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AB-2916 Property tax revenue allocations: qualified fire protection districts.(2017-2018)

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Date Published: 03/22/2018 09:00 PM
AB2916:v98#DOCUMENT

Amended  IN  Assembly  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2916


Introduced by Assembly Member Grayson

February 16, 2018


An act to amend Section 23153 of the Revenue and Taxation Code, relating to taxation.An act to add Article 3.5 (commencing with Section 97.90) to Chapter 6 of Part 0.5 of Division 1 of the Revenue and Taxation Code, relating to local government finance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2916, as amended, Grayson. Minimum franchise tax. Property tax revenue allocations: qualified fire protection districts.
Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generally requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the prior fiscal year, subject to certain modifications, and that jurisdiction’s portion of the annual tax increment, as defined.
This bill, for the 2020–21 to 2024–25 fiscal years, inclusive, would require the auditor of a county in which a qualified fire protection district, as defined, is located to increase the total amount of ad valorem property tax revenue that is otherwise required to be allocated to each qualified fire protection district by the fire protection district equity amount, as defined, and to commensurately reduce the total amount of ad valorem property tax revenue otherwise required to be allocated among all other local agencies in the county that are not fire protection districts by the fire protection district equity amount. The bill, on or before January 1, 2020, would require the Office of Emergency Services to identify which fire protection districts in the state are qualified fire protection districts and to determine what amount of additional ad valorem property tax revenues are necessary for the qualified fire protection district to provide effective services for the district. The bill would require the Office of Emergency Services to report these amounts to the auditor of each county in which a qualified fire protection district is located.
By changing the manner in which ad valorem property tax revenues are allocated by local government officials, this bill would impose a state-mandated local program.
By increasing the amount of ad valorem property tax revenues allocated to qualified fire protection districts from all other local agencies that are not fire protection districts, this bill would change the pro rata shares in which ad valorem property tax revenues are allocated among local agencies in a county, within the meaning of paragraph (3) of subdivision (a) of Section 25.5 of Article XIII of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Existing law, generally, imposes a minimum franchise tax of $800, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state, or doing business in this state.

This bill would make nonsubstantive changes to this provision.

Vote: MAJORITY2/3   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

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


SECTION 1.

 Article 3.5 (commencing with Section 97.90) is added to Chapter 6 of Part 0.5 of Division 1 of the Government Code, to read:
Article  3.5. Revenue Allocation Shifts for Qualified Fire Protection Districts

97.90.
 (a) For the 2020–21 to 2024–25 fiscal years, inclusive, the auditor of a county in which a qualified fire protection district is located shall do both of the following:
(1) Increase the total amount of ad valorem property tax revenue that is otherwise required to be allocated to each qualified fire protection district by the fire protection district equity amount.
(2) (A) Decrease the total amount of ad valorem property tax revenue that is otherwise required to be allocated to all local agencies that are not fire protection districts by the fire protection district equity amount.
(B) The reduction required by paragraph (1) shall be apportioned among each local agency that is not a fire protection district. The reduction for each of these local agencies shall be the percentage share of the total reduction that is equal to the proportion that the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the local agency bears to the total amount of ad valorem property tax revenue that is otherwise required to be allocated to all local agencies in the county that are not fire protection districts.
(b) On or before January 1, 2020, the Office of Emergency Services shall do all of the following:
(1) Identify which fire protection districts in the state are qualified fire protection districts.
(2) For each qualified fire protection district, determine what amount of additional ad valorem property tax revenues are necessary for the qualified fire protection district to provide effective services for the district.
(3) Report to the auditor of each county in which a qualified fire protection district is located the amounts determined pursuant to paragraph (2) for each qualified fire protection district.
(c) For purposes of this section, both of the following definitions shall apply:
(1) “Fire protection district equity amount” means one-fifth of the amount reported to the auditor pursuant to paragraph (2) of subdivision (b) for each qualified fire protection district.
(2) “Qualified fire protection district” means a fire protection district that does not receive sufficient ad valorem property tax revenues to provide effective services for the district.

SEC. 2.

 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SECTION 1.Section 23153 of the Revenue and Taxation Code is amended to read:
23153.

(a)Every corporation described in subdivision (b) is subject to the minimum franchise tax specified in subdivision (d) from the earlier of the date of incorporation, qualification, or commencing to do business within this state, until the effective date of dissolution or withdrawal as provided in Section 23331 or, if later, the date the corporation ceases to do business within the limits of this state.

(b)Unless expressly exempted by this part or the California Constitution, subdivision (a) applies to each of the following:

(1)Every corporation that is incorporated under the laws of this state.

(2)Every corporation that is qualified to transact intrastate business in this state pursuant to Chapter 21 (commencing with Section 2100) of Division 1 of Title 1 of the Corporations Code.

(3)Every corporation that is doing business in this state.

(c)The following entities are not subject to the minimum franchise tax specified in this section:

(1)Credit unions.

