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SB-1508 Corporate taxation: voluntary disclosure agreements: qualified entities.(2017-2018)

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Date Published: 07/02/2018 09:00 PM
SB1508:v98#DOCUMENT

Amended  IN  Assembly  July 02, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill
No. 1508


Introduced by Committee on Governance and Finance (Senators McGuire (Chair), Beall, Hernandez, Hertzberg, Lara, Moorlach, and Nguyen)

March 21, 2018


An act to amend Section 19192 of the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


SB 1508, as amended, Committee on Governance and Finance. Corporate taxation: voluntary disclosure agreements: qualified entities.
Existing law authorizes the Franchise Tax Board to enter into voluntary disclosure agreements with specified entities, including a “qualified entity.” Existing law does not include as a “qualified entity” an entity that is qualified or registered with the office of the Secretary of State.
This bill would include as a “qualified entity” a foreign corporation or foreign limited liability company corporation, foreign limited liability company, foreign limited liability partnership, or foreign limited partnership that has qualified or registered with the office of the Secretary of State within 6 months of the signing date of the voluntary disclosure agreement, date the application for a voluntary disclosure agreement is filed with the Franchise Tax Board, subject to specified limitations.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 19192 of the Revenue and Taxation Code is amended to read:

19192.
 For purposes of this article, the following terms have the following meanings:
(a) (1) “Qualified entity” means an entity that is all of the following:
(A) A corporation, as defined in Section 23038, a limited liability company, as defined in subdivision (d) of Section 17941, a qualified trust, as defined in paragraph (7), or a qualified partnership, as defined in paragraph (12).
(B) An entity, including any predecessors to the entity, that previously has never filed a return with the Franchise Tax Board pursuant to this part, Part 10 (commencing with Section 17001), or Part 11 (commencing with Section 23011).
(C) An entity, including any predecessors to the entity, that previously has not been the subject of an inquiry by the Franchise Tax Board with respect to liability for any of the taxes imposed under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001).
(D) An entity that voluntarily comes forward prior to any unilateral contact from the Franchise Tax Board, makes files an application for a voluntary disclosure agreement in a form and manner prescribed by the Franchise Tax Board, and makes a full and accurate statement of its activities in this state for the six immediately preceding taxable years.
(2) (A) Notwithstanding paragraph (1), a qualified entity does not include any of the following:
(i) An entity that is organized and existing under the laws of this state.
(ii) (I) Except as provided in subclause (II), an entity that is qualified or registered with the office of the Secretary of State.
(II) A foreign corporation or foreign limited liability company corporation, foreign limited liability company, foreign limited liability partnership, or foreign limited partnership that has qualified or registered with the office of the Secretary of State within six months of the signing date, as defined in subdivision (b), may be a qualified entity for purposes of this section and Section 19191, but any tax liability for the period that the foreign corporation or foreign limited liability company is qualified or registered in this state shall be excluded from the voluntary disclosure agreement. date the application for a voluntary disclosure agreement is filed with the Franchise Tax Board may be a qualified entity for purposes of this section and Section 19191.
(iii) An entity that maintains and staffs a permanent facility in this state.
(B) For purposes of this paragraph, the storing of materials, goods, or products in a public warehouse pursuant to a public warehouse contract does not constitute maintaining a permanent facility in this state.
(3) “Qualified shareholder” means an individual that is all of the following:
(A) A nonresident on the signing date of the voluntary disclosure agreement.
(B) A shareholder of an “S” corporation (defined in Section 23800) that has applied for a voluntary disclosure agreement under this article under which all material facts pertinent to the shareholder’s liability would be disclosed on that “S” corporation’s voluntary disclosure agreement as required under clause (i) of subparagraph (A) of paragraph (2) of subdivision (d) of Section 19191.
(4) Notwithstanding paragraph (3), subparagraph (B) of paragraph (1) of subdivision (d) of Section 19191 shall not apply to any of the six taxable years immediately preceding the signing date that the qualified shareholder was a California resident required to file a California tax return, nor to any penalties or additions to tax attributable to income other than the California source income from the “S” corporation that filed an application under this article.
