BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1131|
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CONSENT
Bill No: SB 1131
Author: Walters (R)
Amended: As introduced
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 3-0, 3/26/14
AYES: Hueso, Wyland, Padilla
NO VOTE RECORDED: Leno, Yee
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 4/9/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Vidak
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Income taxes: withholding: limited liability
company
SOURCE : California Society of Enrolled Agents
DIGEST : This bill excludes members of a limited liability
company (LLC), treated as a partnership for federal income tax
purposes, from the definition of employee. The exclusion
applies only for personal income tax withholding purposes.
ANALYSIS : Existing law defines, for the purposes of
Unemployment Insurance (UI) taxation, an employer as an
employing unit, which for some portion of a day, has within the
current calendar year or had within the preceding calendar year
employed one or more employees and pays wages for employment in
excess of $100 during any calendar quarter.
CONTINUED
SB 1131
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2
Existing law requires employer contributions to the Unemployment
Fund shall accrue and become payable by every employer for each
calendar year with respect to wages paid for employment. The
contributions cannot be deducted in whole or in part from the
wages of individuals in his/her employment.
Existing law excludes from the definition of "employee" any
members of an LLC recognized under federal law as partnerships.
This exclusion only applies for the purposes of UI and
Disability Insurance withholding.
This bill excludes members of an LLC, treated as a partnership
for federal income tax purposes, from the definition of
employee. The exclusion applies only for personal income tax
withholding purposes.
Prior Legislation
SB 1244 (Walters, Statutes of 2010, Chapter 522) excluded a
member of a limited liability, that is treated as a partnership
for federal income tax purposes, from the definition of
employee. The exclusion only applied for the purposes of UI and
Disability Insurance withholding.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/28/14)
California Society of Enrolled Agents (source)
California Taxpayers Association
ARGUMENTS IN SUPPORT : The California Society of Enrolled
Agents (CSEA) notes that California law currently conforms to
the federal law by exempting members of LLCs taxed as
partnerships from being employees for UI, employment training
tax, state disability insurance tax purposes. However, PIT was
excluded from the federal conformity. CSEA argues that the
result has been confusion for tax practitioners and taxpayers
alike. CSEA argues that SB 1131, by conforming PIT remittance
to existing state law, will enable better compliance with the
tax code, which is better for the state and California taxpayers
alike.
SB 1131
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3
PQ:nl 4/29/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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