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AB-1016 Limited liability companies: annual tax: proration.(2017-2018)

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Date Published: 05/16/2017 09:00 PM
AB1016:v97#DOCUMENT

Amended  IN  Assembly  May 16, 2017
Amended  IN  Assembly  March 29, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill
No. 1016


Introduced by Assembly Member Steinorth

February 16, 2017


An act to amend Section 17941 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 1016, as amended, Steinorth. Limited liability companies: annual tax: proration.
Existing law imposes an annual minimum franchise tax, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state, or doing business in this state. Existing law imposes an annual tax in an amount equal to the minimum franchise tax on every limited liability company doing business in this state.
This bill, upon appropriation of specified funds by the Legislature, for taxable years beginning on or after January 1, 2018, and before January 1, 2023, would prorate that annual tax for a new limited liability company, as defined, depending upon the quarter in which the company’s articles of organization are filed, as provided.
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 17941 of the Revenue and Taxation Code is amended to read:

17941.
 (a) For each taxable year beginning on or after January 1, 1997, a limited liability company doing business in this state (as defined in Section 23101) shall pay annually to this state a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in paragraph (1) of subdivision (d) of Section 23153 for the taxable year.
(b) (1) In addition to any limited liability company that is doing business in this state and is therefore subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, a limited liability company shall pay annually the tax prescribed in subdivision (a) if articles of organization have been accepted, or a certificate of registration has been issued, by the office of the Secretary of State. The tax shall be paid for each taxable year, or part thereof, until a certificate of cancellation of registration or of articles of organization is filed on behalf of the limited liability company with the office of the Secretary of State.
(2) If a taxpayer files a return with the Franchise Tax Board that is designated as its final return, the Franchise Tax Board shall notify the taxpayer that the annual tax shall continue to be due annually until a certificate of dissolution is filed with the Secretary of State pursuant to Section 17707.08 of the Corporations Code or a certificate of cancellation is filed with the Secretary of State pursuant to Section 17708.06 of the Corporations Code.
(c) The tax assessed under this section shall be due and payable on or before the 15th day of the fourth month of the taxable year.
(d) For purposes of this section, “limited liability company” means an organization, other than a limited liability company that is exempt from the tax and fees imposed under this chapter pursuant to Section 23701h or 23701x, that is formed by one or more persons under the law of this state, any other country, or any other state, as a “limited liability company” and that is not taxable as a corporation for California tax purposes.
(e) Notwithstanding anything in this section to the contrary, if the office of the Secretary of State files a certificate of cancellation pursuant to Section 17707.02 of the Corporations Code for any limited liability company, then paragraph (1) of subdivision (f) of Section 23153 shall apply to that limited liability company as if the limited liability company were properly treated as a corporation for that limited purpose only, and paragraph (2) of subdivision (f) of Section 23153 shall not apply. Nothing in this subdivision entitles a limited liability company to receive a reimbursement for any annual taxes or fees already paid.
(f) (1) Notwithstanding any provision of this section to the contrary, a limited liability company that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the tax imposed under this section for any taxable year the owner is deployed and the limited liability company 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 a limited liability company’s expenses exceed its receipts.
(C) “Small business” means a limited liability company 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.
(g) (1) Notwithstanding any provision of this section to the contrary, for taxable years beginning on or after January 1, 2018, and before January 1, 2023, every new limited liability company shall pay to the state an annual tax as follows:
(A) For a new limited liability company that files its articles of organization in the first quarter of the calendar year, eight hundred dollars ($800).
(B) For a new limited liability company that files its articles of organization in the second quarter of the calendar year, six hundred dollars ($600).
(C) For a new limited liability company that files its articles of organization in the third quarter of the calendar year, four hundred dollars ($400).
(D) For a new limited liability company that files its articles of organization in the fourth quarter of the calendar year, two hundred dollars ($200).
(2) “New limited liability company” means a limited liability company that on or after January 1, 2018, is organized 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 organization. organization and files a short-period return on a calendar year basis for the calendar year in which the limited liability company is organized. “New limited liability company” does not include any limited liability company that began business operations as, or acquired its business operations from, a sole proprietorship, a limited liability company, or any other form of business entity prior to its organization.
(3) A new limited liability company that pays a prorated annual tax pursuant to this subdivision shall notify the Franchise Tax Board, in a manner prescribed by the Franchise Tax Board, that the new limited liability company is paying a prorated annual tax pursuant to this subdivision.
(4) This subdivision shall become operative on the effective date of any budget measure specifically appropriating funds to the Franchise Tax Board for its costs of administering this subdivision.
(5) This subdivision shall become inoperative for taxable years beginning on or after January 1, 2023.

SEC. 2.

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