Today's Law As Amended


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SB-263 Taxation: credit: savings plans: qualified ABLE program: small business cash method of accounting. (2019-2020)



As Amends the Law Today


SECTION 1.

 Section 17052.9 is added to the Revenue and Taxation Code, to read:

17052.9.
 (a) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, there shall be allowed as a credit against the “net tax,” as defined by Section 17039, for the taxable year an amount determined in accordance with Section 25B of the Internal Revenue Code, relating to elective deferrals and IRA contributions by certain individuals, as amended by Section 11002(d)(1)(C) and Section 11024(b) of the Tax Cuts and Jobs Act (Public Law 115-97), except as follows:
(1) Section 25B(b)(3), relating to inflation adjustment, is modified by substituting “2021” in lieu of “2006.”
(2) Section 25B(b)(3)(B) is modified by substituting “calendar year 2020” for “calendar year 2005.”
(3) Section 25B(d), relating to qualified retirement savings contributions, shall not apply and instead “qualified savings contributions” means the amount of contributions made before January 1, 2026, by an individual to the ABLE account, within the meaning of Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, as amended by Section 11024(a)(1) of the Tax Cuts and Jobs Act (Public Law 11597), of which the individual is the designated beneficiary.
(b) This section shall remain in effect only until December 1, 2026, and as of that date is repealed.

SECTION 1.SEC. 2.

 Section 17140.3 of the Revenue and Taxation Code is amended to read:

17140.3.
 Section 529 of the Internal Revenue Code, relating to qualified state  tuition programs, shall apply, except as otherwise provided.
(a) Section 529(a)  529 (a)  of the Internal Revenue Code  Code, relating to general rule,  is modified as follows:
(1) By substituting the phrase “under this part and Part 11 (commencing with Section 23001)” in lieu of the phrase “under this subtitle.”
(2) By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.”
(b) A copy of the report required to be filed with the Secretary of the Treasury under Section 529(d) of the Internal Revenue Code  Code, relating to reports,  shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(c) (1) The amendments made by Section 302(a)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(e) of the Internal Revenue Code, relating to other definitions and special rules, shall apply except as otherwise provided.
(2) The amendments made by Section 302(b)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(c)(3) of the Internal Revenue Code, relating to distributions, shall apply, except as otherwise provided.
(3) The amendments made by Section 302(c)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(c)(3)(D) of the Internal Revenue Code, relating to special rule for contributions of refunded amounts, shall apply, except as otherwise provided.
(d) (1) The amendments made by Section 11025(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529(c)(3)(C) of the Internal Revenue Code, relating to change in beneficiaries or programs, shall apply, except as otherwise provided.
(2) (A) The amendments made by Section 11032(a)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529(c) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors, shall not apply, except as otherwise provided.
(B) The amendments made by Section 11032(a)(2) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529(e)(3)(A) of the Internal Revenue Code, relating to qualified higher education expenses, shall not apply, except as otherwise provided.
(C) In the case of any distribution made under Section 529(e)(3)(A) of the Internal Revenue Code, as amended by Section 11032(a)(2) of the Tax Cuts and Jobs Act (Public Law 115-97), that would be treated for federal income tax purposes as a “qualified higher education expense” under Section 529(c)(7) of the Internal Revenue Code, as added by Section 11032(a)(1) of the Tax Cuts and Jobs Act (Public Law 115-97), the amount of that distribution shall, notwithstanding anything in Section 529 of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code.
(D) Any distribution includable in the gross income of a distributee under subparagraph (C) shall not affect the exempt status of the qualified tuition program under Section 529 of the Internal Revenue Code for purposes of this part.
(e) (c)  (1)  For taxable years beginning on or after January 1, 2021, the amendments made by Section 302(a) of Division O of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94) to Section 529(c)(8) 2020, and before January 1, 2026, the amendments to Section 529  of the Internal Revenue Code, relating to distributions for certain expenses associated with registered apprenticeship programs,  qualified tuition programs, made by Section 11025 of Public Law 115-97, relating to rollovers to ABLE programs from 529 programs,  shall apply.
(2) For taxable years beginning on or after January 1, 2021, the amendments made by Section 302(b)(1) of Division O of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94) to Section 529(c)(9) of the Internal Revenue Code, relating to distributions for qualified education loan repayments, shall apply.

