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AB-33 Income taxes: credit: patent licensing.(2013-2014)

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AB33:v97#DOCUMENT

Amended  IN  Assembly  April 08, 2013
Amended  IN  Assembly  March 14, 2013

CALIFORNIA LEGISLATURE— 2013–2014 REGULAR SESSION

Assembly Bill
No. 33

Introduced by Assembly Member Perea
(Coauthor: Coauthors: Assembly Member Members Mullin and Wieckowski)
(Coauthor: Senator Beall)

December 03, 2012

An act to add and repeal Sections 17053.99 and 23699 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 33, as amended, Perea. Income taxes: credit: patent licensing.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill would, under the Personal Income Tax Law and the Corporation Tax Law, for taxable years beginning on or after January 1, 2013, allow a credit against those taxes in an amount equal to 15% of the qualified royalties, as defined, paid by a qualified taxpayer, as defined. The bill would calculate the cut-off date for the above-described credit based upon an estimate by the Franchise Tax Board of claims cumulatively totaling $100,000,000 for all taxable years, as specified. The bill would require a qualified taxpayer to commercialize, as defined, a qualified patent for at least 5 consecutive years.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 17053.99 is added to the Revenue and Taxation Code, to read:

17053.99.
 (a) For each taxable year beginning on or after January 1, 2013, there shall be allowed to a qualified taxpayer as a credit against the “net tax,” as defined in Section 17039, an amount equal to 15 percent of the qualified royalties paid by the qualified taxpayer during the taxable year.
(b) For purposes of this section:
(1) “Commercialize” means the process in which a taxpayer is a licensee of a qualified patent and uses the patent in connection with, or incorporates the patent into, intellectual property or tangible personal property in the manner described, with respect to which a qualified patent is used directly or indirectly in connection with the growing, manufacturing, production, growing, or extraction process with respect to such property, or is incorporated into such property and such incorporation serves a significant commercial purpose.
(2) “Qualified patent” means a patent owned by the University of California or the California State University for an invention where the research and development for that invention was funded, in whole or in part, by amounts eligible for the credit under Section 17052.12 or 23609.
(3) “Qualified research” has the same meaning as set forth in Section 41(d) of the Internal Revenue Code, as modified by Section 17052.12.
(4) “Qualified royalties” means any royalties paid by a qualified taxpayer for the use of a qualified patent through a license agreement with the University of California, the California State University, or another entity.
(5) “Qualified taxpayer” means a taxpayer that paid qualified royalties during the taxable year and commercializes, for at least one year within the state, the licensed patent for which qualified royalties were paid during the taxable year.
(c) If the qualified taxpayer does not commercialize the qualified patent for at least five consecutive years, the tax imposed by this part shall be increased by an amount equal to the credit allowed under subdivision (a) for all the taxable years the qualified taxpayer claimed the credit.
(d) In the case where the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding eight years if necessary, until the credit is exhausted.
(e) (1) (A) Credit under this section and Section 23699 shall be allowed only for credits claimed on timely filed original returns received by the Franchise Tax Board on or before the cutoff date established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cutoff date shall be the last day of the calendar quarter within which the Franchise Tax Board estimates it will have received timely filed original returns claiming credits under this section and Section 23699 that cumulatively total one hundred million dollars ($100,000,000) for all taxable years.
(2) The date a return is received shall be determined by the Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect to the cutoff date, the date a return is received, and whether a return has been timely filed for purposes of this subdivision may not be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination under this subdivision, including the application of the limitation specified in paragraph (1), shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from such disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on its Internet Web site with respect to the amount of credit under this section and Section 23699 claimed on timely filed original returns received by the Franchise Tax Board.
(f) (1) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the limitation on total credits allowable under this section and Section 23699.
(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.
(g) This section shall remain in effect only until December 1 of the calendar year after the year of the cutoff date, and as of that December 1 is repealed.

SEC. 2.

 Section 23699 is added to the Revenue and Taxation Code, to read:

23699.
 (a) For each taxable year beginning on or after January 1, 2013, there shall be allowed to a qualified taxpayer as a credit against the “tax,” as defined in Section 23036, an amount equal to 15 percent of the qualified amount paid by the qualified taxpayer during the taxable year.
(b) For purposes of this section:
(1) “Commercialize” means the process in which a taxpayer is a licensee of a qualified patent and uses the patent in connection with, or incorporates the patent into, intellectual property or tangible personal property in the manner described, with respect to which a qualified patent is used directly or indirectly in connection with the growing, manufacturing, production, growing, or extraction process with respect to such property, or is incorporated into such property and such incorporation serves a significant commercial purpose.
(2) “Qualified patent” means a patent owned by the University of California or the California State University for an invention where the research and development for that invention was funded, in whole or in part, by amounts eligible for the credit under Section 17052.12 or 23609.
(3) “Qualified research” has the same meaning as set forth in Section 41(d) of the Internal Revenue Code, as modified by Section 23609.
(4) “Qualified royalties” means any royalties paid by a qualified taxpayer for the use of a qualified patent through a license agreement with the University of California, the California State University, or another entity.
(5) “Qualified taxpayer” means a taxpayer that paid qualified royalties during the taxable year and commercializes, for at least one year within the state, the licensed patent for which qualified royalties were paid during the taxable year.
(c) If the qualified taxpayer does not commercialize the qualified patent for at least five consecutive years, the tax imposed by this part shall be increased by an amount equal to the credit allowed under subdivision (a) for all the taxable years the qualified taxpayer claimed the credit.
(d) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding eight years if necessary, until the credit is exhausted.
(e) (1) (A) Credit under this section and Section 17053.99 shall be allowed only for credits claimed on timely filed original returns received by the Franchise Tax Board on or before the cutoff date established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cutoff date shall be the last day of the calendar quarter within which the Franchise Tax Board estimates it will have received timely filed original returns claiming credits under this section and Section 17053.99 that cumulatively total one hundred million dollars ($100,000,000) for all taxable years.
(2) The date a return is received shall be determined by the Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect to the cutoff date, the date a return is received, and whether a return has been timely filed for purposes of this subdivision may not be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination under this subdivision, including the application of the limitation specified in paragraph (1), shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from such disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on its Internet Web site with respect to the amount of credit under this section and Section 23623 claimed on timely filed original returns received by the Franchise Tax Board.
(f) (1) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the limitation on total credits allowable under this section and Section 17053.99.
(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.
(g) This section shall remain in effect only until December 1 of the calendar year after the year of the cutoff date, and as of that December 1 is repealed.

SEC. 3.

 This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.