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SB-1357 Income tax credits: research and development: California Competes Tax Credit: sales and use taxes: refund.(2019-2020)

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Date Published: 02/21/2020 09:00 PM
SB1357:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1357


Introduced by Senator Portantino

February 21, 2020


An act to add Section 6902.9 to the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


SB 1357, as introduced, Portantino. Income tax credits: research and development: California Competes Tax Credit: sales and use taxes: refund.
The Personal Income Tax Law and the Corporation Tax Law allows various credits against the taxes imposed by those laws, including (1) in modified conformity to a credit allowed by federal income tax laws, a credit under both laws in an amount equal to 15% of the excess of qualified research expenses for the taxable year over the base amount, as defined, and, for purposes of the Corporation Tax Law, 24% of the basic research payments, as defined, (research and development income tax credit) and (2) a credit against the taxes imposed under those laws for each taxable year beginning on and after January 1, 2014, and before January 1, 2030, in an amount provided in a written agreement between the Governor’s Office of Business and Economic Development and the taxpayer, approved by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer (Cal Competes income tax credit).
Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law.
This bill would permit a qualified person who has paid qualified sales tax reimbursement to a retailer on the sale of tangible personal property sold at retail in this state or has paid qualified use tax on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state, in lieu of claiming the research and development income tax credit or the Cal Competes income tax credit under the Personal Income Tax Law or the Corporation Tax Law, to file a claim for a refund equal to the amount of the credit, as specified. The bill would define qualified sales tax reimbursement and qualified use tax to include state sales and use taxes and those local sales and use taxes imposed pursuant to, or in accordance with, the Bradley-Burns Uniform Local Sales and Use Tax Law and the Transactions and Use Tax Law.
The bill would require that a claim for refund be accompanied by proof of payment by the qualified person of the sales tax reimbursement or the use tax and would require any person who claims a refund to make an irrevocable election to waive the equivalent amount of research and development income tax credit or Cal Competes income tax credit for which a refund is made. The bill would require the California Department of Tax and Fee Administration to provide an annual listing to the Franchise Tax Board of the qualified persons who, during the year, have made a claim for refund and an irrevocable election and the amount of the refund issued to each qualified person pursuant to the bill. The bill would provide that any refunds made by the department pursuant to a claim for refund under the bill is payable from the General Fund, upon appropriation by the Legislature.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 6902.9 is added to the Revenue and Taxation Code, to read:

6902.9.
 (a) For purposes of this section, all of the following definitions shall apply:
(1) “Department” means the California Department of Tax and Fee Administration.
(2) “Qualified person” means a person who has paid qualified sales tax reimbursement or qualified use tax or both.
(3) “Qualified sales tax reimbursement” means sales tax reimbursement paid to a retailer for the sales tax imposed by Sections 6051, 6051.2, and 6051.3, Section 35 of Article XIII of the California Constitution, and any local sales tax or transactions tax imposed pursuant to, or in accordance with, the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) and the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) on the sale of tangible personal property sold at retail in this state.
(4) “Qualified use tax” means use tax paid to the department for use taxes imposed by Sections 6201, 6201.2, and 6201.3, Section 35 of Article XIII of the California Constitution, and any local use tax imposed pursuant to, or in accordance with, the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) and the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)) on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state.
(b) (1) On and after January 1, 2021, in lieu of claiming the credit allowed by Section 17052.12, 17059.2, 23609, or 23689, a qualified person may file a claim for refund of qualified sales tax reimbursement and qualified use taxes the qualified person has paid equal to the amount of credit that would otherwise be allowed by Section 17052.12, 17059.2, 23609, or 23689 to the qualified person in accordance with this section.
(2) A qualified person shall submit a claim for refund to the department with the irrevocable election described in subdivision (e) no earlier than the date a tax credit or carryover of a credit under Section 17052.12, 17059.2, 23609, or 23689, whichever is applicable, would be allowed pursuant to those sections, and for an amount not in excess of the amount of the credit that could have been used to reduce the “net tax,” as defined in Section 17039, or the “tax,” as defined in Section 23036. Any credit carried over pursuant to Section 17052.12, 17059.2, 23609, or 23689 may not be refunded pursuant to this section until the credit carried over could be applied to reduce the “net tax,” as defined in Section 17039, or the “tax,” as defined in Section 23036, as applicable. Under no circumstances may any claim for refund exceed the “net tax,” as defined by Section 17039, or the “tax,” as defined by Section 23036, after the allowance of any credits authorized by Section 17039 or 23036.
(c) The claim for refund under this section shall be in a form as prescribed by the department that shall include, but not be limited to, the following information:
(1) In the case of a claim for refund of qualified sales tax reimbursement:
(A) The date on which the purchase occurred.
(B) A description of the tangible personal property purchased.
(C) The price paid for the tangible personal property.
(D) The amount of qualified sales tax reimbursement paid with respect to the purchase.
(2) In the case of a claim for refund of qualified use tax, the following information:
(A) Whether the qualified use tax was self reported and paid to the department, reported and paid on an income tax return, collected by a retailer, or remitted by any other method.
(B) The information required in subparagraphs (A), (B), and (C) of paragraph (1).
(C) The amount of qualified use tax paid.
(D) The date or period for which that qualified use tax was remitted.
(d) A claim for a refund under this section shall be accompanied with the following:
(1) Unless the sale or use of the property is otherwise exempt under this part, proof of payment by the qualified person of the sales tax reimbursement to a retailer or of the use tax, including, but not limited to, a copy of an invoice or purchase contract that indicates the information required in subparagraphs (A), (B), and (C) of paragraph (1) of subdivision (c) and the amount of sales tax reimbursement or use tax paid by the qualified person.
(2) A copy of the personal or corporation tax return required filed by the qualified person pursuant to Part 10.2 (commencing with Section 18401) on which the tax liability was assessed for which the in-lieu refund is being claimed under this section.
(e) (1) Any person who claims a refund under this section shall make an irrevocable election to waive the equivalent amount of credit allowed under Section 17052.12, 17059.2, 23609, or 23689 for which a refund is made.
(2) The election shall be filed on or before the date on which the qualified person would first be allowed to claim a credit pursuant to Section 17052.12, 17059.2, 23609, or 23689 on its personal or corporation tax return filed pursuant to Part 10.2 (commencing with Section 18401).
(3) Any refund made pursuant to a claim for refund filed under this section shall be in lieu of claiming the equivalent amount of credit under Section 17052.12, 17059.2, 23609, or 23689.
(f) No interest shall be paid on any amount refunded pursuant to this section.
(g) Notwithstanding Section 6961, the department may recover any refund or part thereof that is erroneously made pursuant to this section. In recovering any erroneous refund made pursuant to this section, the department, in its discretion, may issue a deficiency determination in accordance with Article 2 (commencing with Section 6481) or Article 4 (commencing with Section 6536) of Chapter 5. Except in the case of fraud, that determination shall be made within three years from the last day of the month following the quarterly period in which the department approved the refund.
(h) The department shall provide an annual listing to the Franchise Tax Board, in a form and manner agreed upon by the department and the Franchise Tax Board, of the qualified persons who, during the year, have made a claim for refund and an irrevocable election pursuant to this section and the amount of the refund issued to each qualified person pursuant to this section.
(i) Any refunds made by the department pursuant to a claim for refund under this section shall be payable from the General Fund, upon appropriation by the Legislature.