Amended in Assembly May 20, 2014

Amended in Assembly April 1, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1778

Introduced by Assembly Member Allen

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(Coauthor: Assembly Member Ian Calderon)

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(Coauthor: Senator Gaines)

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February 18, 2014

An act to amend Section 17941 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 1778, as amended, Allen. begin delete Corporation end delete begin insert Income end insert taxes: begin delete minimum end delete annual tax: limited liability company: exemption.

Existing law begin delete generally end delete imposes an annual begin delete minimum franchise end delete tax begin delete of $800 end delete begin insert in an amount equal to the minimum franchise tax end insert , except as provided, on every limited liability company doing business in this state or registered in this state, as specified. Existing law defines the term “limited liability company,” for purposes of the payment of the annual begin delete minimum franchise end delete tax, to exclude a limited liability company that is exempt from the payment of the tax and certain fees under other existing law.

This bill would also exclude from that definition a limited liability company that is formed for the exclusive purpose of acquiring and holding title to intangible personal property constituting equity or debt interests, or both, in a single other corporation, limited liability company, or partnership, collecting income therefrom, and turning over the entire amount thereof, less expenses, to its members, thereby exempting such an entity from that begin delete minimum end delete begin insert annual end insert tax.

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 17941 of the Revenue and Taxation Code
is amended to read:

17941.  

(a) For each taxable year beginning on or after January
1, 1997, a limited liability company doing business in this state,
as defined in Section 23101, shall pay annually to this state a tax
for the privilege of doing business in this state in an amount equal
to the applicable amount specified in subdivision (d) of Section
23153 for the taxable year.

(b) (1) In addition to any limited liability company that is doing
business in this state and is therefore subject to the tax imposed
by subdivision (a), for each taxable year beginning on or after
January 1, 1997, a limited liability company shall pay annually
the tax prescribed in subdivision (a) if articles of organization have
been accepted, or a certificate of registration has been issued, by
the office of the Secretary of State. The tax shall be paid for each
taxable year, or part thereof, until a certificate of cancellation of
registration or of articles of organization is filed on behalf of the
limited liability company with the office of the Secretary of State.

(2) If a taxpayer files a return with the Franchise Tax Board that
is designated as its final return, the Franchise Tax Board shall
notify the taxpayer that the annual tax shall continue to be due
annually until a certificate of dissolution is filed with the Secretary
of State pursuant to Section 17707.08 of the Corporations Code
or a certificate of cancellation is filed with the Secretary of State
pursuant to Section 17708.06 of the Corporations Code.

(c) The tax assessed under this section shall be due and payable
on or before the 15th day of the fourth month of the taxable year.

(d) For purposes of this section, “limited liability company”
means an organization, other than the following:

(1) A limited liability company that is exempt from the tax and
fees imposed under this chapter pursuant to Section 23701h or
Section 23701x, that is formed by one or more persons under the
law of this state, any other country, or any other state, as a “limited
liability company” and that is not taxable as a corporation for
California tax purposes.

(2) A limited liability company that is formed for the exclusive
purpose of acquiring and holding title to intangible personal
property constituting equity or debt interests, or both, in a single
other corporation, limited liability company, or partnership,
collecting income therefrom, and turning over the entire amount
thereof, less expenses, to its members.

(e) Notwithstanding anything in this section to the contrary, if
the office of the Secretary of State files a certificate of cancellation
pursuant to Section 17707.02 of the Corporations Code for any
limited liability company, then paragraph (1) of subdivision (f) of
Section 23153 shall apply to that limited liability company as if
the limited liability company were properly treated as a corporation
for that limited purpose only, and paragraph (2) of subdivision (f)
of Section 23153 shall not apply. Nothing in this subdivision
entitles a limited liability company to receive a reimbursement for
any annual taxes or fees already paid.

(f) (1) Notwithstanding any provision of this section to the
contrary, a limited liability company that is a small business solely
owned by a deployed member of the United States Armed Forces
shall not be subject to the tax imposed under this section for any
taxable year the owner is deployed and the limited liability
company operates at a loss or ceases operation.

(2) The Franchise Tax Board may promulgate regulations as
necessary or appropriate to carry out the purposes of this
subdivision, including a definition for “ceases operation.”

(3) For the purposes of this subdivision, all of the following
definitions apply:

(A) “Deployed” means being called to active duty or active
service during a period when a Presidential Executive order
specifies that the United States is engaged in combat or homeland
defense. “Deployed” does not include either of the following:

(i) Temporary duty for the sole purpose of training or processing.

(ii) A permanent change of station.

(B) “Operates at a loss” means a limited liability company’s
expenses exceed its receipts.

(C) “Small business” means a limited liability company with
total income from all sources derived from, or begin delete attributable, to end delete
begin insert attributable to, end insert the state of two hundred fifty thousand dollars
($250,000) or less.

(4) This subdivision shall become inoperative for taxable years
beginning on or after January 1, 2018.

SEC. 2.  

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.