AB 1618

Bill Subjects

Abstract

(1) The Sales and Use Tax Law provides that every person storing, using, or otherwise consuming in this state tangible personal property purchased from a retailer is liable for use tax, and must pay the use tax to the State Board of Equalization, unless that person has paid the use tax to a retailer registered to collect the tax. That law requires a person selling tangible personal property for storage, use, or other consumption in this state to register with, and to obtain a seller's permit or certification of registration-use tax from, the State Board of Equalization. For taxable years beginning on or after January 1, 2003, and on or before December 31, 2009, a person not otherwise registered with the board could make an irrevocable election to report qualified use tax, as defined, on that person's income tax return, and the Franchise Tax Board was required to revise the income tax returns to allow a person to report and remit qualified use tax to it and to remit the qualified use tax collected to the board. This bill would authorize an eligible person to make an irrevocable election to report qualified use tax, as defined, on that person's income tax return, for taxable years beginning on and after January 1, 2010, and would require the Franchise Tax Board to allow a person to report and remit qualified use taxes to it and to remit the qualified use taxes collected to the board, as provided. (2) Existing law imposes a penalty on a taxpayer subject to the Corporation Tax Law with an understatement of tax, as defined, in excess of $1,000,000 in an amount equal to 20% of that understatement, except as specified. This bill would, for each taxable year beginning on or after January 1, 2010, revise those provisions to impose a penalty for understatement of tax for each taxable year that exceeds the greater of $1,000,000 or 20% of the tax shown on an original return or shown on an amended return filed on or before the original or extended due date of the return for the taxable year, as provided. (3) Existing law allows individual and corporate taxpayers to utilize net operating losses and carryovers and carrybacks of those losses for purposes of offsetting their individual and corporate tax liabilities. Existing law, for net operating losses incurred in taxable years beginning on or after January 1, 2008, provides a carryover period of 20 years and allows net operating losses attributable to taxable years beginning on or after January 1, 2011, to be carrybacks to each of the preceding 2 taxable years, as provided. Existing law disallows the deduction for net operating losses and net operating loss carryovers in the 2008 and 2009 taxable years for a taxpayer with business income of $500,000 or more and extends the carryover period for those net operating losses, thus allowing the taxpayer to have the same number of years to utilize the deduction as it would have had if the disallowance for 2008 and 2009 had not occurred. This bill would extend the disallowance of the net operating loss deduction and carryovers, and the carryover extension, to the 2010 and 2011 taxable years for a taxpayer with income of $300,000 or more. This bill would disallow net operating loss carrybacks for any net operating losses attributable to taxable years beginning before January 1, 2013, but would allow net operating losses attributable to taxable years beginning on or after January 1, 2013, to be carrybacks to each of the preceding 2 taxable years, as provided. This bill would, under the Corporation Tax Law, specify that the above provisions do not apply to a taxpayer that ceased to do business or has a final taxable year ending prior to August 28, 2008, that sold or transferred substantially all of its assets resulting in a gain on sale during a taxable year ending prior to August 28, 2008, for which the gain could be offset with existing net operating loss deductions and the sale or transfer occurred pursuant to a reorganization under federal bankruptcy provisions. The bill would also specify that an amended tax return claiming net operating loss deductions allowed pursuant to those provisions shall be treated as a timely filed original return. (4) The Corporation Tax Law imposes taxes measured by income and, in the case of a business with income derived from or attributable to sources both within and without this state, apportions the income between this state and other states and foreign countries in accordance with a specified 4-factor formula based on the property, payroll, and sales within and without this state, except that in the case of an apportioning trade or business that derives more than 50% of its gross business receipts from conducting one or more qualified business activities, as defined, business income is apportioned in accordance with a specified 3-factor formula. That law, for taxable years beginning on or after January 1, 2011, allows a taxpayer to have that income apportioned in accordance with a single sales factor formula, except as provided, pursuant to an irrevocable annual election, as specified. That law also provides that sales of tangible and intangible personal property are in this state in accordance with specified criteria. This bill would, for taxable years beginning or after January 1, 2011, revise provisions for determining whether sales of services and intangibles occur in this state for purposes of taxpayers who elect to have their business income apportioned in accordance with the single sales factor formula, as provided, and for purposes of the 4-factor formula if the single sales factor formula election is not allowed. (5) Existing law requires the payment of taxes, fees, and surcharges that are administered by the State Board of Equalization under the provisions of the Sales and Use Tax Law, Use Fuel Tax Law, Private Railroad Car Tax Law, Cigarette and Tobacco Products Tax Law, Alcoholic Beverage Tax Law, Timber Yield Tax Law, Energy Resources Surcharge Law, Emergency Telephone Users Surcharge Act, Hazardous Substances Tax Law, Integrated Waste Management Fee Law, Oil Spill Response, Prevention, and Administration Fees Law, Underground Storage Tank Maintenance Fee Law, Fee Collection Procedures Law, and Diesel Fuel Tax Law, as prescribed. This bill would require the payment of a collection cost recovery fee if a person fails to pay a tax, fee, or surcharge under the laws stated above, and the State Board of Equalization has mailed the person a demand notice, on or after January 1, 2011, that explains that the failure to pay the amount due may result in collection action, including the imposition of the collection cost recovery fee. This bill would authorize the collection cost recovery fee to be collected and deposited in the same manner in which the tax, fee, or surcharge that the person failed to pay is collected and deposited. This bill would deposit the collection cost recovery fee in the same manner as the revenues derived from the tax, fee, or surcharge imposed by the laws stated above, which deposit those revenues into various funds, some of which are continuously appropriated. Because the bill would provide additional amounts payable from a continuously appropriated fund, the bill would make an appropriation. (6) This bill would require the State Board of Equalization to relieve a person from paying the collection cost recovery fee if that person files a statement under penalty of perjury, setting forth the reasonable cause for not paying the tax, fee, or surcharge, to the State Board of Equalization. Because this bill would expand the scope of the existing crime of perjury, it 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. (7) This bill would declare that it is to take effect immediately as an urgency statute.