Bill Text: CA ABX11 | 2009-2010 | Regular Session | Introduced
Bill Title: Taxation: corporate reorganizations: built-in losses.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2009-01-07 - Died at Desk. [ABX11 Detail]
Download: California-2009-ABX11-Introduced.html
BILL NUMBER: ABX1 1 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Charles Calderon
DECEMBER 8, 2008
An act relating to taxation, and declaring the urgency thereof, to
take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1, as introduced, Charles Calderon. Taxation: corporate
reorganizations: built-in losses.
The Corporation Tax Law, in specified conformity to federal income
tax laws, imposes certain limitations on the use of built-in losses
in conjunction with corporate reorganizations.
This bill would clarify that a specified federal administrative
notice relating to those limitations does not apply for purposes of
California law.
The California Constitution authorizes the Governor to declare a
fiscal emergency and to call the Legislature into special session for
that purpose. The Governor issued a proclamation declaring a fiscal
emergency, and calling a special session for this purpose, on
December 1, 2008.
This bill would state that it addresses the fiscal emergency
declared by the Governor by proclamation issued on December 1, 2008,
pursuant to the California Constitution.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: no. State-mandated
local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares the following:
(1) The Personal Income Tax Law (Part 10 (commencing with Section
17001) of Division 2 of the Revenue and Taxation Code) and the
Corporation Tax Law (Part 11 (commencing with Section 23001) of
Division 2 of the Revenue and Taxation Code) provide for specified
conformity to various referenced provisions of the federal Internal
Revenue Code, as enacted as of a specified date.
(2) Those laws provide that for taxable years beginning on or
after January 1, 2005, the conformity date specified in California
law for those referenced Internal Revenue Code sections is January 1,
2005, except as otherwise specifically provided.
(3) Included among the federal provisions conformed to as enacted
as of January 1, 2005, are the provisions of Section 382 of the
Internal Revenue Code, relating to limitations on net operating loss
carryforwards and certain built-in losses following ownership change.
(4) As enacted as of January 1, 2005, Section 382 of the Internal
Revenue Code applied to financial institutions, and Section 382
included no specific authority for regulatory actions by the Internal
Revenue Service or the Department of the Treasury to exempt banks or
other financial institutions from its provisions.
(5) On October 20, 2008, the Internal Revenue Service issued
Notice 2008-83, 2008-42 I.R.B. 905, stating that "(f)or purposes of
section 382(h), any deduction properly allowed after an ownership
change (as defined in section 382(g)) to a bank with respect to
losses on loans or bad debts (including any deduction for a
reasonable addition to a reserve for bad debts) shall not be treated
as a built-in loss or a deduction that is attributable to periods
before the change date."
(6) Notice 2008-83, which precludes the application of provisions
of Section 382 of the Internal Revenue Code to financial
institutions, constitutes a substantive change to the application of
Section 382 of the Internal Revenue Code, as enacted as of January 1,
2005.
(7) This state conformed to Section 382 of the Internal Revenue
Code, as enacted as of January 1, 2005, but the Legislature's action
in conforming to Section 382 of the Internal Revenue Code did not
contemplate the substantive change in application of these provisions
set forth in Notice 2008-83.
(b) Inasmuch as the Legislature has determined that the changes
set forth in Notice 2008-83 are inconsistent with, and in conflict
with, the intent of the Legislature in conforming with Section 382 of
the Internal Revenue Code, the Legislature makes the following
finding and directs the Franchise Tax Board to apply it for purposes
of the Personal Income Tax Law and the Corporation Tax Law:
(1) Notice 2008-83, relating to application of Section 382(h) of
the Internal Revenue Code to banks, and any other administrative
guidance issued by the Internal Revenue Service after October 20,
2008, and any federal Treasury regulations promulgated after October
20, 2008, which have the same or similar effect regarding the
application of Section 382 of the Internal Revenue Code to banks,
shall not apply for purposes of the Personal Income Tax Law and the
Corporation Tax Law.
(2) Paragraph (1) shall apply to the same taxable periods to which
any federal guidance described in Notice 2008-83 is applicable.
SEC. 2. This act addresses the fiscal emergency declared by the
Governor by proclamation on December 1, 2008, pursuant to subdivision
(f) of Section 10 of Article IV of the California Constitution.
SEC. 3. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to provide clarity of revenue estimates for purposes of
addressing the current state fiscal crisis, it is necessary that this
act go into immediate effect.
