Bill Text: CA AB2244 | 2013-2014 | Regular Session | Amended
Bill Title: Corporation taxes: minimum franchise tax: annual tax: dormant and inactive business entities.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-05-23 - Joint Rule 62(a), file notice suspended. (Page 5065.) In committee: Set, second hearing. Held under submission. [AB2244 Detail]
Download: California-2013-AB2244-Amended.html
BILL NUMBER: AB 2244 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 15, 2014
AMENDED IN ASSEMBLY APRIL 24, 2014
AMENDED IN ASSEMBLY MARCH 26, 2014
INTRODUCED BY Assembly Member Chau
FEBRUARY 21, 2014
An act to amend Section 23153 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2244, as amended, Chau. Corporation taxes: minimum franchise
tax: annual tax: dormant and inactive business entities.
The Corporation Tax Law imposes taxes on, or measured by, income,
as specified. The Corporation Tax Law imposes a minimum franchise tax
of $800, except as provided, on every corporation incorporated in
this state, qualified to transact intrastate business in this state,
or doing business in this state , and an annual tax in an
amount equal to the minimum franchise tax on every limited liability
company, limited partnership, and limited liability partnership
registered, qualified to transact intrastate business, or doing
business in this state, as specified . Existing law
imposes an annual tax in an amount equal to the minimum franchise tax
on every limited partnership, limited liability company, and limited
liability partnership doing business in this state. In
addition, existing law requires every limited partnership that has
filed a certificate with the Secretary of State and every foreign
limited partnership that has registered with the Secretary of State,
every limited liability company if the articles of organization have
been accepted by, or a certificate of registration has been issued
by, the Secretary of State, and every registered limited liability
partnership and every foreign limited liability partnership that has
registered with the Secretary of State, to pay an annual tax in an
amount equal to the minimum franchise tax.
This bill would reduce the minimum franchise tax to $200 for a
dormant business entity and to $50 for an inactive business entity
, as specified . This bill would define "dormant business
entity" as a business entity that is organized under state law or has
qualified to transact intrastate business in this state and that
certifies under penalty of perjury with its return for the taxable
year that it was not doing business in this state. This bill defines
"inactive business entity" as a business entity, other than a limited
partnership or a limited liability partnership, that is organized
under state law or has qualified to transact intrastate business and
that reasonably believes that it will not be doing business in this
state for that taxable year.
By expanding the crime of perjury, this bill would impose a
state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 23153 of the Revenue and Taxation Code is
amended to read:
23153. (a) Every corporation described in subdivision (b) shall
be subject to the minimum franchise tax specified in subdivision (d)
from the earlier of the date of incorporation, qualification, or
commencing to do business within this state, until the effective date
of dissolution or withdrawal as provided in Section 23331 or, if
later, the date the corporation ceases to do business within the
limits of this state.
(b) Unless expressly exempted by this part or the California
Constitution, subdivision (a) shall apply to each of the following:
(1) Every corporation that is incorporated under the laws of this
state.
(2) Every corporation that is qualified to transact intrastate
business in this state pursuant to Chapter 21 (commencing with
Section 2100) of Division 1 of Title 1 of the Corporations Code.
(3) Every corporation that is doing business in this state.
(c) The following entities are not subject to the minimum
franchise tax specified in this section:
(1) Credit unions.
(2) Nonprofit cooperative associations organized pursuant to
Chapter 1 (commencing with Section 54001) of Division 20 of the Food
and Agricultural Code that have been issued the certificate of the
board of supervisors prepared pursuant to Section 54042 of the Food
and Agricultural Code. The association shall be exempt from the
minimum franchise tax for five consecutive taxable years, commencing
with the first taxable year for which the certificate is issued
pursuant to subdivision (b) of Section 54042 of the Food and
Agricultural Code. This paragraph only applies to nonprofit
cooperative associations organized on or after January 1, 1994.
(d) (1) Except as provided in paragraph (2), paragraph (1) of
subdivision (f) of Section 23151, paragraph (1) of subdivision (f) of
Section 23181, and paragraph (1) of subdivision (c) of Section
23183, corporations subject to the minimum franchise tax shall pay
annually to the state a minimum franchise tax of eight hundred
dollars ($800).
(2) The minimum franchise tax shall be twenty-five dollars ($25)
for each of the following:
(A) A corporation formed under the laws of this state whose
principal business when formed was gold mining, which is inactive and
has not done business within the limits of the state since 1950.
(B) A corporation formed under the laws of this state whose
principal business when formed was quicksilver mining, which is
inactive and has not done business within the limits of the state
since 1971, or has been inactive for a period of 24 consecutive
months or more.
(3) For purposes of paragraph (2), a corporation shall not be
considered to have done business if it engages in business other than
mining.
(e) Notwithstanding subdivision (a), for taxable years beginning
on or after January 1, 1999, and before January 1, 2000, every
"qualified new corporation" shall pay annually to the state a minimum
franchise tax of five hundred dollars ($500) for the second taxable
year. This subdivision shall apply to any corporation that is a
qualified new corporation and is incorporated on or after January 1,
1999, and before January 1, 2000.
(1) The determination of the gross receipts of a corporation, for
purposes of this subdivision, shall be made by including the gross
receipts of each member of the commonly controlled group, as defined
in Section 25105, of which the corporation is a member.
(2) "Gross receipts, less returns and allowances reportable to
this state," means the sum of the gross receipts from the production
of business income, as defined in subdivision (a) of Section 25120,
and the gross receipts from the production of nonbusiness income, as
defined in subdivision (d) of Section 25120.
