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SB-263 Taxation: credit: savings plans: qualified ABLE program: small business cash method of accounting. (2019-2020)



Current Version: 04/22/19 - Amended Senate

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SB263:v98#DOCUMENT

Amended  IN  Senate  April 22, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 263

Introduced by Senator Dodd

February 12, 2019

An act to amend Sections 17140.3, 17140.4, 23711, 23711.4, and 24654 of of, and to add and repeal Section 17052.9 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 263, as amended, Dodd. Taxation: credit: savings plans: qualified ABLE program: small business cash method of accounting.
Existing federal law, the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), for taxable years beginning on or after January 1, 2014, encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a Qualified ABLE Program established and maintained by a state, as specified. Existing federal law, the Tax Cuts and Jobs Act, increases the amount of contributions allowed to an ABLE account, adds special rules for the increased contribution limit, and exempts from taxation distributions from a qualified tuition program, as defined, rolled into an ABLE account. Existing federal law additionally allows a “savers tax credit” to qualified taxpayers for qualified retirement savings contributions, defined to include contributions by the taxpayer to their ABLE account.
Existing law, the Personal Income Tax Law and the Corporation Tax Law, for taxable years beginning on or after January 1, 2016, conforms to these federal income tax law provisions relating to the ABLE Act, as provided. Existing law creates the ABLE Act Board and requires the board to provide an annual listing of distributions to individuals that have an interest in an ABLE account to the Franchise Tax Board, as provided.
This bill, for taxable years beginning on or after January 1, 2020, and before January 1, 2026, would conform to those changes made by the Tax Cuts and Jobs Act. The bill, for taxable years beginning on or after January 1, 2020, and before January 1, 2026, would, in partial conformity with the federal “savers tax credit,” allow a credit for qualified retirement savings contributions to ABLE accounts.
Existing federal law, the Tax Cuts and Jobs Act, allows a small business to use the cash method of accounting if its average annual gross receipts for the 3 taxable years ending with the prior taxable year do not exceed $25,000,000.
Existing state law, the Corporation Tax Law, allows a small business to use the cash method of accounting if its average annual gross receipts for the 3 taxable years ending with the prior taxable year do not exceed $5,000,000.
This bill, for taxable years beginning on or after January 1, 2020, would conform the Corporation Tax Law to the change made by the Tax Cuts and Jobs Act that increased the allowable amount of annual gross receipts to $25,000,000 for a small business to use the cash method of accounting.
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 17052.9 is added to the Revenue and Taxation Code, to read:

17052.9.
 (a) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, there shall be allowed as a credit against the “net tax,” as defined by Section 17039, for the taxable year an amount determined in accordance with Section 25B of the Internal Revenue Code, relating to elective deferrals and IRA contributions by certain individuals, as amended by Section 11002(d)(1)(C) and Section 11024(b) of the Tax Cuts and Jobs Act (Public Law 115-97), except as follows:
(1) Section 25B(b)(3), relating to inflation adjustment, is modified by substituting “2021” in lieu of “2006.”
(2) Section 25B(b)(3)(B) is modified by substituting “calendar year 2020” for “calendar year 2005.”
(3) Section 25B(d), relating to qualified retirement savings contributions, shall not apply and instead “qualified savings contributions” means the amount of contributions made before January 1, 2026, by an individual to the ABLE account, within the meaning of Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, as amended by Section 11024(a)(1) of the Tax Cuts and Jobs Act (Public Law 11597), of which the individual is the designated beneficiary.
(b) This section shall remain in effect only until December 1, 2026, and as of that date is repealed.

SECTION 1.SEC. 2.

 Section 17140.3 of the Revenue and Taxation Code is amended to read:

17140.3.
 Section 529 of the Internal Revenue Code, relating to qualified tuition programs, shall apply, except as otherwise provided.
(a) Section 529 (a) of the Internal Revenue Code, relating to general rule, is modified as follows:
(1) By substituting the phrase “under this part and Part 11 (commencing with Section 23001)” in lieu of the phrase “under this subtitle.”
(2) By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.”
(b) A copy of the report required to be filed with the Secretary of the Treasury under Section 529(d) of the Internal Revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(c) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, the amendments to Section 529 of the Internal Revenue Code, relating to qualified tuition programs, made by Section 11025 of Public Law 115-97, relating to rollovers to ABLE programs from 529 programs, shall apply.

