Bill Text: CA AB2166 | 2019-2020 | Regular Session | Amended
Bill Title: Personal Income Tax Law: net operating loss.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2020-05-05 - Re-referred to Com. on REV. & TAX. [AB2166 Detail]
Download: California-2019-AB2166-Amended.html
|
Amended
IN
Assembly
May 04, 2020 |
CALIFORNIA LEGISLATURE—
2019–2020 REGULAR SESSION
Assembly Bill
No. 2166
| Introduced by Assembly Member Kiley |
February 11, 2020 |
LEGISLATIVE COUNSEL'S DIGEST
AB 2166, as amended, Kiley.
Personal income taxes: credits: residential fire insurance policy premiums. Personal Income Tax Law: net operating loss.
The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions in computing the income that is subject to the taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law, the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), among other things, authorizes, with respect to a taxable year beginning on or after January 1, 2018, and before January 1, 2021, a net operating loss carryback to each of the 5 taxable years preceding the taxable year of that loss.
This bill would, under both laws, conform to the provision of the CARES Act described above and would authorize a taxpayer to file a return for the first six months of a
taxable year if that return includes a claim for a net operating loss carryback pursuant to that provision. The bill would also make legislative findings and declarations regarding the public purpose served by the bill.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
The bill also would include additional information required for any bill authorizing a new tax expenditure.
The Personal Income Tax Law allows various credits against the taxes imposed by that law. Existing law requires any bill authorizing a new tax expenditure, including a tax credit, to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements. Existing law establishes the continuously appropriated Tax Relief and Refund Account in the General Fund and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account.
This bill would allow a credit against the taxes imposed by the Personal Income Tax Law for each taxable year beginning on or after January 1, 2020, and before January 1, 2026, in an amount equal to the difference between the annual premium amount paid or
incurred during the taxable year by a qualified taxpayer for a residential fire insurance policy for coverage of the qualified principal residence of the qualified taxpayer and the annual premium amount paid or incurred by the qualified taxpayer during a specified threshold calendar year for a residential fire insurance policy for coverage of that same qualified principal residence. The bill would require amounts of this credit in excess of the qualified taxpayer’s tax liability and other amounts due to be paid to the qualified taxpayer from the Tax Relief and Refund Account upon appropriation by the Legislature.
The bill would also include additional information required for any bill authorizing a new income tax expenditure.
This bill would take effect immediately as a tax levy.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 17276 of the Revenue and Taxation Code is amended to read:17276.
Except as provided in Sections 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7, the deduction provided by Section 172 of the Internal Revenue Code, relating to net operating loss deduction, shall be modified as follows:(a) (1) Net operating losses attributable to taxable years beginning before January 1, 1987, shall not be allowed.
(2) A net operating loss shall not be carried forward to any taxable year beginning before January 1, 1987.
(b) (1) Except as provided in paragraphs (2) and (3), the provisions of Section 172(b)(2) of the Internal Revenue Code, relating to amount of carrybacks and carryovers,
shall be modified so that the applicable percentage of the entire amount of the net operating loss for any taxable year shall be eligible for carryover to any subsequent taxable year. For purposes of this subdivision, the applicable percentage shall be:
(A) Fifty percent for any taxable year beginning before January 1, 2000.
(B) Fifty-five percent for any taxable year beginning on or after January 1, 2000, and before January 1, 2002.
(C) Sixty percent for any taxable year beginning on or after January 1, 2002, and before January 1, 2004.
(D) One hundred percent for any taxable year beginning on or after January 1, 2004.
(2) In the case of a taxpayer who has a net operating loss in any
taxable year beginning on or after January 1, 1994, and who operates a new business during that taxable year, each of the following shall apply to each loss incurred during the first three taxable years of operating the new business:
(A) If the net operating loss is equal to or less than the net loss from the new business, 100 percent of the net operating loss shall be carried forward as provided in subdivision (d).
(B) If the net operating loss is greater than the net loss from the new business, the net operating loss shall be carried over as follows:
(i) With respect to an amount equal to the net loss from the new business, 100 percent of that amount shall be carried forward as provided in subdivision (d).
