Bill Text

Bill Information


PDF |Add To My Favorites |Track Bill | print page

AB-2493 Income tax credits: research credit.(2019-2020)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 05/01/2020 09:00 PM
AB2493:v98#DOCUMENT

Amended  IN  Assembly  May 04, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2493


Introduced by Assembly Member Choi

February 19, 2020


An act to add and repeal Sections 17053.81 and 23681 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. An act to amend Sections 17052.12 and 23609 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 2493, as amended, Choi. Income tax credits: Homelessness Prevention Pilot Act of 2021. Income tax credits: research credit.
The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.
This bill would, under both laws for each taxable year beginning on or after January 1, 2020, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2020, increase the amount of the credit for basic research payments to 30%.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
The bill also would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill, under both laws, for taxable years beginning on or after January 1, 2021, and before January 1, 2026, would allow a credit against those taxes in an amount equal to $500 for each qualified property owned by the taxpayer, not to exceed $2,000 per taxable year.

The bill would define a qualified property to mean a unit located in this state that is rented to, or leased by, qualified persons at an amount that is below market rates for the entire taxable year and a nonprofit organization subsidizes the rent or lease of the unit in whole or in part pursuant to an agreement with the taxpayer.

Existing law requires a bill that would authorize certain tax expenditures, including a new credit against the tax imposed by the Personal Income Tax Law or the Corporation Tax Law, to contain specific goals, purposes, and objectives that the new tax expenditure will achieve, and detailed performance indicators and data collection requirements for determining whether the new tax expenditure achieves these goals, purposes, and objectives.

This bill would make findings specifying the goals, purposes, and objectives of the above-described tax credits and would require the Franchise Tax Board to provide a report regarding the credit.

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 17052.12 of the Revenue and Taxation Code is amended to read:

17052.12.
 For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “net tax” (as tax,” as defined by Section 17039) 17039, for the taxable year an amount determined in accordance with Section 41 of the Internal Revenue Code, relating to credit for increasing research activities, except as follows:
(a) For each taxable year beginning before January 1, 1997, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “8 percent.”
(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.”
(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “12 percent.”
(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2020, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “15 percent.”
(c) Section 41(a)(2) of the Internal Revenue Code shall not apply.
(d) “Qualified research” shall include only research conducted in California.
(e) In Ifthe case where the credit allowed under this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding years if necessary, until the credit has been exhausted.
(f) (1) With respect to any expense paid or incurred after the operative date of Section 6378, Section 41(b)(1) of the Internal Revenue Code is modified to exclude from the definition of “qualified research expense” any amount paid or incurred for tangible personal property that is eligible for the exemption from sales or use tax provided by Section 6378.
(2) For each taxable year beginning on or after January 1, 1998, the reference to “Section 501(a)” in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read “this part or Part 11 (commencing with Section 23001).”
(g) (1) For each taxable year beginning on or after January 1, 2000:
(A) The reference to “3 percent” in Section 41(c)(4)(A)(i) of the Internal Revenue Code is modified to read “one and forty-nine hundredths of one percent.”
(B) The reference to “4 percent” in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified to read “one and ninety-eight hundredths of one percent.”
(C) The reference to “5 percent” in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is modified to read “two and forty-eight hundredths of one percent.”
(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 1998. That election shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Franchise Tax Board.
(3) Section 41(c)(7) of the Internal Revenue Code, relating to gross receipts, is modified to take into account only those gross receipts from the sale of property held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser within this state, regardless of f.o.b. point or any other condition of the sale.
(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.
(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.
(i) Section 41(g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal Revenue Code for any taxable year exceeds the limitation of Section 41(g) of the Internal Revenue Code, that amount may be carried over to other taxable years under the rules of subdivision (e); except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.
(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(k) Section 41(b)(3)(D) of the Internal Revenue Code, relating to amounts paid to eligible small businesses, universities, and federal laboratories, shall not apply.
(l) Section 41(f)(6), relating to energy research consortium, shall not apply.

SEC. 2.

 Section 23609 of the Revenue and Taxation Code is amended to read:

23609.
 For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “tax” (as “tax,” as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:
(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:
(1) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “8 percent.”
(2) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “12 percent.”
(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:
(A) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.”
(B) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.”
(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:
(A) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “12 percent.”
(B) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.”
(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2020, both of the following shall apply:
(A) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “15 percent.”
(B) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.”
(c) For each taxable year beginning on or after January 1, 2020, the reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “30 percent.”

(c)

(d) (1) With respect to any expense paid or incurred after the operative date of Section 6378, Section 41(b)(1) of the Internal Revenue Code is modified to exclude from the definition of “qualified research expense” any amount paid or incurred for tangible personal property that is eligible for the exemption from sales or use tax provided by Section 6378.
(2) “Qualified research” and “basic research” shall include only research conducted in California.

(d)

(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that “basic research,” for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:
(1) Basic research conducted outside California.
(2) Basic research in the social sciences, arts, or humanities.
(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.
(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.

(e)

(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:
(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.
(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a “specialized laboratory cancer center,” and has received Clinical Cancer Research Center status from the National Cancer Institute.
(2) For purposes of this subdivision:
(A) “Biopharmaceutical research activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.
(B) “Other biotechnology research and development activities” means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.

(f)

(g) In If 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 years if necessary, until the credit has been exhausted.

(g)

(h) For each taxable year beginning on or after January 1, 1998, the reference to “Section 501(a)” in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read “this part or Part 10 (commencing with Section 17001).”

