SB 175

Bill Subjects

Abstract

(1) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions in computing the income that is subject to the taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law disallows the net operating loss deduction, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2022. Senate Bill 167 of the 2023–24 Regular Session (Senate Bill 167) proposes to disallow the net operating loss deduction for taxable years beginning on or after January 1, 2024, and before January 1, 2027. This bill would provide that the disallowance of the net operating loss deduction proposed by Senate Bill 167 would not apply for taxable years in which the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and there is legislation in the annual Budget Act not applying those provisions, as specified. (2) The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws. Existing law, for taxable years beginning on or after January 1, 2020, and before January 1, 2022, limits the total tax reduction by all business credits, as defined, to $5,000,000 per taxable year, and allows the amounts disallowed by that limit to be carried over, as specified. Senate Bill 167 proposes to similarly apply a $5,000,000 business credit limit and related carryover provisions to taxable years beginning on or after January 1, 2024, and before January 1, 2027, as provided, unless a specified exception applies. This bill would provide that the $5,000,000 business credit limit proposed by Senate Bill 167 would not apply for taxable years in which the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and there is legislation in the annual Budget Act not applying those provisions, as specified. This bill, for a qualified taxpayer who elects to receive a specified refund under the motion picture credit, would allow the amount of the credit under the motion picture credit that exceeds the $5,000,000 limitation proposed in Senate Bill 167 to be refunded in the first taxable year that the limitation is not operative, subject to certain conditions. This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2027, would allow a taxpayer to make an irrevocable election to receive an annual refundable credit amount, beginning the 3rd taxable year after the election is made, equal to 20% of the qualified credits that would have otherwise been available to the taxpayer but for the $5,000,000 limitation proposed in Senate Bill 167. The bill would require the annual refundable credit amount to be allowed as a credit for the taxable year, as specified, and would require the balance, if any, to be paid from the Tax Relief and Refund Account to the taxpayer. By authorizing a refund to be paid from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation. (3) The Sales and Use Tax Law, in lieu of specified credits allowed under the Personal Income Tax Law and the Corporation Tax Law for qualified expenditures paid or incurred by a taxpayer for the production of a qualified motion picture, allows a qualified taxpayer or affiliate to make an irrevocable election to apply that income tax credit amount against qualified sales and use taxes imposed on the qualified taxpayer in the reporting periods in the following 5 years. Under existing law, amounts included in the election are excluded from the $5,000,000 business credit limitation described above. Existing law, for irrevocable elections made on and after June 29, 2020, imposes, until January 1, 2022, a cap of $5,000,000 per taxable year on those tax credit amounts the taxpayer would otherwise be allowed to apply against those sales and use taxes for taxable years beginning on or after January 1, 2020, and before January 1, 2022, as specified. Senate Bill 167 similarly proposes to impose a $5,000,000 limitation on those tax credit amounts applied against qualified sales and use taxes, as specified. This bill would specify that the $5,000,000 credit limitation applies for the 2024, 2025, and 2026 calendar years. The bill would provide that the $5,000,000 tax credit cap proposed by Senate Bill 167 would not apply in the 2025 or 2026 calendar years if the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and there is legislation in the annual Budget Act not applying those provisions, as specified. (4) The California Tire Recycling Act, until January 1, 2034, requires a person who purchases a new tire, as defined, to pay a California tire fee of $1.75 per tire, for deposit, except for 112% retained by retailers and as provided below, in the California Tire Recycling Management Fund for expenditure by the Department of Resources Recycling and Recovery upon appropriation by the Legislature for prescribed purposes related to disposal and use of used tires. Commencing January 1, 2034, existing law reduces the California tire fee to $0.75 per tire and changes the retailers' share to 3%. Existing law authorizes the department, in carrying out the act, to solicit and use any and all expertise available in, and to contract or cooperate with, other state agencies, as provided. Existing law authorizes the department to contract with the California Department of Tax and Fee Administration to collect the fees imposed under the division. Existing law requires the department, or its authorized agent, to be reimbursed for its costs of collection, auditing, and making refunds associated with the California Tire Recycling Management Fund, in an amount not to exceed 3% of the total annual revenue deposited in the fund. Existing law requires the payment of sales and use taxes, and specified taxes, fees, and surcharges that are administered by the California Department of Tax and Fee Administration under the provisions of the Sales and Use Tax Law and the Fee Collection Procedures Law, respectively. A violation of the Fee Collection Procedures Law is a crime. Senate Bill 167 proposes, among other things, to require the California Department of Tax and Fee Administration to collect specified fees imposed by the California Tire Recycling Act pursuant to the Fee Collection Procedures Law. This bill, if Senate Bill 167 becomes operative, would instead specify that the California Department of Tax and Fee Administration is required to collect the California tire fee pursuant to the Fee Collection Procedures Law. By expanding the scope of crimes, the bill would impose a state-mandated local program. The bill would make additional nonsubstantive changes to the California Tire Recycling Act amendments proposed by Senate Bill 167. (5) This bill would make additional conforming changes related to tax administration. (6) 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 provide that it would become operative only if Senate Bill 167 of the 2023–24 Regular Session is enacted and becomes effective. (8) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.