(ii) With respect to the portion of the net
operating loss that exceeds the net loss from the new business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d).
(C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B).
(3) In the case of If a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates an eligible small business during that taxable year, each of the following shall apply:
(A) If the net operating loss is equal to or less than the net loss from the eligible small business, 100 percent of the net operating loss shall be carried forward to the taxable years specified in subdivision (d).
(B) If the net operating loss is greater than the net loss from the eligible small business, the net operating loss shall be carried over as follows:
(i) With respect to an amount equal to the net loss from the eligible small business, 100 percent of that amount shall be carried forward as provided in subdivision (d).
(ii) With respect to that portion of the net operating loss that
exceeds the net loss from the eligible small business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d).
(C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B).
(4) In the case of If a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates a business that qualifies as both a new business and an eligible small business under this section, that business shall be treated as a new business for the first three taxable years of the new business.
(5) In the case of If a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates more than one business, and more than one of those businesses qualifies as either a new business or an eligible small business under this section, paragraph (2) shall be applied first, except that if there is any remaining portion of the net operating loss after application of clause (i) of subparagraph (B) of that paragraph, paragraph (3) shall be applied to the remaining portion of the net operating loss as though that remaining portion of the net operating loss constituted the entire net operating loss.
(6) For purposes of this section, the term “net loss” means the amount of net loss after application of Sections 465 and 469 of the Internal Revenue Code.
(c) Section 172(b)(1) of the Internal Revenue Code, relating to years to which the loss may be carried, is modified as follows:
(1) Net Except as provided in subdivision (d), net operating loss carrybacks shall not be allowed for any net operating losses attributable to taxable years beginning on or after December 31, 2018, January 1, 2019, and before January 1, 2013.
(2) A Except as provided in subdivision (d), a net operating loss attributable to taxable years beginning on or after January 1, 2013, and before January 1, 2019, shall be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss in lieu of the number of years provided therein.
(A) For a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2014, the amount of carryback to any taxable year shall not exceed 50 percent of the net operating loss.
(B) For a net operating loss attributable to a taxable year beginning on or after January 1, 2014, and before January 1, 2015, the amount of carryback to any taxable year shall not
exceed 75 percent of the net operating loss.
(C) For a net operating loss attributable to a taxable year beginning on or after January 1, 2015, and before January 1, 2019, the amount of carryback to any taxable year shall not exceed 100 percent of the net operating loss.
(3) A net operating loss carryback shall not be carried back to any taxable year beginning before January 1, 2011.
(d) (1) Section 172(b)(1)(D)(i) of the Internal Revenue Code shall apply.
(2) (A) Notwithstanding any other law, a taxpayer may file a return
for the first six months of a taxable year if that return includes a claim for a net operating loss carryback allowed pursuant to paragraph (1).
(B) A taxpayer electing to file a return pursuant to this paragraph shall file that return on or before September 1 of the taxable year to which the net operating loss is attributable.
(d)
(e) (1) (A) For a net operating loss for any taxable year beginning on or after January 1, 1987, and before January 1, 2000, Section 172(b)(1)(A)(ii) of the Internal Revenue Code is modified to substitute “five taxable years” in lieu of “20 taxable years” except as otherwise provided in paragraphs (2) and (3).
(B) For a net operating loss for any taxable year beginning on or after January 1, 2000, and before January 1, 2008, Section 172(b)(1)(A)(ii) of the Internal Revenue Code is modified to substitute “10 taxable years” in lieu of “20 taxable years.”
(2) For any taxable year beginning before January 1, 2000, in the case of a “new business,” the “five taxable years” in paragraph (1) shall be modified to read as follows:
(A) “Eight taxable years” for a net operating loss attributable to the first taxable year of that new business.
(B) “Seven taxable years” for a net operating loss attributable to the second taxable year of that new business.
(C) “Six taxable years” for a net operating loss attributable to the third taxable year of that new business.
(3) For any carryover of a net operating loss for which a deduction is denied by Section 17276.3, the carryover period specified in this subdivision shall be extended as follows:
(A) By one year for a net operating loss attributable to taxable years beginning in 1991.
