BILL NUMBER: SB 364 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JULY 11, 2011
AMENDED IN ASSEMBLY JUNE 14, 2011
AMENDED IN SENATE MAY 31, 2011
AMENDED IN SENATE MAY 3, 2011
AMENDED IN SENATE APRIL 25, 2011
AMENDED IN SENATE MARCH 21, 2011
INTRODUCED BY Senator Yee
(Coauthor: Assembly Member Huffman)
FEBRUARY 15, 2011
An act to add Sections 6372 and Section
19137 to the Revenue and Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
SB 364, as amended, Yee. Sales and use taxes: income
Income taxes: business tax incentives:
credits: reporting information and penalty.
The Sales and Use Tax Law, the Personal Income
Tax Law , and the Corporation Tax Law authorize
various credits , deductions, exclusions, exemptions, and
other tax benefits with respect to the taxes imposed by
those laws.
This bill would, with respect to any business tax
incentive or business tax credit, as defined, enacted after
the effective date of this bill, require a qualified taxpayer, as
defined, that benefits from a business tax incentive or
claims a business tax credit and that has a
specified net decrease in its employees in this state to
pay a penalty, as specified.
This bill would also require a qualified taxpayer doing
business in California that claims a business tax incentive
to submit to the State Board of Equalization annually on a
return or to the Franchise Tax Board on the original return
specified information, including the number of annual full-time
equivalent employees employed by the qualified taxpayer in the state
in the current and previous year , as provided . The bill
would impose a penalty if that information is not provided.
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. (a) The Legislature finds and declares the following:
(1) The nation's economy began to recover in 2010, but California
still has the highest unemployment rate in the country.
(2) The creation of quality jobs, in key expanding and emerging
industries, is critical to maintain California's status as a center
of productivity, innovation, and growth.
(b) It is the intent of the Legislature to do all of the
following:
(1) Encourage economic recovery and a deep and lasting rebound by
increasing the number of quality jobs in this state.
(2) Encourage the state to invest in ensuring high-quality
employment through transparency and accountability at all levels of
business, in order to promote economic recovery and job creation.
(3) Provide tax incentives, benefits, deductions, and
credits only to businesses that share the vision and
commitment of a transparent, highly functioning, high-employment
state.
SEC. 2. Section 6372 is added to the Revenue
and Taxation Code, to read:
6372. (a) Notwithstanding any other law, for calendar years
beginning on or after January 1, 2012, a qualified taxpayer that
benefits from a business tax incentive shall annually include on a
timely filed original return, in the form and manner as required by
the forms and instructions prescribed by the board, the number of
annual full-time equivalent employees employed by the qualified
taxpayer in the state for the current calendar year and the preceding
calendar year.
(b) For purposes of this section:
(1) "Annual full-time equivalent" means either of the following:
(A) In the case of an employee paid hourly qualified wages,
"annual full-time equivalent" means the total number of hours worked
for the qualified taxpayer by an employee (not to exceed 1,820 hours
per employee) divided by 1,820.
(B) In the case of a salaried employee, "annual full-time
equivalent" means the total number of weeks worked for the qualified
taxpayer by an employee divided by 52.
(2) "Business tax incentive" means an exemption or exclusion from
the taxes imposed by this part that is based on qualified wages or
the number of employees employed, by an act that takes effect after
the effective date of the act adding this section.
(3) (A) "Qualified taxpayer" means a person that is a manufacturer
or a person that engages in research and development activities in
this state, and that pays qualified wages to more than 100 annual
full-time equivalent employees in this state.
(B) For the purpose of determining whether a person is a qualified
taxpayer, all employees of the trades or businesses that are treated
as related under Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single person.
(4) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(c) Notwithstanding any other law, if a qualified taxpayer that
benefits from a business tax incentive has a net decrease in the
number of annual full-time equivalent employees in this state in a
calendar year that is equal to or greater than 10 percent of the
total annual full-time equivalent employees of the qualified taxpayer
in this state in the preceding calendar year, the qualified taxpayer
shall be subject to a penalty in the amount specified in subdivision
(d).
