Today's Law As Amended


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SB-775 Corporation taxes: exempt organizations: mutual ditch or irrigation companies: public water system: mutual water companies.(2019-2020)



As Amends the Law Today


SECTION 1.

 Section 14308 is added to the Corporations Code, to read:

14308.
 (a) On or before June 30, 2020, a mutual water company that operates a public water system shall adopt policies to comply with Sections 14305 to 14307, inclusive, and shall update the policies as necessary to remain in compliance.
(b) On or before June 30, 2020, and annually thereafter, the mutual water company shall submit to the Division of Drinking Water of the State Water Resources Control Board the policies adopted or updated pursuant to subdivision (a) and a certification that the mutual water company is in compliance with, and will remain in compliance with, those policies.
(c) On or before September 30, 2020, and annually thereafter in any year in which Section 23701m of the Revenue and Taxation Code is operative, the Division of Drinking Water of the State Water Resources Control Board shall submit to the Franchise Tax Board a list of mutual water companies that have not complied with subdivision (b).
(d) (1) The State Water Resources Control Board shall charge a mutual water company that does not comply with subdivision (b) by the June 30th deadline and subsequently wants to comply a compliance fee in an amount not to exceed the reasonable regulatory costs incurred by the board to ensure the mutual water company is in compliance with subdivision (b).
(2) The State Water Resources Control Board shall revise the list submitted to the Franchise Tax Board pursuant to subdivision (c).

SEC. 2.

 Section 23701m is added to the Revenue and Taxation Code, to read:

23701m.
 (a) For taxable years beginning on or after January 1, 2019, and before January 1, 2024, mutual ditch or irrigation companies, as described in Section 501(c)(12) of the Internal Revenue Code, that operate a public water system, as defined in Section 116275 of the Health and Safety Code.
(b) This section shall not apply to a mutual ditch or irrigation company that does any of the following:
(1) Fails to comply with Sections 14301.1, 14301.2, 14301.3, 14305, 14306, or 14307 of the Corporations Code or Section 116755 of the Health and Safety Code.
(2) Does not provide information to a local agency formation commission upon request, as authorized by subdivision (d) of Section 56430 of the Government Code.
(c) Notwithstanding subdivision (b), gross income does not include funding provided by the State Water Resources Control Board to a mutual ditch or irrigation company operating a public water system pursuant to subdivision (a) of Section 79712 or Section 79724 of the Water Code, subdivisions (e) or (f) of Section 116682, Section 116686, or Section 116687 of the Health and Safety Code, nor shall that funding impact the mutual ditch or irrigation company’s tax-exempt status, as described in Section 501(c)(12) of the Internal Revenue Code.
(d) This section shall remain in effect only until December 1, 2024, and as of that date is repealed.

SEC. 3.

 Section 24316 is added to the Revenue and Taxation Code, to read:

24316.
 (a) For taxable years beginning on or after January 1, 2019, and before January 1, 2024, gross income does not include funding provided by the State Water Resources Control Board to a mutual water company, formed under Section 14300 of the Corporations Code, pursuant to subdivision (a) of Section 79712 or Section 79724 of the Water Code, subdivisions (e) or (f) of Section 116682, Section 116686, or Section 116687 of the Health and Safety Code, nor shall that funding impact the mutual water company’s tax-exempt status, as described in Section 501(c)(12) of the Internal Revenue Code.
(b) This section shall remain in effect only until December 1, 2024, and as of that date is repealed.
SEC. 4.
 (a) It is the intent of the Legislature to comply with Section 41 of the Revenue and Taxation Code.
(b) For the purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Sections 23701m and 24316 of the Revenue and Taxation Code, as added by the act adding this section, the Legislature finds and declares as follows:
(1) The specific goals, purposes, and objectives of the act are as follows:
(A) To clarify existing state tax laws by conforming to an exemption authorized under the federal Internal Revenue Code to allow for small water systems to declare themselves to be tax-exempt entities under state law for purposes of potentially receiving grant funding.
(B) To allow public water systems to utilize grant funds for necessary improvements to their systems in order to provide clean, safe, and affordable drinking water in accordance with state law, and without the potential of significant taxes becoming due.
(2) (A) To allow the Legislature to measure whether the exemption authorized under Sections 23701m and 24316 of the Revenue and Taxation Code, as added by the act adding this section, achieves its intended purpose, the Franchise Tax Board shall annually determine the number of corporations that have applied for the exemption and shall annually calculate the tax revenue lost due to the exemption.
(B) The State Water Resources Control Board shall annually inform the Legislature of the grant funds distributed to mutual water companies that operate a public water system.