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AB-3208 Income tax: gross income: loan forgiveness.(2019-2020)

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Date Published: 05/05/2020 09:00 PM
AB3208:v97#DOCUMENT

Amended  IN  Assembly  May 05, 2020
Amended  IN  Assembly  May 04, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 3208

Introduced by Assembly Member Brough Members Kiley and Obernolte
(Principal coauthor: Assembly Member Brough)

February 21, 2020

An act to add and repeal Section 17053.79 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. An act to add Sections 17131.8 and 24308.6 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 3208, as amended, Brough Kiley. Income tax: credits: charitable monetary contributions. Income tax: gross income: loan forgiveness.
The Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income.
Existing federal law, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), among other things, authorizes forgiveness of indebtedness for eligible recipients with covered loans, as defined, in an amount equal to the sum of the recipient’s payroll costs, interest on mortgage obligations, rent obligations, and utility payments, subject to specified conditions and during a specified time period. Existing federal law excludes any amounts of covered loans forgiven under the CARES Act from gross income for federal income tax purposes.
This bill, for taxable years beginning on or after January 1, 2020, would exclude from gross income, for state income tax purposes, any covered loan amount forgiven pursuant to the federal CARES Act.
This bill would take effect immediately as a tax levy.

The Personal Income Tax Law, in specified conformity to federal income tax laws, allows a charitable contribution deduction and a deduction for certain business expenses in computing tax liability.

This bill would allow a credit against income tax for each taxable year beginning on or after January 1, 2021, and before January 1, 2026, in an amount equal to 50% of the amount donated to a qualified charitable organization, as defined. The bill would require the Franchise Tax Board to allow the credit to taxpayers on a first-come-first-served basis, as specified, and limits the aggregate amount of the credit allowed per taxable year to $500,000,000. The bill would require the board to certify that the donee organization is a qualified charitable organization and post a list of the certified qualified charitable organizations and amount of credits remaining on its internet website. The bill would require a taxpayer to maintain a record of any confirmation of the taxpayer’s monetary contribution to a qualified charitable organization and provide that record to the board upon request. The bill would also require qualified charitable organizations, within 45 days of receiving a monetary contribution from a taxpayer, to report to the board the amount of the contribution. The bill would also require a taxpayer to designate that a monetary contribution be directed only to a qualified charitable organization in order for a taxpayer to claim a credit for a monetary contribution made to a charitable organization that collects monetary contributions on behalf of other charitable organizations.

Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would also include additional information required for any bill authorizing a new tax expenditure.

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 17131.8 is added to the Revenue and Taxation Code, to read:

17131.8.
 (a) For taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136).
(b) For purposes of this section, “covered loan” has the same meaning as in Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136).

SEC. 2.

 Section 24308.6 is added to the Revenue and Taxation Code, to read:

24308.6.
 (a) For taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136).
(b) For purposes of this section, “covered loan” has the same meaning as in Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136).

SEC. 3.

  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 17053.79 is added to the Revenue and Taxation Code, to read:
17053.79.

(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 50 percent of the amount donated by the taxpayer during the taxable year to a qualified charitable organization.

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

(1)“Qualified charitable organization” means an organization that meets all of the following requirements:

(A)Is an organization that is exempt from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code.

(B)Is incorporated in the State of California.

(C)Spends at least 50 percent of its budget on services to individuals in California who are homeless or mentally ill.

(D)Demonstrates that the organization plans to continue to spend at least 50 percent of its budget on services to those persons described in subparagraph (C).

(E)Applies to, and receives from, the Franchise Tax Board certification that the organization meets all of the requirements of subparagraphs (A) to (D), inclusive.

(c)(1)The Franchise Tax Board shall allow the credit to taxpayers on a first-come-first-served basis, determined by the date the taxpayer’s timely filed original tax return is received by the Franchise Tax Board.

(2)The total amount of the credit allowed under this section per taxable year shall not exceed five hundred million dollars ($500,000,000).

(3)For purposes of this subdivision, the date a return is received shall be determined by the Franchise Tax Board. The determination of the Franchise Tax Board as to the date a return is received and whether a return has been timely filed for purposes of this subdivision may not be reviewed in any administrative or judicial proceeding.

(4)Any disallowance of a credit claimed due to the limitations specified in this subdivision shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that disallowance may be assessed by the Franchise Tax Board in the same manner as provided in Section 19051.

(d)The Franchise Tax Board shall post on its internet website the names of qualified charitable organizations and the amount of credits remaining for the taxable year.

(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the certification of qualified charitable organizations pursuant to this section.

(f)(1)The taxpayer shall maintain a record of any confirmation of the taxpayer’s monetary contribution to a qualified charitable organization and shall provide that record to the Franchise Tax Board upon request.

(2)Qualified charitable organizations, within 45 days of receiving a monetary contribution from a taxpayer, shall report to the Franchise Tax Board the amount of the contribution.

(g)In order to claim a credit under this section for a monetary contribution made to a charitable organization that collects monetary contributions on behalf of other charitable organizations, a taxpayer shall designate that the monetary contribution be directed only to a qualified charitable organization.

(h)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.

(i)A credit allowed by this section shall be in lieu of any charitable deduction otherwise allowed by this part.

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

SEC. 2.

For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Section 17053.79 of the Revenue and Taxation Code as added by this act, hereafter “the credit,” the Legislature finds and declares all of the following:

(a)The specific goal, purpose, and objective of the credit is to incentivize taxpayers to make monetary contributions to nonprofit organizations that assist persons who are homeless or mentally ill.

(b)The performance indicators for the Legislature to use when measuring whether the credit meets the goal, purpose, and objective stated in subdivision (a) shall be measured by the number of taxpayers taking advantage of the credit and amount of credits provided.

(c)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 credit to the Legislature by December 1, 2025.

SEC. 3.

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