(d) The penalty imposed under this section shall be computed as
follows:
(1) Ninety percent of the annual full-time equivalents, including
any fractional portion thereof, for the prior calendar year, less
(2) The annual full-time equivalents, including any fractional
portion thereof, for the current calendar year, multiplied by
(3) Five thousand dollars ($5,000) per annual full-time
equivalent, including any fractional portion thereof, as computed
under paragraphs (1) and (2).
(4) (A) For purposes of paragraphs (1) and (2), the employees of
any trade or business acquired by the qualified taxpayer during the
current calendar year shall be aggregated with the qualified taxpayer'
s existing employees.
(B) The provisions of subdivision (f) of Section 17276.20, except
for paragraph (7) thereof, and subdivision (g) of Section 24416.20,
except for paragraph (7) thereof, shall apply in determining whether
the acquisition of a trade or business during the calendar year is
required to be included in the calculation under this subdivision.
(5) If the amount computed under paragraph (2) exceeds the amount
computed under paragraph (1), the penalty shall be zero.
(6) The amount of the penalty shall not exceed an amount equal to
the amount of business tax incentives that reduced the tax of the
qualified taxpayer on the qualified taxpayer's tax returns for the
three preceding years.
(e) A qualified taxpayer that fails to timely provide the
information required by subdivision (a) shall pay a penalty of five
thousand dollars ($5,000) for each failure, unless that failure is
due to reasonable cause and not due to willful neglect. The penalty
imposed pursuant to this subdivision shall be in addition to any
penalty imposed under subdivision (c).
(f) (1) The board may prescribe rules, guidelines, or procedures
necessary or appropriate to carry out the purposes of this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the State Board of Equalization
pursuant to this section.
(3) This section shall not limit the authority of the board to
audit the information provided by the taxpayer pursuant to
subdivision (a).
SEC. 3. SEC. 2. Section 19137 is
added to the Revenue and Taxation Code, to read:
19137. (a) (1) Notwithstanding any other
law, for taxable years beginning on or after January 1, 2012, a
qualified taxpayer doing business in this state that claims any
business tax credit shall annually include on a timely filed original
return, in the form and manner as required by the forms and
instruction prescribed by the Franchise Tax Board, the number of
annual full-time equivalent employees employed by the qualified
taxpayer in the state for the current taxable year and the preceding
taxable year.
(2) For purposes of this subdivision:
(A) The employees of any trade or business acquired by the
qualified taxpayer during the current taxable year shall be
aggregated with the qualified taxpayer's existing employees for the
current and prior year reporting purposes.
(B) The employees of any trade or business that is disposed of or
otherwise is no longer a related entity under the rules of this
section during the current taxable year shall be excluded from the
qualified taxpayer's existing employees for the current and prior
year reporting purposes.
(b) For purposes of this section:
(1) "Annual full-time equivalent" means either of the following:
(A) In the case of an employee paid hourly qualified wages,
"annual full-time equivalent" means the total number of hours worked
for the qualified taxpayer by an employee (not to exceed 1,820 hours
per employee) divided by 1,820.
(B) In the case of a salaried employee, "annual full-time
equivalent" means the total number of weeks worked for the qualified
taxpayer by an employee divided by 52.
(C) For purposes of this paragraph, if either of the taxable years
being reported under subdivision (a) is a period of less than 12
months, the computation of "annual full-time equivalents" as
prescribed in subparagraphs (A) and (B) shall be annualized by
adjusting the numbers of hours or weeks, respectively, in the formula
to equal the length of the period being reported, so that each
annual full-time equivalent equals a 12-month equivalent.
(2) "Business tax credit" means a credit that is based on
employee compensation that includes qualified wages or the
number of employees employed against the "net tax," as defined in
Section 17039, or against the "tax," as defined in Section 23036,
, added by an act that takes effect
after the effective date of the act adding this section.
(3) (A) "Qualified taxpayer" means a person that is engaged in or
carrying on a trade, business, profession, vocation, calling, or
commercial activity, in the state, and that pays qualifying wages to
more than 100 annual full-time equivalent employees in this state.
(B) For the purpose of determining whether a person is a qualified
taxpayer, all employees of the trades or businesses that are treated
as related under Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single person.