SEC. 2.SEC. 3.

 Section 17140.4 of the Revenue and Taxation Code is amended to read:

17140.4.
 (a)  For taxable years beginning on or after January 1, 2016, Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, added by Section 102 of Division B of Public Law 113-295, shall apply, except as otherwise provided.
(a) (1)  Section 529A(a) of the Internal Revenue Code  Code, relating to general rules,  is modified as follows:
(1) (A)  By substituting the phrase “under this part and Part 11 (commencing with Section 23001)” in lieu of the phrase “under this subtitle.”
(2) (B)  By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.”
(b) (2)  Section 529A(c)(3)(A) of the Internal Revenue Code is modified by substituting “2.5 percent” in lieu of “10 percent.”
(c) (3)  A copy of the report required to be filed with the Secretary of the Treasury under Section 529A(d) of the Internal Revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(d) (1) The amendments made by Section 303(a) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529A(b)(1) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided.
(2) The amendments made by Section 303(b) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Sections 529A(d)(3) and 529A(e) of the Internal Revenue Code, relating to qualified ABLE programs shall apply, except as otherwise provided.
(3) The amendments made by Section 303(c) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Sections 529A(d)(4) and 529A(c)(1)(C)(i) of the Internal Revenue Code, relating to qualified ABLE program, shall apply, except as otherwise provided.
(e) The amendments made by Section 11024(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529A(b)(2)(B) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided.
(f) (b)  (1)  For taxable years beginning on or after January 1, 2026, the amendments made by Section 124 of the Consolidated Appropriations Act, 2023 (Public Law 117-328) to Section 529A(e) 2020, and before January 1, 2026, the amendments to Section 529A  of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. made by Section 11024 of Public Law 115-97, relating to increased contributions to ABLE accounts, shall apply. 
(2) (A) For the purpose of complying with Section 41, as it relates to the tax expenditures established by this subdivision and subdivision (f) of Section 23711.4 (hereafter the “tax expenditures,”) the Legislature finds and declares as follows:
(i) The goal, purpose, and objective of the tax expenditures are to encourage and assist individuals and families to save private funds for purposes of supporting persons with disabilities to maintain their health, independent, and quality of life.
(ii) The performance indicators for the Legislature to use in determining whether the tax expenditures are achieving their stated goal shall be the number of ABLE accounts that are created for individuals who are made newly eligible by the raised age limit.
(B) No later than January 1, 2030, the Treasurer’s office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, detailing the number of ABLE accounts that are created for individuals who are made newly eligible by the raised age limit.

SEC. 3.SEC. 4.

 Section 23711 of the Revenue and Taxation Code is amended to read:

23711.
 Section 529 of the Internal Revenue Code, relating to qualified state tuition programs, shall apply, except as otherwise provided.
(a) Section 529(a) of the Internal Revenue Code  Code, relating to general rule,  is modified as follows:
(1) By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” in lieu of the phrase “under this subtitle.”
(2) By substituting “Article 2 (commencing with Section 23731)” in lieu of “section 511.”
(b) A copy of the report required to be filed with the Secretary of the Treasury under Section 529(d) of the Internal Revenue Code  Code, relating to reports,  shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(c) (1) The amendments made by Section 302(a)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(e) of the Internal Revenue Code, relating to other definitions and special rules, shall apply except as otherwise provided.
(2) The amendments made by Section 302(b)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(c)(3) of the Internal Revenue Code, relating to distributions, shall apply, except as otherwise provided.
(3) The amendments made by Section 302(c)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(c)(3)(D) of the Internal Revenue Code, relating to special rule for contributions of refunded amounts, shall apply, except as otherwise provided.
(d) (1) The amendments made by Section 11025(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529(c)(3)(C) of the Internal Revenue Code, relating to change in beneficiaries or programs, shall apply, except as otherwise provided.
(2) (A) The amendments made by Section 11032(a)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529(c) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors, shall not apply, except as otherwise provided.
(B) (c)  The amendments made by Section 11032(a)(2) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529(e)(3)(A) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, the amendments to Section 529  of the Internal Revenue Code, relating to qualified higher education expenses, shall not apply, except as otherwise provided. tuition programs, made by Section 11025 of Public Law 115-97, relating to rollovers to ABLE programs from 529 programs, shall apply. 
(C) In the case of any distribution made under Section 529(e)(3)(A) of the Internal Revenue Code, as amended by Section 11032(a)(2) of the Tax Cuts and Jobs Act (Public Law 115-97), that would be treated for federal income tax purposes as a “qualified higher education expense” under Section 529(c)(7) of the Internal Revenue Code, as added by Section 11032(a)(1) of the Tax Cuts and Jobs Act (Public Law 115-97), the amount of that distribution shall, notwithstanding anything in Section 529 of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code.
(D) Any distribution includable in the gross income of a distributee under subparagraph (C) shall not affect the exempt status of the qualified tuition program under Section 529 of the Internal Revenue Code for purposes of this part.

