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AB-1085 Business entities: annual tax: minimum franchise tax: fees.(2017-2018)

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Date Published: 02/16/2017 09:00 PM
AB1085:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 1085


Introduced by Assembly Member Calderon

February 16, 2017


An act to amend Sections 17941 and 19025 of the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


AB 1085, as introduced, Calderon. Business entities: annual tax: minimum franchise tax: fees.
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. In addition, existing law requires every limited liability company, if the articles of organization have been accepted by, or a certificate of registration has been issued by, the Secretary of State, to pay an annual tax in an amount equal to the minimum franchise tax. Existing law requires the tax assessed under these provisions to be due and payable on or before the 15th day of the 4th month of the taxable year.
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 exempts a corporation that incorporates or qualifies to do business in this state from the payment of the minimum franchise tax in its first taxable year. Existing law requires corporations subject to the minimum franchise tax to pay annually to the state a minimum franchise tax of $800 and provides that the estimated tax shall not be less than the minimum tax. If the amount of estimated tax does not exceed the minimum franchise tax, existing law requires the entire amount of the estimated tax to be due and payable on or before the 15th day of the 4th month of the taxable year.
This bill would also authorize that annual tax and minimum franchise tax to be due and payable in 2 or 3 equal installments, on or before specified dates.
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 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) (1) The tax assessed under this section shall be due and payable according to one of the following:

(c)The tax assessed under this section shall be due and payable on

(A) On or before the 15th day of the fourth month of the taxable year.
(B) In three equal installments on or before the 15th day of the 4th, 8th, and 12th months of the taxable year.
(C) In two equal installments, with the first installment on or before the 15th day of the fourth month of the taxable year and the second installment on or before 12 months of that date.
(2) The Franchise Tax Board shall develop procedures for taxpayers to notify the Franchise Tax Board of the payment option used under this subdivision.
(3) Penalties and interest shall not be imposed on a taxpayer for electing to use an alternative payment option under this subdivision.
(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 Section 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.

SEC. 2.

 Section 19025 of the Revenue and Taxation Code is amended to read:

19025.
 (a) (1) If the amount of estimated tax does not exceed the minimum tax specified by Section 23153, the entire amount of the estimated tax shall be due and payable on or before the 15th day of the fourth month of the taxable year. according to one of the following:
(A) On or before the 15th day of the fourth month of the taxable year.
(B) In three equal installments on or before the 15th day of the 4th, 8th, and 12th months of the taxable year.
(C) In two equal installments, with the first installment on or before the 15th day of the fourth month of the taxable year and the second installment on or before 12 months of that date.
(2) The Franchise Tax Board shall develop procedures for taxpayers to notify the Franchise Tax Board of the payment option used under this subdivision.
(3) Penalties and interest shall not be imposed on a taxpayer for electing to use an alternative payment option under this subdivision.
(b) Except as provided in subdivision (c), if the amount of estimated tax exceeds the minimum tax specified by Section 23153, the amount payable shall be paid in installments as follows:
If the
requirements
The following percentages of the estimated tax
shall be paid on the 15th day of the—
of this subdivision
are first met—
4th
month
6th
month
9th
month
12th
month
Before the 1st day of the 4th month of the taxable year  ........................


30 (but not less than the minimum tax provided in Section 23153 and any tax under Section 23800.5)


40


0


30
After the last day of the 3rd month and before the 1st day of the 6th month of the taxable year  ........................
__
60
0
40
After the last day of the 5th month and before the 1st day of the 9th month of the taxable year  ........................
__
__
70
30
After the last day of the 8th month and before the 1st day of the 12th month of the taxable year  ........................
__
__
__
100
(c) If a wholly owned subsidiary is first subject to tax under Section 23800.5 after the last day of the third month of the taxable year of owner, the amount of the next installment of estimated tax under subdivision (b) after the wholly owned subsidiary is subject to tax under Section 23800.5 shall not be less than the amount of the tax of the wholly owned subsidiary under Section 23800.5 and an amount equal to that amount shall be due and payable on the date the installment is required to be paid. For purposes of determining which installment is the next installment of estimated tax under subdivision (b), subdivision (b) shall be modified by substituting “includes the tax of a wholly owned subsidiary under Section 23800.5” for “exceeds the minimum tax specified by Section 23153.”
(d) The amendments made to this section by Section 1 of Chapter 1 of the First Extraordinary Session of the Statutes of 2008 shall apply to installments due for each taxable year beginning on or after January 1, 2009, and before January 1, 2010.
(e) The amendments made to this section by the act adding this subdivision Section 2 of Chapter 15 of the Fourth Extraordinary Session of the Statutes of 2009 shall apply to installments due for each taxable year beginning on or after January 1, 2010.