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AB-1818 Income taxes: credit: patent licensing.(2011-2012)

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AB1818:v97#DOCUMENT

Amended  IN  Assembly  May 17, 2012
Amended  IN  Assembly  March 29, 2012

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Assembly Bill
No. 1818


Introduced  by  Assembly Member Perea, Beall

February 21, 2012


An act to add Sections 17053.99 and 23699 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 1818, as amended, Perea. Income taxes: credit: patent licensing.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill would, under the Personal Income Tax Law and the Corporation Tax Law, for taxable years beginning on or after January 1, 2012, allow a credit against those taxes in an amount equal to ____% 15% of the qualified royalties, as defined, paid by a qualified taxpayer, as defined.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17053.99 is added to the Revenue and Taxation Code, to read:

17053.99.
 (a) For each taxable year beginning on or after January 1, 2012, there shall be allowed to a qualified taxpayer as a credit against the “net tax,” as defined in Section 17039, an amount equal to ____ 15 percent of the qualified royalties paid by the qualified taxpayer during the taxable year.
(b) For purposes of this section:
(1) “Commercialize” means the process in which a taxpayer is a licensee of a qualified patent and uses the patent in connection with, or incorporates the patent into, intellectual property or tangible personal property in the manner described, with respect to which a qualified patent is used directly or indirectly in connection with the manufacturing, production, growing, or extraction process with respect to such property, or is incorporated into such property and such incorporation serves a significant commercial purpose.

(1)

(2) “Qualified patent” means a patent owned by the University of California for an invention where the research and development for that invention was funded, in whole or in part, by amounts eligible for the credit under Section 17052.12 or 23609.
(3) “Qualified research” has the same meaning as set forth in Section 41(d) of the Internal Revenue Code, as modified by Section 17052.12.

(2)

(4) “Qualified royalties” means any royalties paid by a qualified taxpayer for the use of a qualified patent through a license agreement with the University of California or another entity.

(3)

(5) “Qualified taxpayer” means a taxpayer that paid qualified royalties during the taxable year and commercializes, for at least five consecutive years within the state, the licensed patent for which qualified royalties were paid during the taxable year.
(c) In the case where the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding eight years if necessary, until the credit is exhausted.

SEC. 2.

 Section 23699 is added to the Revenue and Taxation Code, to read:

23699.
 (a) For each taxable year beginning on or after January 1, 2012, there shall be allowed to a qualified taxpayer as a credit against the “tax,” as defined in Section 23036, an amount equal to ____ 15 percent of the qualified amount paid by the qualified taxpayer during the taxable year.
(b) For purposes of this section:
(1) “Commercialize” means the process in which a taxpayer is a licensee of a qualified patent and uses the patent in connection with, or incorporates the patent into, intellectual property or tangible personal property in the manner described, with respect to which a qualified patent is used directly or indirectly in connection with the manufacturing, production, growing, or extraction process with respect to such property, or is incorporated into such property and such incorporation serves a significant commercial purpose.

(1)

(2) “Qualified patent” means a patent owned by the University of California for an invention where the research and development for that invention was funded, in whole or in part, by amounts eligible for the credit under Section 17052.12 or 23609.
(3) “Qualified research” has the same meaning as set forth in Section 41(d) of the Internal Revenue Code, as modified by Section 23609.

(2)

(3) “Qualified royalties” means any royalties paid by a qualified taxpayer for the use of a qualified patent through a license agreement with the University of California or another entity.

(3)

(4) “Qualified taxpayer” means a taxpayer that paid qualified royalties during the taxable year and commercializes, for at least five consecutive years within the state, the licensed patent for which qualified royalties were paid during the taxable year.
(c) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding eight years if necessary, until the credit is exhausted.

SEC. 3.

 This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.