SB 1372, as amended, DeSaulnier. Corporation taxes: tax rates: publicly held corporations.
The Corporation Tax Law imposes taxes according to or measured by net income at a rate of 8.84%, or for financial institutions, at a rate of 10.84%, as specified.
This bill would, for taxable years beginning on and after January 1, 2015, revise that rate for taxpayers that are publicly held corporations, as defined, and instead impose an applicable tax rate from 7% to 13%, or for financial institutions, from 9% to 15%, based on the compensation ratio, as defined, of the corporation. This bill would increase the applicable tax rate by 50% for those taxpayers that have a specified decrease in full-time employees employed in the United States as compared to an increase in contracted and foreign full-time employees, as described.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.
This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
Vote: 2⁄3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 23151 of the Revenue and Taxation Code
2 is amended to read:
(a) With the exception of banks and financial
4corporations, every corporation doing business within the limits
5of this state and not expressly exempted from taxation by the
6provisions of the Constitution of this state or by this part, shall
7annually pay to the state, for the privilege of exercising its
8corporate franchises within this state, a tax according to or
9measured by its net income, to be computed at the rate of 7.6
10percent upon the basis of its net income for the next preceding
11income year, or if greater, the minimum tax specified in Section
1223153.
13(b) For calendar or fiscal years ending after June 30, 1973, the
14rate of tax shall be 9
percent instead of 7.6 percent as provided by
15subdivision (a).
16(c) For calendar or fiscal years ending in 1980 to 1986, inclusive,
17the rate of tax shall be 9.6 percent.
18(d) For calendar or fiscal years ending in 1987 to 1996,
19inclusive, and for any income year beginning before January 1,
201997, the tax rate shall be 9.3 percent.
21(e) For any income year beginning on or after January 1, 1997,
22the tax rate shall be 8.84 percent. The change in rate provided in
23this subdivision shall be made without proration otherwise required
24by Section 24251.
25(f) (1) For the first taxable year beginning on or after January
261, 2000, the tax imposed under
this section shall be the sum of
27both of the following:
28(A) A tax according to or measured by net income, to be
29computed at the rate of 8.84 percent upon the basis of the net
30income for the next preceding income year, but not less than the
31minimum tax specified in Section 23153.
32(B) A tax according to or measured by net income, to be
33computed at the rate of 8.84 percent upon the basis of the net
P3 1income for the first taxable year beginning on or after January 1,
22000, but not less than the minimum tax specified in Section 23153.
3(2) Except as provided in paragraph (1) and subdivision (g), for
4taxable years beginning on or after January 1, 2000, the tax
5imposed under this section shall be a tax according to or measured
6by
net income, to be computed at the rate of 8.84 percent upon the
7basis of the net income for that taxable year, but not less than the
8minimum tax specified in Section 23153.
9(g) (1) For taxable years beginning on or after January 1, 2015,
10the tax imposed under this section upon a publicly held corporation,
11as defined in Section 162(m)(2), relating to publicly held
12corporation, of the Internal Revenue Code, shall be a tax according
13to or measured by net income, to be computed at the applicable
14tax rate upon the basis of the net income for that taxable year, as
15determined by paragraph (2), but not less than the minimum tax
16specified in Section 23153.
17(2) The applicable tax rate shall be determined as follows:
18
| If the compensation ratio is: | The applicable tax rate is: |
| Over zero but not over 25 | 7% upon the basis of net income |
| Over 25 but not over 50 | 7.5% upon the basis of net income |
| Over 50 but not over 100 | 8% upon the basis of net income |
| Over 100 but not over 150 | 9% upon the basis of net income |
| Over 150 but not over 200 | 9.5% upon the basis of net income |
| Over 200 but not over 250 | 10% upon the basis of net income |
| Over 250 but not over 300 | 11% upon the basis of net income |
| Over 300 but not over 400 | 12% upon the basis of net income |
| Over 400 | 13% upon the basis of net income |
30(3) For purposes of this subdivision:
31(A) “Client employer” means an individual or entity that
32receives workers to perform labor or services within the usual
33course of business of the individual or entity from a labor
34contractor.
