Board does not lose
any revenue if a non-profit files a "Postcard" because the
filing fee is $10 regardless of form. However, non-profits
often pay a tax expert to do their taxes and the cost to do
a 199 Form far exceeds the cost-free "Postcard." This bill
would assist non-profits by allowing them to file the
simpler form and avoid paying a tax expert to prepare the
long form tax statement. It helps them keep more of their
own money, money they would prefer using for their
scholarship fund.
ASSEMBLY FLOOR : 74-0, 4/26/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Hall, Hayashi, Roger Hern�ndez, Hill, Huber,
Hueso, Huffman, Jeffries, Knight, Lara, Logue, Bonnie
Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel P�rez, Portantino, Silva, Skinner,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Cedillo, Furutani, Halderman, Harkey,
Jones, Smyth
AGB:n 8/20/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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