SB 567

Bill Subjects

Abstract

(1) The Personal Income Tax Law does not conform to specified provisions of federal law relating to the taxation of specified trusts. Existing law exempts from tax for the taxable year any charitable remainder annuity trust or charitable remainder unitrust, subject to specified requirements, including that the value of the charitable remainder interest must be at least 10% of the initial fair market value of all of the property placed in trust. This bill would, for charitable remainder annuity trusts formed on or after January 1, 2018, require that the charitable remainder interest must be at least 40% of the initial fair market value of all of the property placed in trust. (2) The Personal Income Tax Law and Corporate Tax Law provide, in modified conformity with federal law, that for purposes of calculating the gain or loss upon the disposition of property, generally the basis of property acquired from a decedent is the fair market value at the date of death. This bill would revise this provision with regard to decedents who died on or after January 1, 2018, to provide that no adjustment shall be allowed where the person who acquires the property has an adjusted gross income or net income over specified amounts. (3) The Corporation Tax Law allows various deductions in computing the income that is subject to the taxes imposed by that law. That law, in modified conformity, applies provisions of the Internal Revenue Code relating to business or trade deductions. The Internal Revenue Code provides that a publicly held corporation may not deduct, as a trade or business expense, applicable employee remuneration, as defined, paid to the chief executive officer or other specified employees to the extent that the amount of that compensation exceeds $1,000,000 in the taxable year. The term "applicable employee remuneration" does not include any compensation payable solely on account of the chief executive officer based on commission or on meeting certain performance goals, thereby allowing a deduction for that compensation even if it exceeds $1,000,000. This bill, for taxable years beginning January 1, 2018, would eliminate those deductions for compensation payable to the chief executive officer for based on commission or on meeting certain performance goals under the Corporation Tax Law, thereby no longer conforming to federal income tax law. (4) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature. This bill would take effect immediately as a tax levy.