Bill Text: CA SB797 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Income taxation: net operating losses: fraudulent investment arrangement losses.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 62(a). [SB797 Detail]

Download: California-2013-SB797-Amended.html

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BILL NUMBER: SB 797	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 1, 2013

INTRODUCED BY   Senator Anderson

                        FEBRUARY 22, 2013

    An act to amend Section 206.1 of the Revenue and Taxation
Code, relating to taxation.   An act to amend Sections
17276.21 and 24416.21 of, and to add Sections 17207.1, 19057.5,
19306.5, and 24347.1 to, the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy. 


	LEGISLATIVE COUNSEL'S DIGEST


   SB 797, as amended, Anderson.  Property taxation:
exemption: parking: religious activities.   Income
taxation: net operating losses: fraudulent investment arrangement
losses.  
   The Personal Income Tax Law and the Corporation Tax Law, in
modified conformity with federal income tax laws, allow a deduction
for losses sustained during the taxable year and not compensated for
by insurance or otherwise. Those state laws conform to specified
revenue rulings and revenue procedures of the Internal Revenue
Service regarding treatment of losses due to investment arrangements
discovered to be criminally fraudulent, except that, among other
things, net operating loss carrybacks and carryforwards are not
allowed.  
   This bill would provide a safe harbor for determining the year in
which those losses attributable to criminal fraud occurred, as
described in a specified revenue procedure of the Internal Revenue
Service, and would allow a net operating loss carryover or carryback
of any resulting deduction from the losses in conformity with federal
income tax law.  
   This bill would make a legislative finding and declaration
relating to the public purpose served by the bill.  
   This bill would take effect immediately as a tax levy. 

   Existing property tax law exempts from tax any real property that
is reasonably and necessarily required for the parking of automobiles
by persons engaged in religious activities, as specified. 

   This bill would make technical, nonsubstantive changes to that
provision. 
   Vote: majority. Appropriation: no. Fiscal committee:  no
  yes  . State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
   
  SECTION 1.    Section 17207.1 is added to the Revenue and
Taxation Code, to read:
   17207.1.  (a) (1) For each taxable year beginning on or after
January 1, 2008, if a taxpayer that is a qualified investor, as
defined in the Internal Revenue Service's Revenue Procedure 2009-20,
follows the procedures described in Section 6 of that Revenue
Procedure for federal income tax purposes, and follows the same
procedures for purposes of this part, the Franchise Tax Board shall
not challenge the treatment described in paragraph (2) by the
qualified investor with respect to the qualified loss.
   (2) The treatment described in this paragraph means all of the
following:
   (A) The loss is deducted as a theft loss.
   (B) The taxable year in which the theft was discovered within the
meaning of Section 165(e) of the Internal Revenue Code is the
discovery year described in Section 4.04 of the Internal Revenue
Service's Revenue Procedure 2009-20.
   (C) The amount of the deduction is the amount specified in Section
5.02 of the Internal Revenue Service's Revenue Procedure 2009-20.
   (b) To the extent a deduction resulting from the application of
this section results in a net operating loss, Section 172 of the
Internal Revenue Code, as applicable for federal income tax purposes
for a taxable year, shall be applicable for purposes of this section
for the same taxable year, without regard to Section 17276.20. 
   SEC. 2.    Section 17276.21 of the   Revenue
and Taxation Code   is amended to read: 
   17276.21.  (a) Notwithstanding Sections 17276, 17276.1, 17276.2,
17276.4, 17276.5, 17276.6, 17276.7, and 17276.20 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) 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.