(B) By two years for a net operating loss attributable to taxable years beginning before January 1, 1991.
(4) The net operating loss attributable to taxable years beginning on or after January 1, 1987, and before January 1, 1994, shall be a net operating loss carryover to each of the 10 taxable years following the year of the loss if it is incurred by a taxpayer that is under the jurisdiction of the court in a Title 11 or similar case at any time during the income year. The loss carryover provided in the preceding sentence does not apply to any loss incurred after the date the taxpayer is no longer under the jurisdiction of the court in a Title 11 or similar case.
(e)
(f) For purposes of this section:
(1) “Eligible small business” means any trade or business that has gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the taxable year.
(2) Except as provided in subdivision (f), (g), “new business” means any trade or business activity that is first commenced in this state on or after January 1, 1994.
(3) “Title 11 or similar case” shall have the same meaning as in Section 368(a)(3) of the Internal Revenue Code.
(4) In the case of any trade or business activity conducted by a partnership or “S” corporation paragraphs (1) and (2) shall be applied to the partnership or “S” corporation.
(f)
(g) For purposes of this section, in determining whether a trade or business activity qualifies as a new business under paragraph (2) of subdivision (e), (f), the following rules apply:
(1) In any case where If a taxpayer purchases or otherwise acquires all or any portion of the assets of an existing trade or business (irrespective business, irrespective of the form of entity) entity, that is doing business in this state (within state, within the meaning of Section 23101), 23101, the trade or business thereafter conducted by the taxpayer (or taxpayer, or any related person) person, shall not be treated as a new business if the aggregate fair market value of the acquired assets (including assets, including real, personal, tangible, and intangible property) property, used by the taxpayer (or taxpayer, any related person) person, in the conduct of its trade or business exceeds 20 percent of the aggregate fair market value of the total assets of the trade or business being conducted by the taxpayer (or taxpayer, or any related person). person. For purposes of this paragraph only, the following rules apply:
(A) The determination of the relative fair market values of the acquired assets and the total assets shall be made as of the last day of the first taxable year in which the taxpayer (or taxpayer, or any related person) person, first uses any of the acquired trade or business assets in its business activity.
(B) Acquired assets that constituted property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the transferor shall not be treated as assets acquired from an existing trade or business, unless those assets also constitute property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the acquiring taxpayer (or taxpayer, or any related person). person.
(2) In If a case in which a taxpayer (or taxpayer, or any related person) person, is engaged in one or more trade or business activities in this state, or has been engaged in one or more trade or business activities in this state within the preceding 36 months (“prior trade or business activity”), and thereafter commences an additional trade or business activity in this state, the additional trade or business activity shall only be treated as a new business if the additional trade or business activity is classified under a different division of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, than are any of the taxpayer’s (or taxpayer’s, or any related person’s) person’s, current or prior trade or business activities.
(3) In If a case in which a taxpayer, including all related persons, is engaged in trade or business activities wholly outside of this state and the taxpayer first commences doing business in this state (within state, within the meaning of Section 23101) 23101, after December 31, 1993 (other 1993, other than by purchase or other acquisition described in paragraph (1)), (1), the trade or business activity shall be treated as a new business under paragraph (2) of subdivision (e). (f).
(4) In a case in which If the legal form under which a trade or business activity is being conducted is changed, the change in form shall be disregarded and the determination of whether the trade or business activity is a new business shall be made by treating the taxpayer as having purchased or otherwise acquired all or any portion of the assets of an existing trade or business under the rules of paragraph (1).
(5) “Related person” shall mean any person that is related to the taxpayer under either Section 267 or 318 of the Internal Revenue Code.
(6) “Acquire” shall include any gift, inheritance, transfer incident to divorce, or any other transfer, whether or not for consideration.
(7) (A) For taxable years beginning on or after January 1, 1997, the term “new business” shall include any taxpayer that is engaged in biopharmaceutical activities or other biotechnology activities that are described in Codes 2833 to 2836, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, and as further amended, and that has not received regulatory approval for any product from the Food and Drug Administration.
(B) For purposes of this paragraph:
(i) “Biopharmaceutical activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics.
Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.
