BILL ANALYSIS �
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THIRD READING
Bill No: SB 1526
Author: La Malfa (R)
Amended: 4/18/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 4/25/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hancock,
Hernandez, La Malfa
NO VOTE RECORDED: Kehoe, Liu
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Corporate income taxes: filing requirements:
tax exempt
organizations
SOURCE : American Legion-Department of California
AMVETS-Department of California
Vietnam Veterans of America-California State
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 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 :
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.
State Law
California's laws on tax-exempt organizations generally
conform to federal laws. The Franchise Tax Board (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. State 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 bill applies to taxable years beginning on or after
January 1, 2012.
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Comments
This bill conforms state tax laws to federal tax laws and
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.
The 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.
Similar legislation . AB 1677 (Nestande) revises the annual
filing requirements for certain small tax-exempt
organizations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, the FTB
estimates an annual revenue loss of $90,000 in 2012-13 and
$100,000 annually thereafter (General Fund).
SUPPORT : (Verified 5/24/12)
American Legion-Department of California (co-source)
AMVETS-Department of California (co-source)
Vietnam Veterans of America-California State Council
(co-source)
California State Commanders Veterans Council
AGB:mw 5/24/12 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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