   (d) The provisions of this section shall not apply to the
following taxpayers:
   (1) For any taxable year beginning on or after January 1, 2008,
and before January 1, 2010, this section shall not apply to a
taxpayer with net business income of less than five hundred thousand
dollars ($500,000) for the taxable year. For purposes of this
paragraph, business income means:
   (A) Income from a trade or business, whether conducted by the
taxpayer or by a passthrough entity owned directly or indirectly by
the taxpayer. For purposes of this paragraph, the term "passthrough
entity" means a partnership or an "S" corporation.
   (B) Income from rental activity.
   (C) Income attributable to a farming business.
   (2) For any taxable year beginning on or after January 1, 2010,
and before January 1, 2012, this section shall not apply to a
taxpayer with modified adjusted gross income of less than three
hundred thousand dollars ($300,000) for the taxable year. For
purposes of this paragraph, "modified adjusted gross income" means
the amount described in paragraph (2) of subdivision (h) of Section
17024.5, determined without regard to the deduction allowed under
Section 172 of the Internal Revenue Code, relating to net operating
loss deduction. 
   (e) This section shall not apply to a loss resulting from the
application of Section 17207.1. 
   SEC. 3.    Section 19057.5 is added to the  
Revenue and Taxation Code   , to read:  
   19057.5.  Section 6501(h) of the Internal Revenue Code, relating
to limitations on credit or refund with respect to the special period
of limitation with respect to net operating loss or capital loss
carrybacks, shall apply to a net operating loss resulting from the
application of Section 17207.1 or Section 24347.1, except as
otherwise provided. 
   SEC. 4.    Section 19306.5 is added to the  
Revenue and Taxation Code   , to read:  
   19306.5.  Section 6511(d)(2) of the Internal Revenue Code,
relating to the limitations on credit or refund with respect to the
special period of limitation with respect to net operating loss or
capital loss carrybacks, shall apply to a net operating loss
resulting from the application of Section 17207.1 or Section 24347.1,
except as otherwise provided.
   SEC. 5.    Section 24347.1 is added to the  
Revenue and Taxation Code   , to read:  
   24347.1.  (a) (1) For each taxable year beginning on or after
January 1, 2008, if a taxpayer that is a qualified investor, as
defined in the Internal Revenue Service's Revenue Procedure 2009-20,
follows the procedures described in Section 6 of that Revenue
Procedure for federal income tax purposes, and follows the same
procedures for purposes of this part, the Franchise Tax Board shall
not challenge the treatment described in paragraph (2) by the
qualified investor with respect to the qualified loss.
   (2) The treatment described in this paragraph means all of the
following:
   (A) The loss is deducted as a theft loss.
   (B) The taxable year in which the theft was discovered within the
meaning of Section 165(e) of the Internal Revenue Code is the
discovery year described in Section 4.04 of the Internal Revenue
Service's Revenue Procedure 2009-20.
   (C) The amount of the deduction is the amount specified in Section
5.02 of the Internal Revenue Service's Revenue Procedure 2009-20.
   (b) To the extent a deduction resulting from the application of
this section results in a net operating loss, Section 172 of the
Internal Revenue Code, as applicable for federal income tax purposes
for a taxable year, shall be applicable for purposes of this section
for the same taxable year, without regard to Section 24416.20. 
   SEC. 6.    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, 24416.7, and 24416.20 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) 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.

   (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. 
   (h) This section shall not apply to a loss resulting from the
application of Section 24347.1. 
   SEC. 7.    The Legislature finds and declares that
this act fulfills a statewide public purpose by providing tax relief
for taxpayers who are innocent victims of fraudulent investment
schemes. 
   SEC. 8.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.    Section 206.1 of the Revenue and
Taxation Code is amended to read:
   206.1.  (a) Pursuant to the authority in subdivision (d) of
Section 4 of Article XIII of the California Constitution, and in
accordance with subdivision (b) of this section, all real property
that is necessarily and reasonably required for the parking of
automobiles of persons who are attending religious services, or are
engaged in religious services or worship or any religious activity,
is exempt from taxation.
   (b) For purposes of the exemption established by subdivision (a),
all of the following apply:
   (1) "Real property" means land and improvements or a possessory
interest in land and improvements.
   (2) The real property is not required to be contiguous to the land
on which the church or other structure used for religious services
or as the place of worship or religious activity is located.
   (3) The real property is not at other times used for commercial
purposes. For purposes of this paragraph, "commercial purposes" does
not include use of the property for the parking of vehicles or
bicycles, the revenue from which does not exceed the ordinary and
necessary costs of maintaining the real property.
   (4) The exemption shall apply to otherwise qualifying land and
improvements regardless of whether the land and improvements are
owned by the church, religious denomination, or sect using the land
and improvements for the parking of automobiles by persons described
in subdivision (a). However, the exemption shall apply to land and
improvements that are not owned by the church, religious
denomination, or sect using the land and improvements for the parking
of automobiles by persons described in subdivision (a) only as long
as all of the following conditions are met:
   (A) The congregation of the church, religious denomination, or
sect is no greater than 500 members.
   (B) The church, religious denomination, or sect is engaged in a
lease of the land and improvements for the exclusive purpose of the
parking of automobiles by persons described in subdivision (a).
   (C) The church, religious denomination, or sect is responsible,
under the terms of its lease with the fee owner of the land and
improvements, for paying the property taxes levied on the land and
improvements. For purposes of this subparagraph, paying property
taxes levied on land and improvements includes reimbursement paid to
the fee owner of the land and improvements for those taxes.
   (D) The real property is used exclusively for the parking of
automobiles by persons described in subdivision (a).
   (E) The fee owner of the real property and the county agree that
the fee owner shall pay the total amount of taxes that would be
levied on the real property for the current fiscal year and the first
two subsequent fiscal years in the absence of a grant of exemption
pursuant to this paragraph for the current fiscal year, if the real
property is used for any purpose other than that specified in
subparagraph (D) during either of those two subsequent fiscal years.