Bill Text: CA AB726 | 2011-2012 | Regular Session | Amended

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Bill Title: Personal income taxes: exclusions: rollovers.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2012-02-01 - Died pursuant to Art. IV, Sec. 10(c) of the Constitution. From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB726 Detail]

Download: California-2011-AB726-Amended.html

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BILL NUMBER: AB 726	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 2, 2011

INTRODUCED BY   Assembly Member Morrell
   (Coauthor: Senator Gaines)

                        FEBRUARY 17, 2011

   An act to amend Section 17085 of, and to add Section 17131.7 to,
the Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 726, as amended, Morrell. Personal income taxes: exclusions:
rollovers.
   The Personal Income Tax Law provides various exclusions from gross
income in computing tax liability and, in modified conformity to
federal law, imposes a penalty tax upon early distributions from
tax-deferred retirement accounts, as provided.
   This bill would provide an exclusion from gross income for moneys
removed from a specified savings plan and deposited directly into a
health savings account, as provided, and would waive that penalty tax
for early distribution.
   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 17085 of the Revenue and Taxation Code is
amended to read:
   17085.  Section 72 of the Internal Revenue Code, relating to
annuities; certain proceeds of endowment and life insurance
contracts, is modified as follows:
   (a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
   (1) Any individual whose annuity starting date is after December
31, 1986.
   (2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
   (b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
   (1) An amount equal to the amount includable in federal gross
income for the taxable year.
   (2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
   (c) (1) Except as provided in paragraphs (2) and (3), the amount
of the penalty imposed under this part shall be computed in
accordance with Sections 72(m), (q), (t), and (v) of the Internal
Revenue Code, as applicable for federal income tax purposes for the
same taxable year, using a rate of 21/2 percent, in lieu of the rate
provided in those sections.
   (2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts, as
applicable for federal income tax purposes for the same taxable year,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
   (3) In the case of payments or  distribution 
 distributions  that are excluded from gross income pursuant
to Section 17131.7, the penalty imposed by this subdivision shall
not apply.
   (d) Section 72(f)(2) of the Internal Revenue Code shall be
applicable without applying the exceptions which immediately follow
that paragraph.
   (e) The amendments made by Section 844 of the Pension Protection
Act of 2006 (Public Law 109-280) to Section 72(e) of the Internal
Revenue Code, shall not apply.
  SEC. 2.  Section 17131.7 is added to the Revenue and Taxation Code,
to read:
   17131.7.  Gross income shall not include moneys paid or
distributed out of a 401(k) plan to an individual if the entire
amount received  does not exceed one hundred thousand dollars
($100,000) and is paid into a health savings account not later
than the 60th day after the day on which he or she receives the
payment or distribution.
  SEC. 3.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.