(ii) “Other biotechnology activities” means activities consisting of the application of recombinant DNA technology to produce commercial products, as well as activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.
(g)
(h) Notwithstanding any provisions of this section to the contrary, a deduction shall be allowed to a “qualified taxpayer” as provided in Sections 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7.
(h)
(i) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this section, including any regulations necessary to prevent the avoidance of the purposes of this section through splitups, shell corporations, partnerships, tiered ownership structures, or otherwise.
(i)
(j) The Franchise Tax Board may reclassify any net operating loss carryover determined under either paragraph (2) or (3) of subdivision (b) as a net operating loss carryover under paragraph (1) of subdivision (b) upon a showing that the reclassification is necessary to prevent evasion of the purposes of this section.
(j)
(k) Except as otherwise provided, the amendments made by Chapter 107 of the Statutes of 2000 apply to net operating losses for taxable years beginning on or after January 1, 2000.
SEC. 2.
Section 17276.22 of the Revenue and Taxation Code is amended to read:17276.22.
(a) Notwithstanding Section 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, or 17276.7 to the contrary, a net operating loss attributable to a taxable year beginning on or after January 1, 2008, shall be a net operating carryover to each of the 20 taxable years following the year of the(b) (1) Notwithstanding Section 17276.1, 17276.4, or 17276.7 to the contrary, a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019, shall also be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss, subject to paragraph (2).
(2) Pursuant to subdivision (d) of
Section 17276, a net operating loss attributable to a taxable year beginning on or after January 1, 2018, and before January 1, 2019, shall be a net operating loss carryback to each of the five taxable years preceding the taxable year of the loss.
SEC. 3.
Section 24416 of the Revenue and Taxation Code is amended to read:24416.
Except as provided in Sections 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, and 24416.7, a net operating loss deduction shall be allowed in computing net income under Section 24341 and shall be determined in accordance with Section 172 of the Internal Revenue Code, except as otherwise provided.(a) (1) Net operating losses attributable to taxable years beginning before January 1, 1987, shall not be allowed.
(2) A net operating loss shall not be carried forward to any taxable year beginning before January 1, 1987.
(b) (1) Except as provided in paragraphs (2) and (3), the provisions of Section 172(b)(2) of the
Internal Revenue Code, relating to amount of carrybacks and carryovers, shall be modified so that the applicable percentage of the entire amount of the net operating loss for any taxable year shall be eligible for carryover to any subsequent taxable year. For purposes of this subdivision, the applicable percentage shall be:
(A) Fifty percent for any taxable year beginning before January 1, 2000.
(B) Fifty-five percent for any taxable year beginning on or after January 1, 2000, and before January 1, 2002.
(C) Sixty percent for any taxable year beginning on or after January 1, 2002, and before January 1, 2004.
(D) One hundred percent for any taxable year beginning on or after January 1, 2004.
(2) In the case of If a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates a new business during that taxable year, each of the following shall apply to each loss incurred during the first three taxable years of operating the new business:
(A) If the net operating loss is equal to or less than the net loss from the new business, 100 percent of the net operating loss shall be carried forward as provided in subdivision (e).
(B) If the net operating loss is greater than the net loss from the new business, the net operating loss shall be carried over as follows:
(i) With respect to an amount equal to the net loss from the new business, 100 percent of that amount shall be carried forward as provided in subdivision (e).
(ii) With respect to the portion of the net
operating loss that exceeds the net loss from the new business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d).
(C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B).
(3) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates an eligible small business during that taxable year, each of the following apply:
(A) If the net operating loss is equal to or less than the net loss from the eligible small business, 100 percent of the net operating loss shall be carried forward to the taxable years specified in paragraph (1) of subdivision (e).
(B) If the net operating loss is greater than the net loss from the eligible small business, the net operating loss shall be carried over as follows:
(i) With respect to an amount equal to the net loss from the eligible small business, 100 percent of that amount shall be carried forward as provided in subdivision (e).
(ii) With respect to that portion of the net operating loss that exceeds the net loss from the eligible small business, the applicable percentage of that amount shall be carried forward as provided in subdivision (e).
(C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B).