(4) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(c) Notwithstanding any other law, if a qualified taxpayer that
claims a business tax credit against the "net tax," as defined in
Section 17039, or against the "tax," as defined in Section 23036, has
a net decrease in the number of annual full-time equivalent
employees in this state in a taxable year that is equal to or greater
than 10 percent of the total annual full-time equivalent employees
of the qualified taxpayer in this state in the prior taxable year,
the qualified taxpayer shall be subject to a penalty in the amount
specified in subdivision (d).
(d) The penalty imposed under this section shall be computed as
follows:
(1) Ninety percent of the annual full-time equivalents, including
any fractional portion thereof, for the prior calendar
taxable year, less
(2) The annual full-time equivalents, including any fractional
portion thereof, for the current calendar
taxable year, multiplied by
(3) Five thousand dollars ($5,000) per annual full-time
equivalent, including any fractional portion thereof, as computed
under paragraphs (1) and (2).
(4) (A) For purposes of paragraphs (1) and (2), the employees of
any trade or business acquired by the qualified taxpayer during the
current calendar year shall be aggregated with the qualified taxpayer'
s existing employees.
(B) The provisions of subdivision (f) of Section 17276.20, except
for paragraph (7) thereof, and subdivision (g) of Section 24416.20,
except for paragraph (7) thereof, shall apply in determining whether
the acquisition of a trade or business during the calendar year is
required to be included in the calculation under this subdivision.
(4) For purposes of this subdivision:
(A) The employees of any trade or business acquired by the
qualified taxpayer during the current taxable year shall be
aggregated with the qualified taxpayer's existing employees.
(B) The employees of any trade or business that is disposed of or
otherwise is no longer a related entity during the current taxable
year shall be excluded from the qualified taxpayer's existing
employees.
(5) If the amount computed under paragraph (2) exceeds the amount
computed under paragraph (1), the penalty shall be zero.
(6) (A) The amount of the penalty shall not
exceed an amount equal to the amount of business tax credits that
reduced the "net tax," as defined in Section 17039, or the "tax," as
defined in Section 23036, of the qualified taxpayer, as reflected on
the qualified taxpayer's income or franchise tax returns for the
three preceding taxable years.
(B) For purposes of this section, any business tax credit that is
sold, assigned, or otherwise transferred under the provisions of Part
10 (commencing with Section 17001), this part, or Part 11
(commencing with Section 23001) to another taxpayer shall be treated
as reducing the "net tax," as defined in Section 17039, or the "tax,"
as defined in Section 23036, of the qualified taxpayer for the
taxable year for which the assignment, sale, or transfer was made.
(e) A qualified taxpayer that fails to provide the information
required by subdivision (a) shall pay a penalty of five thousand
dollars ($5,000) for each failure, unless that failure is due to
reasonable cause and not due to willful neglect. The penalty imposed
pursuant to this subdivision shall be in addition to any penalty
imposed under subdivision (c).
(f) (1) If any business tax credit is allowed to be sold,
assigned, or otherwise transferred under the provisions of this part
to another taxpayer, any sale, assignment, or other transfer shall
only be valid if the seller or assignor expressly agrees to provide,
and continues to provide, to the buyer or assignee and the Franchise
Tax Board, in the form and manner specified by the Franchise Tax
Board, the information required by subdivision (a) in order to
determine whether a penalty should be imposed as calculated in
subdivision (d) with respect to the seller or assignor.
(2) If a penalty is imposed pursuant to subdivision (c), the buyer
or assignee shall be required to include in its net income the
amount of the penalty.
(3) This subdivision shall apply to any business tax credit that
is sold, assigned, or otherwise transferred under the provisions of
this part, notwithstanding any other provision of this part to the
contrary.
(4) Notwithstanding any other law, if a seller or assignor fails
to satisfy the reporting requirements of this subdivision, then a
notice of proposed deficiency assessment attributable to the business
tax credit with respect to which the reporting requirements were not
satisfied may be mailed to the buyer or assignee within four years
from the date on which the reporting requirements are satisfied by
the seller or assignor.
(g)
(f) (1) The Franchise Tax Board may prescribe rules,
guidelines, or procedures necessary or appropriate to carry out the
purposes of this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(3) This section shall not limit the authority of the Franchise
Tax Board to audit the information provided by the taxpayer pursuant
to subdivision (a).