(2)Nonprofit cooperative associations organized pursuant to Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code that have been issued the certificate of the board of supervisors prepared pursuant to Section 54042 of the Food and Agricultural Code. The association shall be exempt from the minimum franchise tax for five consecutive taxable years, commencing with the first taxable year for which the certificate is issued pursuant to subdivision (b) of Section 54042 of the Food and Agricultural Code. This paragraph only applies to nonprofit cooperative associations organized on or after January 1, 1994.

(d)(1)Except as provided in paragraph (2), paragraph (1) of subdivision (f) of Section 23151, paragraph (1) of subdivision (f) of Section 23181, and paragraph (1) of subdivision (c) of Section 23183, corporations subject to the minimum franchise tax shall pay annually to the state a minimum franchise tax of eight hundred dollars ($800).

(2)The minimum franchise tax shall be twenty-five dollars ($25) for the following:

(A)A corporation formed under the laws of this state whose principal business when formed was gold mining, which is inactive and has not done business within the limits of the state since 1950.

(B)A corporation formed under the laws of this state whose principal business when formed was quicksilver mining, which is inactive and has not done business within the limits of the state since 1971, or has been inactive for a period of 24 consecutive months or more.

(3)For purposes of paragraph (2), a corporation shall not be considered to have done business if it engages in business other than mining.

(e)Notwithstanding subdivision (a), for taxable years beginning on or after January 1, 1999, and before January 1, 2000, every “qualified new corporation” shall pay annually to the state a minimum franchise tax of five hundred dollars ($500) for the second taxable year. This subdivision shall apply to any corporation that is a qualified new corporation and is incorporated on or after January 1, 1999, and before January 1, 2000.

(1)The determination of the gross receipts of a corporation, for purposes of this subdivision, shall be made by including the gross receipts of each member of the commonly controlled group, as defined in Section 25105, of which the corporation is a member.

(2)“Gross receipts, less returns and allowances reportable to this state,” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (d) of Section 25120.

(3)“Qualified new corporation” means a corporation that is incorporated 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 incorporation and that reasonably estimates that it will have gross receipts, less returns and allowances, reportable to this state for the taxable year of one million dollars ($1,000,000) or less. “Qualified new corporation” does not include any corporation that began business operations as a sole proprietorship, a partnership, or any other form of business entity prior to its incorporation. This subdivision shall not apply to any corporation that reorganizes solely for the purpose of reducing its minimum franchise tax.

(4)This subdivision shall not apply to limited partnerships, as defined in Section 17935, limited liability companies, as defined in Section 17941, limited liability partnerships, as described in Section 17948, charitable corporations, as described in Section 23703, regulated investment companies, as defined in Section 851 of the Internal Revenue Code, real estate investment trusts, as defined in Section 856 of the Internal Revenue Code, real estate mortgage investment conduits, as defined in Section 860D of the Internal Revenue Code, qualified Subchapter S subsidiaries, as defined in Section 1361(b)(3) of the Internal Revenue Code, or to the formation of any subsidiary corporation, to the extent applicable.

(5)For any taxable year beginning on or after January 1, 1999, and before January 1, 2000, if a corporation has qualified to pay five hundred dollars ($500) for the second taxable year under this subdivision, but in its second taxable year, the corporation’s gross receipts, as determined under paragraphs (1) and (2), exceed one million dollars ($1,000,000), an additional tax in the amount equal to three hundred dollars ($300) for the second taxable year shall be due and payable by the corporation on the due date of its return, without regard to extension, for that year.

(f)(1)Notwithstanding subdivision (a), every corporation that incorporates or qualifies to do business in this state on or after January 1, 2000, shall not be subject to the minimum franchise tax for its first taxable year.

(2)This subdivision shall not apply to limited partnerships, as defined in Section 17935, limited liability companies, as defined in Section 17941, limited liability partnerships, as described in Section 17948, charitable corporations, as described in Section 23703, regulated investment companies, as defined in Section 851 of the Internal Revenue Code, real estate investment trusts, as defined in Section 856 of the Internal Revenue Code, real estate mortgage investment conduits, as defined in Section 860D of the Internal Revenue Code, and qualified Subchapter S subsidiaries, as defined in Section 1361(b)(3) of the Internal Revenue Code, to the extent applicable.

(3)This subdivision shall not apply to any corporation that reorganizes solely for the purpose of avoiding payment of its minimum franchise tax.

(g)Notwithstanding subdivision (a), a domestic corporation, as defined in Section 167 of the Corporations Code, that files a certificate of dissolution in the office of the Secretary of State pursuant to subdivision (b) of Section 1905 of the Corporations Code, prior to its amendment by the act amending this subdivision, and that does not thereafter do business shall not be subject to the minimum franchise tax for taxable years beginning on or after the date of that filing.

(h)The minimum franchise tax imposed by paragraph (1) of subdivision (d) shall not be increased by the Legislature by more than 10 percent during any calendar year.

(i)(1)Notwithstanding subdivision (a), a corporation that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the minimum franchise tax for any taxable year the owner is deployed and the corporation 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 negative net income as defined in Section 24341.

(C)“Small business” means a corporation 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.