(4) In the case of If a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates a business that qualifies as both a new business and an eligible small business under this section, that business shall be treated as a new business for the first three taxable years of the new business.
(5) In the case of If a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates more than one business, and more than one of those businesses qualifies as either a new business or an eligible small business under this section, paragraph (2) shall be applied first, except that if there is any remaining portion of the net operating loss after application of clause (i) of subparagraph (B) of paragraph (2), paragraph (3) shall be applied to the remaining portion of the net operating loss as though that remaining portion of the net operating loss constituted the entire net operating loss.
(6) For purposes of this section, “net loss” means the amount of net loss after application of Sections 465 and 469 of the Internal Revenue Code.
(c) For any taxable year in which the taxpayer has in effect a water’s-edge election under Section 25110, the deduction of a net operating loss carryover shall be
denied to the extent that the net operating loss carryover was determined by taking into account the income and factors of an affiliated corporation in a combined report whose income and apportionment factors would not have been taken into account if a water’s-edge election under Section 25110 had been in effect for the taxable year in which the loss was incurred.
(d) Section 172(b)(1) of the Internal Revenue Code, relating to years to which the loss may be carried, is modified as follows:
(1) Net Except as provided in subdivision (e), net operating loss carrybacks shall not be allowed for any net operating losses attributable to taxable years beginning on or after December 31, 2018, January 1, 2019, and before January 1, 2013.
(2) A Except as provided in subdivision (e), a net operating loss attributable to taxable years beginning on or after January 1, 2013, and before January 1, 2019, shall be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss in lieu of the number of years provided therein.
(A) For a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2014, the amount of carryback to any taxable year shall not exceed 50 percent of the net operating loss.
(B) For a net operating loss attributable to a taxable year beginning on or after January 1, 2014, and before January 1, 2015, the amount of carryback to any taxable year shall not
exceed 75 percent of the net operating loss.
(C) For a net operating loss attributable to a taxable year beginning on or after January 1, 2015, and before January 1, 2019, the amount of carryback to any taxable year shall not exceed 100 percent of the net operating loss.
(3) A net operating loss carryback shall not be carried back to any taxable year beginning before January 1, 2011.
(e) (1) Section 172(b)(1)(D)(i) of the Internal Revenue Code shall apply.
(2) (A) Notwithstanding any other law, a taxpayer may file a return
for the first six months of a taxable year if that return includes a claim for a net operating loss carryback allowed pursuant to paragraph (1).
(B) A taxpayer electing to file a return pursuant to this paragraph shall file that return on or before September 1 of the taxable year to which the net operating loss is attributable.
(e)
(f) (1) (A) For a net operating loss for any taxable year beginning on or after January 1, 1987, and before January 1, 2000, Section 172(b)(1)(A)(ii) of the Internal Revenue Code is modified to substitute “five taxable years” in lieu of “20 years” except as otherwise provided in paragraphs (2), (3), and (4).
(B) For a net operating loss for any income year beginning on or after January 1, 2000, and before January 1, 2008, Section 172(b)(1)(A)(ii) of the Internal Revenue Code is modified to substitute “10 taxable years” in lieu of “20 taxable years.”
(2) For any income year beginning before January 1, 2000, in the case of a “new business,” the “five taxable years” referred to in paragraph (1) shall be modified to read as follows:
(A) “Eight taxable years” for a net operating loss attributable to the first taxable year of that new business.
(B) “Seven taxable years” for a net operating loss attributable to the second taxable year of that new business.
(C) “Six taxable years” for a net operating loss attributable to the third taxable year of that new business.
(3) For any carryover of a net operating loss for which a deduction is denied by Section 24416.3, the carryover period specified in this subdivision shall be extended as follows:
(A) By one year for a net operating loss attributable to taxable years beginning in 1991.
(B) By two years for a net operating loss attributable to taxable years beginning prior to January 1, 1991.