SEC. 2.SEC. 3.

 Section 17140.4 of the Revenue and Taxation Code is amended to read:

17140.4.
 (a) For taxable years beginning on or after January 1, 2016, Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, added by Section 102 of Division B of Public Law 113-295, shall apply, except as otherwise provided.
(1) Section 529A(a) of the Internal Revenue Code, relating to general rules, is modified as follows:
(A) By substituting the phrase “under this part and Part 11 (commencing with Section 23001)” in lieu of the phrase “under this subtitle.”
(B) By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.”
(2) Section 529A(c)(3)(A) of the Internal Revenue Code is modified by substituting “2.5 percent” in lieu of “10 percent.”
(3) A copy of the report required to be filed with the Secretary of the Treasury under Section 529A(d) of the Internal Revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(b) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, the amendments to Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, made by Section 11024 of Public Law 115-97, relating to increased contributions to ABLE accounts, shall apply.

SEC. 3.SEC. 4.

 Section 23711 of the Revenue and Taxation Code is amended to read:

23711.
 Section 529 of the Internal Revenue Code, relating to qualified state tuition programs, shall apply, except as otherwise provided.
(a) Section 529(a) of the Internal Revenue Code, relating to general rule, is modified as follows:
(1) By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” in lieu of the phrase “under this subtitle.”
(2) By substituting “Article 2 (commencing with Section 23731)” in lieu of “section 511.”
(b) A copy of the report required to be filed with the Secretary of the Treasury under Section 529(d) of the Internal Revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(c) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, the amendments to Section 529 of the Internal Revenue Code, relating to qualified tuition programs, made by Section 11025 of Public Law 115-97, relating to rollovers to ABLE programs from 529 programs, shall apply.

SEC. 4.SEC. 5.

 Section 23711.4 of the Revenue and Taxation Code is amended to read:

23711.4.
 (a) For taxable years beginning on or after January 1, 2016, Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, added by Section 102 of Division B of Public Law 113-295, shall apply, except as otherwise provided.
(1) Section 529A(a) of the Internal Revenue Code, relating to general rules, is modified as follows:
(A) By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” in lieu of the phrase “under this subtitle.”
(B) By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.”
(2) Section 529A(c)(3)(A) of the Internal Revenue Code is modified by substituting “2.5 percent” in lieu of “10 percent.”
(3) A copy of the report required to be filed with the Secretary of the Treasury under Section 529A(d) of the Internal revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.
(b) For taxable years beginning on or after January 1, 2020, and before January 1, 2026, the amendments to Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, made by Section 11024 of Public Law 115-97, relating to increased contributions to ABLE accounts, shall apply.

SEC. 5.SEC. 6.

 Section 24654 of the Revenue and Taxation Code is amended to read:

24654.
 (a) Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, shall apply, except as otherwise provided.
(b) For purposes of applying Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, Sections 801(d)(2), 801(d)(3), and 801(d)(5) of the Tax Reform Act of 1986 (Public Law 99-514), as modified by Section 1008(a) of Public Law 100-647, shall apply to each taxable year beginning on or after January 1, 1987.
(c) (1) For taxable years beginning on or after January 1, 2020, the amendments to Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, made by Section 13102 of Public Law 115-97, relating to small business accounting method reform and simplification, shall apply, except as otherwise provided.
(2) Section 448(c)(4) of the Internal Revenue Code, relating to adjustment for inflation, is modified by substituting the phrase “beginning on or after January 1, 2020” in lieu of the phrase “beginning after December 31, 2018.”
(3) Section 448(c)(4)(B) of the Internal Revenue Code is modified by substituting the phrase “calendar year 2018” in lieu of the phrase “calendar year 2017.”
(4) Section 448(d)(7), relating to coordination with Section 481, is modified by substituting “Franchise Tax Board” in lieu of “Secretary.”

SEC. 6.SEC. 7.

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