(h)

(i) (1) For each taxable year beginning on or after January 1, 2000:
(A) The reference to “3 percent” in Section 41(c)(4)(A)(i) of the Internal Revenue Code is modified to read “one and forty-nine hundredths of one percent.”
(B) The reference to “4 percent” in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified to read “one and ninety-eight hundredths of one percent.”
(C) The reference to “5 percent” in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is modified to read “two and forty-eight hundredths of one percent.”
(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 1998. That election shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Franchise Tax Board.
(3) Section 41(c)(7) of the Internal Revenue Code, relating to gross receipts, is modified to take into account only those gross receipts from the sale of property held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser within this state, regardless of f.o.b. point or any other condition of the sale.
(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.

(i)

(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.

(j)

(k) Section 41(g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal Revenue Code for any taxable year exceeds the limitation of Section 41(g) of the Internal Revenue Code, that amount may be carried over to other taxable years under the rules of subdivision (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.

(k)

(l) Section 41(a)(3) of the Internal Revenue Code shall not apply.

(l)

(m) Section 41(b)(3)(D) of the Internal Revenue Code, relating to amounts paid to eligible small businesses, universities, and federal laboratories, shall not apply.

(m)

(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.

SEC. 3.

 (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:
(1) The specific goals, purposes, and objectives of this bill are as follows:
(A) To encourage the activity of research in California.
(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.
(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:
(A) The number of taxpayers claiming the credit.
(B) The average credit amount on tax returns claiming the credit.
(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.

SEC. 4.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.Section 17053.81 is added to the Revenue and Taxation Code, to read:
17053.81.

(a)For each taxable year beginning on or after January 1, 2021, and before January 1, 2026, there shall be allowed a credit against the “net tax,” as defined in Section 17039, in an amount equal to five hundred dollars ($500) for each qualified property owned by the taxpayer, not to exceed two thousand dollars ($2,000) per taxable year.

(b)For purposes of this section, both of the following shall apply:

(1)“Below market rate” means at a rate that equal to or less than 75 percent of the measured market rate in the area where the qualified property is located for a unit that is of a similarly-sized square footage space and similar property description to that qualified property.

(2)“Nonprofit organization” means an organization that is exempt from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code that provides housing assistance in the form of subsidies.

(3)“Qualified person” means an individual or family receiving housing assistance from a nonprofit organization in the form of full or partial rental in order to rent housing.

(4)“Qualified property” means a unit located in this state that meets both of the following criteria:

(A)Is rented to, or leased by, qualified persons at an amount that is below market rates for the entire taxable year.

(B)A nonprofit organization subsidizes the rent or lease of the unit in whole or in part pursuant to an agreement with the taxpayer.

(c)A taxpayer that owns a proportional share of the qualified property may claim the credit allowed by this section based upon the taxpayer’s ownership share of the property.

(d)The taxpayer shall maintain a record of any agreement between the taxpayer and the nonprofit organization that indicates the rental or lease of qualified property was below market rate and was subsidized in whole or in part by the nonprofit organization. The taxpayer shall provide that record to the Franchise Tax Board upon request.

(e)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 taxable year, and one succeeding year if necessary, until the credit is exhausted.

(f)This section and Section 23681 may be known and cited as the Homelessness Prevention Pilot Act of 2021.

(g)This section shall remain in effect only until December 1, 2026, and as of that date is repealed.

SEC. 2.Section 23681 is added to the Revenue and Taxation Code, to read:
23681.

(a)For each taxable year beginning on or after January 1, 2021, and before January 1, 2026, there shall be allowed a credit against the “tax,” as defined in Section 23036, in an amount equal to five hundred dollars ($500) for each qualified property owned by the taxpayer, not to exceed two thousand dollars ($2,000) per taxable year.

(b)For purposes of this section, both of the following shall apply:

(1)“Below market rate” means at a rate that equal to or less than 75 percent of the measured market rate in the area where the qualified property is located for a unit that is of a similarly-sized square footage space and similar property description to that qualified property.

(2)“Nonprofit organization” means an organization that is exempt from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code that provides housing assistance in the form of subsidies.

(3)“Qualified person” means an individual or family receiving housing assistance from a nonprofit organization in the form of full or partial subsidies in order to rent housing.

(4)“Qualified property” means a unit located in this state that meets both of the following criteria:

(A)Is rented to, or leased by, qualified persons at an amount that is below market rates for the entire taxable year.

(B)A nonprofit organization subsidizes the rent or lease of the unit in whole or in part pursuant to an agreement with the taxpayer.

(c)A taxpayer that owns a proportional share of the qualified property may claim the credit allowed by this section based upon the taxpayer’s ownership share of the property.

(d)The taxpayer shall maintain a record of any agreement between the taxpayer and the nonprofit organization that indicates the rental or lease of qualified property was below market rate and was subsidized in whole or in part by the nonprofit organization. The taxpayer shall provide that record to the Franchise Tax Board upon request.

(e)In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and one succeeding year if necessary, until the credit is exhausted.

(f)This section and Section 17053.81 may be known and cited as the Homelessness Prevention Pilot Act of 2021.

(g)This section shall remain in effect only until December 1, 2026, and as of that date is repealed.

SEC. 3.

(a)For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Sections 17053.81 and 23681 of the Revenue and Taxation Code as added by this act, hereafter “the credits,” the Legislature finds and declares as follows:

(1)The specific goal, purpose, and objective of the credits is to incentivize small unit owners to agree to lower rental rates in connection with an organization described in Section 501(c)(3) of the Internal Revenue Code to preempt the situation of an individual or families becoming homeless.

(2)The performance indicators for the Legislature to use when measuring whether the credits meets the goal, purpose, and objective stated in paragraph (1) would be measured by the allowance of the credits by taxpayers in the private sector.

(b)Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall prepare a report, in compliance with Section 9795 of the Government Code, on the allowance of the credits under Sections 17053.81 and 23681 of the Revenue and Taxation Code, as added by this act, to the Legislature during the odd-numbered calendar years through 2027.

SEC. 4.

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