(4) The net operating loss attributable to taxable years beginning on or after January 1, 1987, and before January 1, 1994, shall be a net operating loss carryover to each of the 10 taxable years following the year of the loss if it is incurred by a corporation that was either of the following:
(A) Under the jurisdiction of the court in a Title 11 or similar case at any time prior to January 1, 1994. The loss carryover provided in the preceding sentence shall not apply to any loss incurred in an income year after the taxable year during which the corporation is
no longer under the jurisdiction of the court in a Title 11 or similar case.
(B) In receipt of assets acquired in a transaction that qualifies as a tax-free reorganization under Section 368(a)(1)(G) of the Internal Revenue Code.
(f)
(g) For purposes of this section:
(1) “Eligible small business” means any trade or business that has gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the income year.
(2) Except as provided in subdivision (g), (h), “new business” means any trade or business activity that is first commenced in this state on or after January 1, 1994.
(3) “Title 11 or similar case” shall have the same meaning as in Section 368(a)(3) of the Internal Revenue Code.
(4) In the case of any trade or business activity conducted by a partnership or an “S” corporation, paragraphs (1) and (2) shall be applied to the partnership or “S” corporation.
(g)
(h) For purposes of this section, in determining whether a trade or business activity qualifies as a new business under paragraph (2) of subdivision (e), (f), the following rules shall apply:
(1) In any case where If a taxpayer purchases or otherwise acquires all or any portion of the assets of an existing trade or business (irrespective business, irrespective of the form of entity) entity, that is doing business in this state (within state, within the meaning of Section 23101), 23101, the trade or business thereafter conducted by the taxpayer (or taxpayer, or any related person) person, shall not be treated as a new business if the aggregate fair market value of the acquired assets (including assets, including real, personal, tangible, and intangible property) property, used by the taxpayer (or taxpayer, or any related person) person, in the conduct of its trade or business exceeds 20 percent of the aggregate fair market value of the total assets of the trade or business being conducted by the taxpayer (or taxpayer, or any related person). person. For purposes of this paragraph only, the following rules shall apply:
(A) The determination of the relative fair market values of the acquired assets and the total assets shall be made as of the last day of the first taxable year in which the taxpayer (or taxpayer, or any related person) person, first uses any of the acquired trade or business assets in its business activity.
(B) Any acquired assets that constituted property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the transferor shall not be treated as assets acquired from an existing trade or business, unless those assets also constitute property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the acquiring taxpayer (or taxpayer, or any related person). person.
(2) In any case where If a taxpayer (or taxpayer, or any related person) person, is engaged in one or more trade or business activities in this state, or has been engaged in one or more trade or business activities in this state within the preceding 36 months (“prior trade or business activity”), and thereafter commences an additional trade or business activity in this state, the additional trade or business activity shall only be treated as a new business if the additional trade or business activity is classified under a different division of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, than are any of the taxpayer’s (or taxpayer’s, or any related person’s) person’s, current or prior trade or business activities.
(3) In If a case in which a taxpayer, including all related persons, is engaged in trade or business activities wholly outside of this state and the taxpayer first commences doing business in this state (within state, within the meaning of Section 23101) 23101, after December 31, 1993 (other 1993, other than by purchase or other acquisition described in paragraph (1)), (1), the trade or business activity shall be treated as a new business under paragraph (2) of subdivision (e). (f).
(4) In a case in which the legal form under which a trade or business activity is being conducted is changed, the change in form shall be disregarded and the determination of whether the trade or business activity is a new business shall be made by treating the taxpayer as having purchased or otherwise acquired all or any portion of the assets of an existing trade or business under the rules of paragraph (1).
(5) “Related person” shall mean any person that is related to the taxpayer under either Section 267 or 318 of the Internal Revenue Code.
(6) “Acquire” shall include any transfer, whether or not for consideration.
(7) (A) For taxable years beginning on or after January 1, 1997, the term “new business” shall include any taxpayer that is engaged in biopharmaceutical activities or other biotechnology activities that are described in Codes 2833 to 2836, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, and as further amended, and that has not received regulatory approval for any product from the Food and Drug Administration.
(B) For purposes of this paragraph:
(i) “Biopharmaceutical activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.
(ii) “Other biotechnology activities” means activities consisting of the application of recombinant DNA technology to produce commercial products, as well as activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.
