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SB-1139 Corporation taxes: deduction: electrical and gas corporations.(2019-2020)

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Date Published: 02/19/2020 09:00 PM
SB1139:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1139


Introduced by Senator Hill

February 19, 2020


An act to add Section 24446 to the Revenue and Taxation Code, relating to income taxation, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 1139, as introduced, Hill. Corporation taxes: deduction: electrical and gas corporations.
Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical and gas corporations.
The Corporation Tax Law, in modified conformity with federal income tax laws, allows various deductions from gross income in computing adjusted gross income for purposes of that law, and provides that no deduction is allowed for any fine or similar penalty paid to a government for the violation of any law, as provided.
This bill, for the taxable years beginning on and after January 1, 2020, would not allow a deduction for expenses or expenditures by an electrical corporation or a gas corporation that the Public Utilities Commission identified in a decision to penalize the electrical or gas corporation for a safety violation. For any taxable year for which those expenses or expenditures are paid or incurred, the bill would require an electrical corporation or a gas corporation to provide with the return a certification, under penalty of perjury, that none of those expenses or expenditures were taken into account, directly or indirectly, in determining the amount of income of the electrical or gas corporation, or any other related taxpayer, for purposes of the Corporation Tax Law for that taxable year. The bill, if the electrical or gas corporation seeks to recover moneys for those taxes, would require the electrical or gas corporation to recover those moneys from shareholders and not the ratepayers. By expanding the scope of the crime of perjury, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 The Legislature finds and declares both of the following:
(a) Under state law, a fine or similar penalty paid at the direction of the government, where the government has determined the fine or similar penalty to be punitive, is not an ordinary and necessary business expense and, therefore, no deduction shall be allowed for any fine or similar penalty paid at the direction of the government for the violation of any law.
(b) Subdivision (a) does not constitute a change in, but is declaratory of, existing law.

SEC. 2.

 Section 24446 is added to the Revenue and Taxation Code, to read:

24446.
 (a) For taxable years beginning on and after January 1, 2020, no deduction shall be allowed for any amount paid or incurred by an electrical corporation or by a gas corporation for expenses or expenditures identified by the Public Utilities Commission in a decision to penalize the electrical or gas corporation for a safety violation, including any of the following:
(1) Electric or gas infrastructure improvements related to safety to be paid for by shareholders of the electrical or gas corporation.
(2) Bill credits for the electric or gas ratepayers of the electrical or gas corporation.
(3) The implementation of safety remedies and reimbursement of the Public Utilities Commission for its costs incurred in investigating and enforcing violations of law relating to the public safety by the electrical or gas corporation.
(b) For any taxable year for which expenses or expenditures identified in subdivision (a) are paid or incurred, the electrical or gas corporation shall provide with the return for that taxable year a certification, under penalty of perjury, that none of those expenses or expenditures were taken into account, directly or indirectly, in determining the amount of income of the electrical or gas corporation, or any other related taxpayer that is subject to a tax under this part, for that taxable year.
(c) If an electrical or gas corporation seeks to recover moneys for taxes paid that, if not for this section, could have otherwise been deducted, the electrical or gas corporation shall recover those moneys from shareholders and shall not recover those moneys from ratepayers.
(d) For purposes of this section, the following shall apply:
(1) “Electrical corporation” shall be defined as in Section 218 of the Public Utilities Code.
(2) “Gas corporation” shall be defined as in Section 222 of the Public Utilities Code.

SEC. 3.

  No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 4.

  This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order for the provisions of this act to be applicable to the current tax year and to better ensure the effectiveness of decisions of the Public Utilities Commission protecting the public safety, it is necessary that this act take effect immediately.