(3) "Qualified new corporation" means a corporation that is
incorporated under the laws of this state or has qualified to
transact intrastate business in this state, that begins business
operations at or after the time of its incorporation and that
reasonably estimates that it will have gross receipts, less returns
and allowances, reportable to this state for the taxable year of one
million dollars ($1,000,000) or less. "Qualified new corporation"
does not include any corporation that began business operations as a
sole proprietorship, a partnership, or any other form of business
entity prior to its incorporation. This subdivision shall not apply
to any corporation that reorganizes solely for the purpose of
reducing its minimum franchise tax.
(4) This subdivision shall not apply to limited partnerships, as
defined in Section 17935, limited liability companies, as defined in
Section 17941, limited liability partnerships, as described in
Section 17948, charitable corporations, as described in Section
23703, regulated investment companies, as defined in Section 851 of
the Internal Revenue Code, real estate investment trusts, as defined
in Section 856 of the Internal Revenue Code, real estate mortgage
investment conduits, as defined in Section 860D of the Internal
Revenue Code, qualified Subchapter S subsidiaries, as defined in
Section 1361(b)(3)(B) of the Internal Revenue Code, or to the
formation of any subsidiary corporation, to the extent applicable.
(5) For any taxable year beginning on or after January 1, 1999,
and before January 1, 2000, if a corporation has qualified to pay
five hundred dollars ($500) for the second taxable year under this
subdivision, but in its second taxable year, the corporation's gross
receipts, as determined under paragraphs (1) and (2), exceed one
million dollars ($1,000,000), an additional tax in the amount equal
to three hundred dollars ($300) for the second taxable year shall be
due and payable by the corporation on the due date of its return,
without regard to extension, for that year.
(f) (1) Notwithstanding subdivision (a), every corporation that
incorporates or qualifies to do business in this state on or after
January 1, 2000, shall not be subject to the minimum franchise tax
for its first taxable year.
(2) This subdivision shall not apply to limited partnerships, as
defined in Section 17935, limited liability companies, as defined in
Section 17941, limited liability partnerships, as described in
Section 17948, charitable corporations, as described in Section
23703, regulated investment companies, as defined in Section 851 of
the Internal Revenue Code, real estate investment trusts, as defined
in Section 856 of the Internal Revenue Code, real estate mortgage
investment conduits, as defined in Section 860D of the Internal
Revenue Code, and qualified Subchapter S subsidiaries, as defined in
Section 1361(b)(3)(B) of the Internal Revenue Code, to the extent
applicable.
(3) This subdivision shall not apply to any corporation that
reorganizes solely for the purpose of avoiding payment of its minimum
franchise tax.
(g) Notwithstanding subdivision (a), a domestic corporation, as
defined in Section 167 of the Corporations Code, that files a
certificate of dissolution in the office of the Secretary of State
pursuant to subdivision (b) of Section 1905 of the Corporations Code,
prior to its amendment by the act amending this subdivision, and
that does not thereafter do business shall not be subject to the
minimum franchise tax for taxable years beginning on or after the
date of that filing.
(h) The minimum franchise tax imposed by paragraph (1) of
subdivision (d) shall not be increased by the Legislature by more
than 10 percent during any calendar year.
(i) (1) Notwithstanding subdivision (a), a corporation that is a
small business solely owned by a deployed member of the United States
Armed Forces shall not be subject to the minimum franchise tax for
any taxable year the owner is deployed and the corporation 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 negative net income as defined in
Section 24341.
(C) "Small business" means a corporation with total income from
all sources derived from, or attributable to, 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.
(j) (1) (A) Notwithstanding subdivision (a), Section 17935,
Section 17941, or Section 17948, for taxable years beginning on or
after January 1, 2015, every dormant business entity shall pay
annually to the state a tax of two hundred dollars ($200) for a
taxable year, and every inactive business entity shall pay annually
to the state a tax of fifty dollars ($50) for a taxable year.
(B) For any taxable year beginning on or after January 1, 2015, if
an inactive business entity was doing business in this state, within
the meaning of subdivision (a) of Section 23101,
in a taxable year, an additional tax in the amount equal to seven
hundred fifty dollars ($750) for the taxable year shall be due and
payable by the business entity on the due date of its return, without
regard to extension, for that year.
(C) This subdivision shall not apply to a business entity that is
a majority or wholly-owned subsidiary or an affiliated
business entity of owned directly or indirectly by
a business entity subject to this part or Part 10 (commencing
with Section 17001).
(D) A business entity shall not be a dormant business entity or an
inactive business entity, or both, for more than a total of five
taxable years.
(2) For the purposes of this subdivision:
(A) "Business entity" means a corporation, a limited partnership,
as defined in Section 17935, a limited liability company, as defined
in Section 17941, a limited liability partnership, as defined in
Section 17948, a charitable corporation, as described in Section
23703, a regulated investment company, as defined in Section 851 of
the Internal Revenue Code, a real estate investment trust, as defined
in Section 856 of the Internal Revenue Code, a real estate mortgage
investment conduit, as defined in Section 860D of the Internal
Revenue Code, or a qualified Subchapter S subsidiary, as defined in
Section 1361(b)(3)(B) of the Internal Revenue Code.
(B) "Dormant business entity" means a business entity that is
organized under the laws of this state or has qualified to transact
intrastate business in this state, and that certifies, under penalty
of perjury, with its return for the taxable year, that it was not
doing business, within the meaning of Section 23101, in this state
for that taxable year. A business entity may be a dormant business
entity for no more than one period of no more than five consecutive
taxable years.
(C) "Inactive business entity" means a business entity, other than
a limited partnership or a limited liability partnership, that is
organized under the laws of this state or has qualified to transact
intrastate business in this state, and that reasonably believes that
it will not be doing business, within the meaning of Section 23101,
in this state for that taxable year. A business entity may be an
inactive business entity for no more than one period of no more than
five consecutive taxable years.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