(5) “Qualified member” means an individual, corporation, or limited liability company that is all of the following:
(A) (i) In the case of an individual, is a nonresident on the signing date of the voluntary disclosure agreement.
(ii) In the case of a corporation or limited liability company, is not either of the following:
(I) Organized under the laws of this state.
(II) Qualified or registered with the office of the Secretary of State.
(B) A member of a limited liability company that has applied for a voluntary disclosure agreement under this article under which all material facts pertinent to the member’s liability would be disclosed on that limited liability company’s voluntary disclosure agreement as required under clause (i) of subparagraph (A) of paragraph (2) of subdivision (d) of Section 19191.
(6) Notwithstanding paragraph (5), in the case of a qualified member who is an individual, subparagraph (B) of paragraph (1) of subdivision (d) of Section 19191 shall not apply to any of the six taxable years immediately preceding the signing date that the qualified member was a California resident required to file a California tax return, nor to any penalties or additions to tax attributable to income other than the California source income from the limited liability company that filed an application under this article.
(7) “Qualified trust” means a trust, the administration of which has never been performed in California. For purposes of this paragraph, administrative activities performed in California would be deemed to be performed outside of California if those activities were inconsequential to the overall administration of the trust.
(8) “Qualified beneficiary” means an individual who is all of the following:
(A) A nonresident on the signing date of the voluntary disclosure agreement and a nonresident during each of the six taxable years ending immediately preceding the signing date of the voluntary disclosure agreement.
(B) A beneficiary with a contingent or noncontingent interest in the qualified trust. A beneficiary’s trust interest for a taxable year is not contingent if the trust has made any distribution to that beneficiary.
(C) A beneficiary of a qualified trust that has applied for a voluntary disclosure agreement under this article under which all material facts pertinent to the beneficiary’s liability would be disclosed on that trust’s voluntary disclosure agreement as required under clause (i) of subparagraph (A) of paragraph (2) of subdivision (d) of Section 19191.
(9) Notwithstanding paragraph (8), subparagraph (B) of paragraph (1) of subdivision (d) of Section 19191 shall not apply to any penalties or additions to tax attributable to income other than income from the trust that filed an application under this article.
(10) “Qualified partner” means an individual that is both of the following:
(A) A nonresident of this state as of the signing date of the voluntary disclosure agreement.
(B) A partner of a qualified partnership that has applied for a voluntary disclosure agreement under this article under which all material facts pertinent to the partner’s liability would be disclosed on the partnership’s voluntary disclosure agreement as required under clause (i) of subparagraph (A) of paragraph (2) of subdivision (d) of Section 19191.
(11) Notwithstanding paragraph (10), in the case of a qualified partner, subparagraph (B) of paragraph (1) of subdivision (d) of Section 19191 shall not apply to any of the six taxable years immediately preceding the signing date that the qualified partner was a California resident required to file a California tax return, nor to any penalties or additions to tax attributable to income other than the California source income from the partnership that filed an application under this article.
(12) “Qualified partnership” means a partnership, as defined in Section 17008, a limited partnership, as defined in subdivision (d) of Section 17935, or a limited liability partnership, within the meaning of Section 17948.
(b) “Signing date” of the voluntary disclosure agreement means the date on which a person duly authorized by the Franchise Tax Board signs the agreement.
(c) The amendments to this section made by Chapter 954 of the Statutes of 1996 shall apply to taxable years beginning on or after January 1, 1997.
(d) The amendments to this section made by Chapter 543 of the Statutes of 2001 shall apply to voluntary disclosure agreements entered into on or after January 1, 2002.
(e) The amendments to this section made by Chapter 354 of the Statutes of 2004 shall apply to voluntary disclosure agreements entered into on or after January 1, 2005.
(f) The amendments to this section made by Chapter 288 of the Statutes of 2017 shall apply to voluntary disclosure agreements entered into on or after January 1, 2018.
(g) The amendments to this section made by the act adding this subdivision shall apply to taxable years beginning voluntary disclosure agreements entered into on or after January 1, 2019.