(h)
(i) For purposes of corporations whose net income is determined under Chapter 17 (commencing with Section 25101), Section 25108 applies to each of the following:
(1) The amount of net operating loss incurred in any taxable year that may be carried forward to another taxable year.
(2) The amount of any loss carry forward that may be deducted in any taxable year.
(i)
(j) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this section, including any regulations necessary to prevent the avoidance of the purposes of this section through splitups, shell corporations, partnerships, tiered ownership structures, or otherwise.
(j)
(k) The Franchise Tax Board may reclassify any net operating loss carryover determined under either paragraph (2) or (3) of subdivision (b) as a net operating loss carryover under paragraph (1) of subdivision (b) upon a showing that the reclassification is necessary to prevent evasion of the purposes of this section.
(k)
(l) Except as otherwise provided, the amendments made by Chapter 107 of the Statutes of 2000 apply to net operating losses for taxable years beginning on or after January 1, 2000.
SEC. 4.
Section 24416.21 of the Revenue and Taxation Code is amended to read:24416.21.
(a) Notwithstanding Sections 24416, 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, and 24416.7 of this code and Section 172 of the Internal Revenue Code, no net operating loss deduction shall be allowed for any taxable year beginning on or after January 1, 2008, and before January 1, 2012.(b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows:
(1) By one year, for losses incurred in taxable years beginning on or after January 1, 2010, and before January 1, 2011.
(2) By two
years, for losses incurred in taxable years beginning on or after January 1, 2009, and before January 1, 2010.
(3) By three years, for losses incurred in taxable years beginning on or after January 1, 2008, and before January 1, 2009.
(4) By four years, for losses incurred in taxable years beginning before January 1, 2008.
(c) (1) Notwithstanding subdivision (a), a net operating loss deduction shall be allowed for carryback of a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019.
(2) Pursuant to subdivision (e) of Section 24416, a net operating loss deduction shall be allowed for a carryback of a net operating loss attributable to a taxable year beginning on or after January 1, 2019, and before January 1, 2021.
(d) The disallowance of any net operating loss deduction for any taxable year beginning on or after January 1, 2008, and before January 1, 2010, pursuant to subdivision (a) shall not apply to a taxpayer with income subject to tax under this part of less than five hundred thousand dollars ($500,000) for the taxable year.
(e) (1) The disallowance of any net operating loss deduction for any taxable year beginning on or after January 1, 2010, and before January 1, 2012, pursuant to subdivision (a) shall not apply to a taxpayer with
preapportioned income of less than three hundred thousand dollars ($300,000) for the taxable year.
(2) For purposes of this subdivision, “preapportioned income” means net income after state adjustments, before the application of the apportionment and allocation provisions of this part.
(3) For taxpayers that are required to be included in a combined report under Section 25101 or authorized to be included in a combined report under Section 25101.15, the amount prescribed in paragraph (1) shall apply to the aggregate amount of preapportioned income for all members included in a combined report.
(f) Notwithstanding subdivision (a), this section shall not apply to a taxpayer that ceased to do business or has a final taxable year ending prior to August 28, 2008, that sold or transferred substantially all of its assets
resulting in a gain on sale during a taxable year ending prior to August 28, 2008, for which the gain could be offset with existing net operating loss deductions and the sale or transfer occurred pursuant to a plan of reorganization under Chapter 11 of Title 11 of the United States Code. An amended tax return claiming net operating loss deductions allowed pursuant to this subdivision shall be treated as a timely filed original return.
(g) The Legislature finds and declares that the addition of subdivision (f) to this section by the act adding this subdivision fulfills a statewide public purpose by providing necessary tax relief for a taxpayer that ceased to do business or has a final taxable year ending prior to August 28, 2008, that sold or transferred substantially all of its assets resulting in a gain or sale during a taxable year prior to August 28, 2008, for which the gain could be offset with existing net operating loss deductions and the
sale or transfer occurred pursuant to a plan of reorganization under Chapter 11 of Title 11 of the United States Code, in order to ensure that these taxpayers are not permanently denied the net operating loss deduction.
SEC. 5.
Section 24416.22 of the Revenue and Taxation Code is amended to read:24416.22.
