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SB-227 Personal income taxes: credits: California Excellence Fund.(2017-2018)

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Date Published: 01/25/2018 09:00 PM
SB227:v97#DOCUMENT

Amended  IN  Senate  January 25, 2018
Amended  IN  Senate  January 03, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 227


Introduced by Senators De León, Allen, and Hill Hill, Lara, and McGuire

February 02, 2017


An act to add Sections 17053.88 and 23688 to amend Section 17039 of, and to add Section 17053.88 to, the Revenue and Taxation Code, relating to taxation, state contributions, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 227, as amended, De León. Income Personal income taxes: credits: California Excellence Fund.
The Personal Income Tax Law and the Corporation Tax Law allow allows various credits against the taxes tax imposed by those laws. that law.
This bill, under both laws for taxable years beginning on or after January 1, 2018, would allow a credit against tax under the Personal Income Tax Law in an amount equal to 85% of the amount contributed by the taxpayer for the taxable year to the California Excellence Fund, which this bill would create in the General Fund to accept monetary contributions for exclusively public purposes. The bill would require all amounts in this fund to be used for those public purposes upon appropriation by the Legislature. Fund.
This bill would require the Treasurer to establish a procedure for the public to make monetary contributions to the California Excellence Fund and for any taxpayer to obtain from the Treasurer a certification for the credit allowed. This bill would require the Treasurer to provide the Franchise Tax Board a copy of the certifications issued, as provided.
The Personal Income Tax Law provides for an alternative minimum tax and provides that, except for specified credits, no credit shall reduce the regular tax, as defined, below the tentative minimum tax.
This bill, for taxable years beginning on or after January 1, 2018, would allow the credit to reduce the regular tax below the tentative minimum tax.
This bill would become operative only if SB 581 of the 2017–18 Regular Session is enacted and takes effect on or before January 1, 2019.
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 17039 of the Revenue and Taxation Code is amended to read:

17039.
 (a) Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term “net tax” means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the “net tax” shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against “net tax” in the following order:
(1) Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5) Credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062.
(6) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7) Credits that contain refundable provisions but do not contain carryover provisions.
The order within each paragraph shall be determined by the Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding), the credits provided in those sections shall be allowed in the order provided in paragraph (6) of subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A) The credit allowed by Section 17052.2 (relating to teacher retention tax credit).
(B) The credit allowed by former Section 17052.4 (relating to solar energy).
(C) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E) The credit allowed by Section 17052.12 (relating to research expenses).
(F) The credit allowed by former Section 17052.13 (relating to sales and use tax credit).
(G) The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit).
(H) The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I) The credit allowed by Section 17053.5 (relating to the renter’s credit).
(J) The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit).
(K) The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit).
(L) The credit allowed by former Section 17053.11 (relating to program area hiring credit).
(M) For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit).
(N) The credit allowed by Section 17053.33 (relating to targeted tax area sales or use tax credit).
(O) The credit allowed by Section 17053.34 (relating to targeted tax area hiring credit).
(P) The credit allowed by Section 17053.49 (relating to qualified property).
(Q) The credit allowed by Section 17053.70 (relating to enterprise zone sales or use tax credit).

(®)

(R) The credit allowed by Section 17053.74 (relating to enterprise zone hiring credit).
(S) The credit allowed by Section 17054 (relating to credits for personal exemption).
(T) The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U) The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V) The credit allowed by former Section 17057 (relating to clinical testing expenses).
(W) The credit allowed by Section 17058 (relating to low-income housing).
(X) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA) The credit allowed by Section 19002 (relating to tax withholding).
(AB) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17053.86 (relating to the College Access Tax Credit Fund).
(AC) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD) The credit allowed by Section 17053.88 (relating to contributions to the California Excellence Fund).
(2) Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partner’s distributive share.
(3) In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayer’s “net tax,” as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayer’s regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. No credit shall be allowed if the taxpayer’s regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayer’s first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2) For purposes of this subdivision, “eligible pass-thru entity” means any partnership or “S” corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3) This subdivision shall apply to credits that become inoperative on or after the operative date of the act adding this subdivision.

SECTION 1.SEC. 2.

 Section 17053.88 is added to the Revenue and Taxation Code, to read:

17053.88.
 (a) For the taxable years beginning on or after January 1, 2018, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount equal to 85 percent of the amount contributed by the taxpayer for the taxable year to the California Excellence Fund. Fund created by Section 16302.5 of the Government Code.

(b)(1)The California Excellence Fund is hereby created in the General Fund to accept monetary contributions for exclusively public purposes as specified under Section 170 of the Internal Revenue Code, relating to charitable, etc., contributions and gifts. All amounts in the fund shall be used for those public purposes upon appropriation by the Legislature.

(2)(A)For

(b) (1) For the purposes of this section and Section 23688, subparagraph (AD) of paragraph (1) of subdivision (c) of Section 17039 the Treasurer shall do both of the following:

(i)

(A) Establish a procedure for the public to make monetary contributions to the California Excellence Fund and for any taxpayer who makes a monetary contribution to the California Excellence Fund created by Section 16302.5 of the Government Code to obtain from the Treasurer a certification for the credit allowed by this section and Section 23688. subparagraph (AD) of paragraph (1) of subdivision (c) of Section 17039. The procedure shall require the Treasurer to certify the contribution amount eligible for credit within 45 days following receipt of the contribution.

(ii)

(B) Provide to the Franchise Tax Board a copy of each credit certificate issued for the calendar year by March 1 January 31 of the calendar year immediately following the year in which those certificates are issued.

(B)(i)The

(2) (A) The Treasurer shall adopt any regulations necessary or appropriate to implement this subdivision.

(ii)

(B) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any regulation adopted by the Treasurer pursuant to clause (i). subparagraph (A).
(c) (1) 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 five years if necessary, until the credit is exhausted.
(2) A deduction shall not No deduction shall be allowed under this part for amounts taken into account under this section in calculating the credit allowed by this section. section, except for a deduction allowed under Section 17201 for a charitable contribution defined under Section 170(c)(1) of the Internal Revenue Code.
(d) The tax credit allowed by subdivision (a) and subdivision (a) of Section 23688 subparagraph (AD) of paragraph (1) of subdivision (c) of Section 17039 for donations to the California Excellence Fund shall be known as the California Excellence Fund Tax Credit.
(e) (1) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section.
(2) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(e)

(f) Section 41 shall not apply to the credit allowed by this section.

SEC. 2.Section 23688 is added to the Revenue and Taxation Code, to read:
23688.

(a)For taxable years beginning on or after January 1, 2018, there shall be allowed as a credit against the “tax,” as defined in Section 23036, an amount equal to the amount contributed by the taxpayer for the taxable year to the California Excellence Fund created pursuant to Section 17053.88.

(b)(1)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 five years if necessary, until the credit is exhausted.

(2)A deduction shall not be allowed under this part for amounts taken into account under this section in calculating the credit allowed by this section.

(c)Section 41 shall not apply to the credit allowed by this section.

SEC. 3.

  This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. effect, but Sections 1 and 2 of this act shall become operative only if Senate Bill 581 of the 2017–18 Regular Session is enacted and takes effect on or before January 1, 2019.