SEC. 4.SEC. 5.

 Section 23711.4 of the Revenue and Taxation Code is amended to read:

23711.4.
 (a)  For taxable years beginning on or after January 1, 2016, Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, added by Section 102 of Division B of Public Law 113-295, shall apply, except as otherwise provided.
(a) (1)  Section 529A(a) of the Internal Revenue Code  Code, relating to general rules,  is modified as follows:
(1) (A)  By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” in lieu of the phrase “under this subtitle.”
(2) (B)  By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.”
(b) (2)  Section 529A(c)(3)(A) of the Internal Revenue Code is modified by substituting “2.5 percent” in lieu of “10 percent.”
(c) (3)  A copy of the report required to be filed with the Secretary of the Treasury under Section 529A(d) of the Internal Revenue revenue  Code, relating to reports reports,  shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(d) (1) The amendments made by Section 303(a) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529A(b)(1) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided.
(2) The amendments made by Section 303(b) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Sections 529A(d)(3) and 529A(e) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided.
(3) The amendments made by Section 303(c) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Sections 529A(d)(4) and 529A(c)(1)(C)(i) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided.
(e) The amendments made by Section 11024(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529A(b)(2)(B) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided.
(f) (b)  (1)  For taxable years beginning on or after January 1, 2026, the amendments made by Section 124 of the Consolidated Appropriations Act, 2023 (Public Law 117-328) to Section 529A(e) 2020, and before January 1, 2026, the amendments to Section 529A  of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. made by Section 11024 of Public Law 115-97, relating to increased contributions to ABLE accounts, shall apply. 
(2) For purposes of complying with Section 41, the goal, purpose, objective, performance indicators, and data collection requirements for the tax expenditure allowed by this subdivision shall be as specified in subdivision (f) of Section 17140.4.

SEC. 5.SEC. 6.

 Section 24654 of the Revenue and Taxation Code is amended to read:

24654.
 (a) Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, shall apply, except as otherwise provided.
(b) For purposes of applying Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting,  Sections 801(d)(2), 801(d)(3), and 801(d)(5) of the Tax Reform Act of 1986 (Public Law 99-514), as modified by Section 1008(a) of Public Law 100-647, shall apply to each taxable year beginning on or after January 1, 1987.
(c) (1) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(a) of the Tax Cuts and Jobs Act (Public Law 115-97)  2020, the amendments  to Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, made by Section 13102 of Public Law 115-97, relating to small business accounting method reform and simplification,  shall apply, except as otherwise provided.
(2) (A) Any change in method of accounting made pursuant to this subdivision shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board.
(B) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to this subdivision.
(C) (2)  Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision to taxable years beginning Section 448(c)(4) of the Internal Revenue Code, relating to adjustment for inflation, is modified by substituting the phrase “beginning  on or after January 1, 2018, and before January 1, 2019. 2020” in lieu of the phrase “beginning after December 31, 2018.” 
(3) Section 448(c)(4)(B) of the Internal Revenue Code is modified by substituting the phrase “calendar year 2018” in lieu of the phrase “calendar year 2017.”
(4) Section 448(d)(7), relating to coordination with Section 481, is modified by substituting “Franchise Tax Board” in lieu of “Secretary.”
SEC. 7.
 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.