Today's Law As Amended


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SB-254 Personal income taxes: corporation taxes: transfer of tax losses.(2019-2020)



As Amends the Law Today


SECTION 1.

 Section 17039.3 is added to the Revenue and Taxation Code, to read:

17039.3.
 (a) Notwithstanding any other law, a taxpayer may transfer any tax loss to an unrelated party.
(1) The transferor shall report to the Franchise Tax Board before the transfer of the tax loss, in the form and manner specified by the Franchise Tax Board, all required information regarding the transfer, including the social security or other taxpayer identification number of the unrelated party to whom the transfer has been made and the amount of the tax loss transferred.
(2) A tax loss shall not be transferred pursuant to this section to more than one taxpayer.
(3) In no event may a taxpayer transfer any portion of a tax loss to the extent that portion has already been claimed, is claimed, or will be claimed on any tax return of the transferor.
(4) In the event that both the transferee and the transferor claim the same amount of tax loss on their tax returns, the Franchise Tax Board may disallow the loss of either taxpayer, so long as the statute of limitations upon assessment remains open.
(b) For purposes of this section, “tax loss” means a loss computed pursuant to this part, including, but not limited to, a net operating loss.
(c) (1) The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section and Section 17158.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section or Section 17158.

SEC. 2.

 Section 17158 is added to the Revenue and Taxation Code, to read:

17158.
 (a) For taxable years beginning on or after January 1, 2021, and before January 1, 2026, gross income shall not include any amount received by a taxpayer in exchange for a tax loss transferred pursuant to Section 17039.3 if the following conditions are met:
(1) Within 180 days of receipt, the taxpayer invests that amount in an affordable housing project or a corporation, partnership, or limited liability company that is engaged in providing affordable housing.
(2) The taxpayer provides documentation to the Franchise Tax Board verifying compliance with paragraph (1), in the form and manner prescribed by the Franchise Tax Board.
(b) For purposes of this section:
(1) “Affordable housing” means housing with an affordable housing cost, as defined in Section 50052.5 of the Health and Safety Code, or affordable rent, as defined in Section 50053 of the Health and Safety Code, to households whose gross income does not exceed 120 percent of the area median income.
(2) “Affordable housing project” means any project, whether by an individual, corporation, partnership, or limited liability company, to design, build, convert, or develop residential housing units for rent or sale as affordable housing.
(c) (1) The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section and Section 17039.3.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section or Section 17039.3.

SEC. 3.

 Section 23005 is added to the Revenue and Taxation Code, to read:

23005.
 (a) Notwithstanding any other law, a taxpayer may transfer any tax loss to an unrelated party.
(1) The transferor shall report to the Franchise Tax Board before the transfer of the tax loss, in the form and manner specified by the Franchise Tax Board, all required information regarding the transfer, including the social security or other taxpayer identification number of the unrelated party to whom the transfer has been made and the amount of the tax loss transferred.
(2) A tax loss shall not be transferred pursuant to this section to more than one taxpayer.
(3) In no event may a taxpayer transfer any portion of a tax loss to the extent that portion has already been claimed, is claimed, or will be claimed on any tax return of the transferor.
(4) In the event that both the transferee and the transferor claim the same amount of tax loss on their tax returns, the Franchise Tax Board may disallow the loss of either taxpayer, so long as the statute of limitations upon assessment remains open.
(b) For purposes of this section, “tax loss” means a loss computed pursuant to this part, including, but not limited to, a net operating loss.
(c) (1) The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section and Section 24317.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section or Section 24317.

SEC. 4.

 Section 24317 is added to the Revenue and Taxation Code, to read:

24317.
 (a) For taxable years beginning on or after January 1, 2021, and before January 1, 2026, gross income shall not include any amount received by a taxpayer in exchange for a tax loss transferred pursuant to Section 23005 if the following conditions are met:
(1) Within 180 days of receipt, the taxpayer invests that amount in an affordable housing project or a corporation, partnership, or limited liability company that is engaged in providing affordable housing.
(2) The taxpayer provides documentation to the Franchise Tax Board verifying compliance with paragraph (1), in the form and manner prescribed by the Franchise Tax Board.
(b) For purposes of this section:
(1) “Affordable housing” means housing with an affordable housing cost, as defined in Section 50052.5 of the Health and Safety Code, or affordable rent, as defined in Section 50053 of the Health and Safety Code, to households whose gross income does not exceed 120 percent of the area median income.
(2) “Affordable housing project” means any project, whether by an individual, corporation, partnership, or limited liability company, to design, build, convert, or develop residential housing units for rent or sale as affordable housing.
(c) (1) The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section and Section 23005.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section or Section 23005.
SEC. 5.
 For purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares all of the following with respect to the exclusions from gross income allowed under Sections 17158 and 24317 of the Revenue and Taxation Code, as added by this act:
(a) The specific goal, purpose, and objective that the gross income exclusions will achieve is incentivizing greater investment in the development of affordable housing.
(b) The detailed performance indicators for the Legislature to use when measuring whether the gross income exclusions meet that specific goal, purpose, and objective shall be the amount invested in affordable housing projects as a result of those gross income exclusions, as measured by the amount excluded from gross income pursuant to Sections 17158 and 24317 of the Revenue and Taxation Code.
(c) (1) The data collection requirements to enable the Legislature to determine whether the gross income exclusions are meeting, failing to meet, or exceeding the goal, purpose, and objective described in subdivision (a) shall be the information on each affordable housing project that is required to be provided to the Franchise Tax Board pursuant to Sections 17158 and 24317 of the Revenue and Taxation Code.
(2) To assist the Legislature in measuring whether the gross income exclusions meet the goal, purpose, and objective specified in subdivision (a), the Legislative Analyst shall review the effectiveness of the gross income exclusion and may request information from the Franchise Tax Board.
(3) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide to the Legislative Analyst any data requested by the Legislative Analyst pursuant to this subdivision.