California Senate Bill SB1391 Amended / Bill

 BILL NUMBER: SB 1391AMENDED BILL TEXT AMENDED IN ASSEMBLY AUGUST 2, 2010 AMENDED IN SENATE MAY 19, 2010 AMENDED IN SENATE APRIL 6, 2010 INTRODUCED BY Senator Yee FEBRUARY 19, 2010 An act to add Sections 17060 and 23603 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. LEGISLATIVE COUNSEL'S DIGEST SB 1391, as amended, Yee.  Tax credits   Income taxes: business tax incentives  : reporting information and recapture. The Personal Income Tax Law and the Corporation Tax Law authorize various credits  against   , deductions, exclusions, exemptions, and other tax benefits with respect to  the taxes imposed by those laws. This bill would require a taxpayer  , as described,  doing business in California that claims a  business  tax  credit   incentive, as provided,  to submit to the Franchise Tax Board on the original return specified information, including the number of employees employed by the taxpayer in the state  and the number of jobs created by the tax credit  . The bill would also require, in cases in which a taxpayer has a net decrease in the number of full-time employees for a  credit   business tax incentive  added by statute on or after January 1, 2011, the  credit   business tax incentive  to be disallowed and the entire amount of any  credit   business tax incentives  previously allowed to be recaptured  or the tax liability to be recomputed  and the taxpayer to be liable for any credits on previous tax returns, as specified. This bill would take effect immediately as a tax levy. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 17060 is added to the Revenue and Taxation Code, to read: 17060. (a) Notwithstanding any other provision of this part, for taxable years beginning on or after January 1, 2011, a taxpayer doing business in this state that claims any business  credit against the "net tax," as defined in Section 17039, shall annually include   tax incentive shall annually include  on the timely filed original  return the following information   return,  in the form and manner as required by forms and instructions prescribed  by the Franchise Tax Board:   (1)     The   by the Franchise Tax Board, the  number of full-time, part-time, and temporary employees, as defined, employed by the taxpayer in the state for the current and preceding taxable years.  (2) The number of full-time jobs, part-time jobs, and temporary jobs created by the tax credit.  (b)  (1)    Notwithstanding any other law, for any business  credit against the "net tax," as defined in Section 17039, that is allowed   tax incentive that is allowed  by an act that takes effect on or after  the effective date of the act adding this section   January 1, 2011  , both of the following shall apply if the taxpayer has a net decrease, as determined under subdivision (c), in the number of full-time equivalent employees  in the state  according to the information provided pursuant to subdivision (a):  (1)   (A)  The entire amount of the  credits   business tax incentives  for all taxable years shall be disallowed.  (2)   (B)  Any previously allowed  credits   business tax incentives  shall be recaptured  or the tax liability shall be recomputed  and the taxpayer shall be liable for the entire amount of any  credits   tax from disallowed business tax incentives  on previous tax returns.  (2) For purposes of this subdivision, a "business tax incentive" means a credit, deduction, exclusion, exemption, or any other tax benefit provided by the state added to this part on or after January 1, 2011, enacted with the principal purpose of creating new jobs in the state, and allowed to taxpayers engaged in or carrying on any trade, business, profession, vocation or calling, or commercial activity in the state, including activities in the state that benefit an affiliated entity of the taxpayer, with respect to the income attributable to the taxpayer's trade, business, profession, vocation or calling, or commercial activity.  (c) (1) The net decrease in full-time equivalent employees  in the state  shall be determined, on and after January 1, 2014, on a full-time equivalent basis by subtracting from the amount determined in subparagraph (A) the amount determined in subparagraph (B). (A) The total number of full-time equivalent employees  in the state  employed in the three preceding taxable years by the taxpayer and by any trade or business acquired by the taxpayer during the current taxable year, divided by three. (B) The total number of full-time equivalent employees employed  in the state  in the current taxable year by the taxpayer and by any trade or business acquired by the taxpayer during the current taxable year. (2) "Full-time equivalent" means either of the following: (A) In the case of a full-time employee paid hourly qualified wages, "full-time equivalent" means the total number of hours worked for the taxpayer by the employee (not to exceed 2,000 hours per employee) divided by 2,000. (B) In the case of a salaried full-time employee, "full-time equivalent" means the total number of weeks worked for the taxpayer by the employee divided by 52. (3) All employees of the trades or businesses that are treated as related under either Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single taxpayer.  (4) The amount of business credits recaptured pursuant to subdivision (b) shall include the business credits reported on previous tax returns and interest computed using the adjusted annual rate established in Section 19521 from the due date of the return for each taxable year in which the business credit was claimed to the date of the payment of the additional tax resulting from the application of this section.   (d)   (5)   (e)     Section 19521, related to computation of interest, shall apply to any tax from disallowed business tax incentives.  For purposes of this section, all of the following definitions apply:  (A) "Business credit" means a credit added to this part on or after January 1, 2011, and allowed to taxpayers engaged in or carrying on any trade, business, profession, vocation or calling, or commercial activity in the state, including activities in the state that benefit an affiliated entity of the taxpayer.   (B)   (1)  "Full-time employee" means an employee who works an average of 35 hours in a week, calculated monthly.  (C)   (2) "Part-time employee" means an employee who works less than an average of 35 hours in a week, calculated monthly.  (D)   (3)  "Temporary employee" means an employee who works less than 120 days per year.  (f) This section shall not apply to a taxpayer with 50 or fewer employees and with net business income of less than five hundred thousand dollars ($500,000) for the taxable year. For purposes of this subdivision, business income means:   (1) Income from a trade or business, whether conducted by the taxpayer or by a passthrough entity owned directly or indirectly by the taxpayer. For purposes of this paragraph, the term "passthrough entity" means a partnership or an "S" corporation.   (2) Income from rental activity.   (3) Income attributable to a farming business.   (d)   (g)  Nothing in this section shall limit the authority of the Franchise Tax Board to audit the information provided by the taxpayer pursuant to subdivision (a).  (e)   (h)  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 standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to subdivision (a). SEC. 2. Section 23603 is added to the Revenue and Taxation Code, to read: 23603. (a) Notwithstanding any other provision of this part, for taxable years on or after January 1, 2011, a taxpayer doing business in the state that claims any business  credit against the "tax," as defined in Section 23036,   tax incentive  shall annually include on the timely filed original return the following information   return,  in the form and manner as required by forms and instructions prescribed by  the Franchise Tax Board:   (1)     The   the Franchise Tax Board, the  number of full-time, part-time, and temporary employees, as defined, employed by the taxpayer in the state for the current and preceding taxable years.  (2) The number of full-time jobs, part-time jobs, and temporary jobs created by the tax credit. (b)  (1)    Notwithstanding any other law, for any business  credit against the "tax," as defined in Section 23036, that is allowed by   tax incentive that is allowed by  an act that takes effect on or after  the effective date of the act adding this section   January 1, 2011  , both of the following shall apply if the taxpayer has a net decrease, as determined under subdivision (c), in the number of full-time equivalent employees  in the state  according to the information provided pursuant to subdivision (a):  (1)   (A)  The entire amount of the  credits   business tax incentives  for all taxable years shall be disallowed.  (2)   (B)  Any previously allowed  credits   business tax incentives  shall be recaptured  or the tax   liability shall be recomputed  and the taxpayer shall be liable for the entire amount of any  credits   tax from disallowed business tax incentives  on previous tax returns.  (2) For purposes of this subdivision, a "business tax incentive" means a credit, deduction, exclusion, exemption, or any other tax benefit provided by the state added to this part on or after January 1, 2011, enacted with the principal purpose of creating new jobs in the state, and allowed to taxpayers engaged in or carrying on any trade, business, profession, vocation or calling, or commercial activity in the state, including activities in the state that benefit an affiliated entity of the taxpayer, with respect to the income attributable to the taxpayer's trade, business, profession, vocation or calling, or commercial activity.  (c) (1) The net decrease in full-time equivalent employees  in the state  shall be determined, on and after January 1, 2014, on a full-time equivalent basis by subtracting from the amount determined in subparagraph (A) the amount determined in subparagraph (B). (A) The total number of full-time equivalent employees employed in the three preceding taxable years by the taxpayer and by any trade or business acquired by the taxpayer during the current taxable year, divided by three. (B) The total number of full-time equivalent employees employed  in the state  in the current taxable year by the taxpayer and by any trade or business acquired by the taxpayer during the current taxable year. (2) "Full-time equivalent" means either of the following: (A) In the case of a full-time employee paid hourly qualified wages, "full-time equivalent" means the total number of hours worked for the taxpayer by the employee (not to exceed 2,000 hours per employee) divided by 2,000. (B) In the case of a salaried full-time employee, "full-time equivalent" means the total number of weeks worked for the taxpayer by the employee divided by 52. (3) All employees of the trades or businesses that are treated as related under either Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single taxpayer.  (4) The amount of business credits recaptured pursuant to subdivision (b) shall include the business credits reported on previous tax returns and interest computed using the adjusted annual rate established in Section 19521 from the due date of the return for each taxable year in which the business credit was claimed to the date of the payment of the additional tax resulting from the application of this section.   (d)   (5)   (e)     19521, relating to computation of interest, shall apply to any tax from disallowed business tax incentives.  For purposes of this section, all of the following definitions apply:  (A) "Business credit" means a credit added to this part on or after January 1, 2011, and allowed to taxpayers engaged in or carrying on any trade, business, profession, vocation or calling, or commercial activity in the state, including activities in the state that benefit an affiliated entity of the taxpayer.   (B)   (1)  "Full-time employee" means an employee who works an average of 35 hours in a week, calculated monthly.  (C)   (2)  "Part-time employee" means an employee who works less than an average of 35 hours in a week, calculated monthly.  (D)   (3)  "Temporary employee" means an employee who works less than 120 days per year.  (f) This section shall not apply to a taxpayer with 50 or fewer employees and with income subject to tax under this part of less than five hundred thousand dollars ($500,000) for the taxable year.   (d)   (g) Nothing in this section shall limit the authority of the Franchise Tax Board to audit the information provided by the taxpayer pursuant to subdivision (a).  (e)   (h)  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 standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to subdivision (a). SEC. 3. This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect. ____ CORRECTIONS Text--Pages 3, 4 and 6. ____