(a) Notwithstanding Section 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, or 24416.7 to the contrary, a net operating loss attributable to a taxable year beginning on or after January 1, 2008, shall be a net operating carryover to each of the 20 taxable years following the year of the(b) (1) Notwithstanding Section 24416.1, 24416.4, or 24416.7 to the contrary, a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019, shall also be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss, subject to paragraph (2).
(2) Pursuant to subdivision (e) of
Section 24416, a net operating loss attributable to a taxable year beginning on or after January 1, 2018, and before January 1, 2019, shall be a net operating loss carryback to each of the five taxable years preceding the taxable year of the loss.
SEC. 6.
The Legislature hereby finds and declares that allowing taxpayers a five-year net operating loss carryback will jumpstart California’s economic recovery from the devastating COVID-19 pandemic and thus serves a public purpose and does not constitute a prohibited gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.SEC. 7.
(a) For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to the amendments to Sections 17276 and 24416 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The goal, purpose, or objective of this expenditure is to jumpstart California’s economic recovery and help bring back the millions of jobs that have been lost as a result of the COVID-19 pandemic.
(2) The performance
indicator for the Legislature to use when measuring whether the credit meets the goal, purpose, or objective specified in paragraph (1) is how many taxpayers are allowed a net operating loss carryback pursuant to this act.
(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall annually publish data on its internet website on the number of taxpayers that are allowed a net operating loss carryback pursuant to this act.
(a)For each taxable year beginning on or after January 1, 2020, and before January 1, 2026, there shall be allowed a credit against the “net tax,” as defined in Section 17039, in an amount equal to the difference between the following amounts:
(1)The annual premium amount paid or incurred during the taxable year by a qualified taxpayer for a residential fire insurance policy for coverage of the qualified principal residence of the qualified taxpayer.
(2)The annual premium amount paid or incurred by the qualified taxpayer during the 2016 calendar year for a residential fire insurance policy for coverage of that same qualified principal residence of the qualified taxpayer or the
annual premium amount paid or incurred by the qualified taxpayer during the calendar year in which the qualified taxpayer first purchased the residential fire insurance policy for coverage of that same qualified principal residence of the qualified taxpayer, whichever calendar year is later.
(b)For purposes of this section:
(1)“Qualified principal residence” means a single-family residence, whether detached or attached, that is the principal residence of the taxpayer and is eligible for the homeowner’s exemption under Section 218.
(2)“Qualified taxpayer” means a taxpayer who has paid or incurred a premium amount during the taxable year for a residential fire insurance policy for coverage of that taxpayer’s qualified principal residence that is an amount equal to an increase of 5 percent or more above the premium
amount paid or incurred by that taxpayer for a residential fire insurance policy for coverage of that same qualified principal residence of the taxpayer during the 2016 calendar year or the calendar year in which the taxpayer first purchased the residential fire insurance policy for coverage of that same qualified principal residence of the taxpayer, whichever calendar year is later.
(3)“Residential fire insurance policy” means a residential fire insurance policy subject to Chapter 2 (commencing with Section 2030) of Part 1 of Division 2 of the Insurance Code for coverage of the qualified principal residence of the qualified taxpayer.
(c)If the amount allowable as a credit under subdivision (a) exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the
Tax Relief and Refund Account and refunded to the qualified taxpayer upon appropriation by the Legislature.
(d)This credit shall be in lieu of any other credit or deduction that the qualified taxpayer may otherwise be allowed pursuant to this part with respect to amounts taken into account under this section in calculating the credit allowed by this section.
(e)This section shall remain in effect only until December 1, 2026, and as of that date is repealed.
(a)For the purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares the following:
(1)The goal, purpose, or objection of Section 17052.16 of the Revenue and Taxation Code, as added by this act, hereafter “the credit,” is to make property owners whole from unexpected premium increases in residential fire insurance policies that result in unaffordable policies.
(2)The performance indicator for the Legislature to use when measuring whether the credit meets the goal, purpose, or objective specified in paragraph (1) is how many taxpayers are allowed the credits.
(b)Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall annually publish data on its internet website on the number of taxpayers that are allowed the credit.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