35(B) (i) “Compensation,” in the case of employees of the
36taxpayer other than the chief operating officer or the highest paid
37employee, means wages as defined in Section 3121(a) of the
38Internal
Revenue Code, relating to wages, paid by the taxpayer
39during a calendar year to employees of the taxpayer.
P4 1(ii) “Compensation,” in the case of the chief operating officer
2begin delete andend deletebegin insert orend insert the highest paid employee of the taxpayer, means total
3compensation as reported in the Summary Compensation Table
4reported to thebegin insert United Statesend insert Securities and Exchange Commission
5pursuant to Item 402 of Regulation S-K of the Securities and
6Exchange Commission.
7(C) (i) “Compensation ratio” for a taxable year means a
ratio
8where the numerator is the amount equal to the greater of the
9compensation of the chief operating officer or the highest paid
10employee of the taxpayer for the calendar year preceding the
11beginning of the taxable year and the denominator is the amount
12equal to the median compensation of all employees employed by
13the taxpayer, including all contracted employees under contract
14with the taxpayer, in the United States for the calendar year
15preceding the beginning of the taxable year.
16(ii) For taxpayers that are required to be included in a combined
17report under Section 25101 or authorized to be included in a
18combined report under Section 25101.15, the calculation of the
19ratio in clause (i) shall be made by treating all taxpayers that are
20required to be or authorized to be included in a combined report
21as a single taxpayer.
22(D) “Contracted employee” means an employee who works for
23a labor contractor.
24(E) “Labor contractor” means an individual or entity that
25contracts with a client employer to supply workers to perform
26labor or services or otherwise provides workers to perform labor
27or services within the usual course of business for the client
28employer.
29(4) A taxpayer subject to this subdivision shall furnish a detailed
30compensation report to the Franchise Tax Board with its timely
31filed original return.
32(5) (A) If the total number of full-time employees, determined
33on an annual full-time equivalent basis, employed by the taxpayer
34in the United States
for a taxable year is reduced by more than 10
35percent, as compared to the total number of full-time employees,
36determined on an annual full-time equivalent basis, employed by
37the taxpayer in the United States for the preceding taxable year
38and the total number of contracted employees or foreign full-time
39employees, determined on an annual full-time equivalent basis, of
40the taxpayer for that taxable year has increased, as compared with
P5 1the total number of contracted employees or foreign full-time
2employees, determined on an annual full-time equivalent basis, of
3the taxpayer for the preceding taxable year, then the applicable
4tax rate determined under paragraph (2) shall be increased by 50
5percent. For taxpayers who first commence doing business in this
6state during the taxable year, the number of full-time employees,
7contracted employees, and foreign full-time employees for the
8immediately preceding
prior taxable year shall be zero.
9(B) For purposes of this paragraph:
10(i) “Annual full-time equivalent” means either of the following:
11(I) In the case of a full-time employee paid hourly qualified
12wages, “annual full-time equivalent” means the total number of
13hours worked for the qualified taxpayer by the employee, not to
14exceed 2,000 hours per employee, divided by 2,000.
15(II) In the case of a salaried full-time employee, “annual
16full-time equivalent” means the total number of weeks worked for
17the qualified taxpayer by the employee divided by 52.
18(ii) “Foreign full-time employee” means a full-time employee
19of
the taxpayer that is employed at a location other than the United
20States.
21(iii) “Full-time employee” means an employee of the taxpayer
22that satisfies either of the following requirements:
23(I) Is paid compensation by the taxpayer for services of not less
24than an average of 30 hours per week.
25(II) Is a salaried employee of the taxpayer and is paid
26compensation during the taxable year for full-time employment,
27within the meaning of Section 515 of the Labor Code.
28(6) The Franchise Tax Board may prescribe rules, guidelines,
29or procedures necessary or appropriate to carry out the purposes
30of this subdivision, including any guidelines regarding the
31determination of
wages, average compensation, and compensation
32ratio. Chapter 3.5 (commencing with Section 11340) of Part 1 of
33Division 3 of Title 2 of the Government Code shall not apply to
34any rule, guideline, or procedure prescribed by the Franchise Tax
35Board pursuant to this subdivision.
This act provides for a tax levy within the meaning of
37Article IV of the Constitution and shall go into immediate effect.
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