BILL NUMBER: AB 2688CHAPTERED BILL TEXT CHAPTER 362 FILED WITH SECRETARY OF STATE SEPTEMBER 17, 2012 APPROVED BY GOVERNOR SEPTEMBER 17, 2012 PASSED THE SENATE AUGUST 22, 2012 PASSED THE ASSEMBLY AUGUST 27, 2012 AMENDED IN SENATE AUGUST 6, 2012 AMENDED IN SENATE JUNE 26, 2012 AMENDED IN SENATE JUNE 18, 2012 INTRODUCED BY Committee on Revenue and Taxation (Perea (Chair), Beall, Charles Calderon, Cedillo, Fuentes, and Gordon) MARCH 12, 2012 An act to amend Sections 1154, 6055, and 6203.5 of the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGEST AB 2688, Committee on Revenue and Taxation. Property taxes: sales and use taxes. Existing law requires the personal property of an air carrier to be taxed at its fair market value, and the California Constitution requires property subject to ad valorem property taxation to be assessed in the county in which it is situated. Existing law requires air taxis which are operated in scheduled air taxi operations to be assessed pursuant to a specified formula, and requires all other air taxis to be assessed in the same manner as personal property, as provided. Existing law defines "air taxi" for purposes of these provisions to mean an aircraft used by an air carrier which does not utilize aircraft having a maximum passenger capacity, as provided, and which does not hold a specified certificate or other economic authority, as provided. The bill would revise the definition of "air taxi," as provided. Existing sales and use tax laws authorize a deduction or refund of tax in the case of worthless and written-off accounts held by a retailer or lender under specified circumstances, which include establishing a proper election by filing an election with the State Board of Equalization before claiming the deduction or refund. This bill would instead require the proper election to be established by the retailer and lender preparing and retaining an election form that would not need to be prepared or retained prior to claiming any deduction or refund. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1154 of the Revenue and Taxation Code is amended to read: 1154. (a) As used in this section, "air taxi" means aircraft used by an air carrier which does not utilize aircraft having a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds in air transportation and which holds a certificate of public convenience and necessity or other economic authority issued by the United States Department of Transportation, or its successor. (b) Air taxis which are operated in scheduled air taxi operations are not subject to the provisions of Part 10 (commencing with Section 5301) of this division and shall be assessed in accordance with the allocation formula set forth in Section 1152. (c) All other air taxis shall be assessed in the county where the aircraft is habitually situated in the same manner and at the same ratio as other personal property in the county subject to general property taxation. Such aircraft shall be taxed at the same rate and in the same manner as all other property on the unsecured roll. SEC. 2. Section 6055 of the Revenue and Taxation Code is amended to read: 6055. (a) A retailer is relieved from liability for sales tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the tax may, under rules and regulations prescribed by the board, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the tax shall be paid with the return. For purposes of this subdivision, the term "retailer" shall include any entity affiliated with the retailer under Section 1504 of Title 26 of the United States Code. (b) (1) In the case of accounts held by a lender, a retailer or lender that makes a proper election under paragraph (4) shall be entitled to a deduction or refund of the tax that the retailer has previously reported and paid if all of the following conditions are met: (A) A deduction was not previously claimed or allowed on any portion of the accounts. (B) The accounts have been found worthless and written off by the lender in accordance with the requirements of subdivision (a). (C) The contract between the retailer and the lender contains an irrevocable relinquishment of all rights to the account from the retailer to the lender. (D) The retailer remitted the tax on or after January 1, 2000. (E) The party electing to claim the deduction or refund under paragraph (4) files a claim in a manner prescribed by the board. (2) If the retailer or the lender thereafter collects in whole or in part any accounts, one of the following shall apply: (A) If the retailer is entitled to the deduction or refund under the election specified in paragraph (4), the retailer shall include the amount collected in its first return filed after the collection and pay tax on that amount with the return. (B) If the lender is entitled to the deduction or refund under the election specified in paragraph (4), the lender shall pay the tax to the board in accordance with Section 6451. (3) For purposes of this subdivision, the term "lender" means any of the following: (A) Any person that holds a retail account which that person purchased directly from a retailer who reported the tax. (B) Any person that holds a retail account pursuant to that person' s contract directly with the retailer that reported the tax. (C) Any person that is either an affiliated entity, under Section 1504 of Title 26 of the United States Code, of a person described in subparagraph (A) or (B), or an assignee of a person described in subparagraph (A) or (B). (4) For purposes of this section, a "proper election" shall be established when the retailer that reported the tax and the lender prepare and retain an election form, signed by both parties, designating which party is entitled to claim the deduction or refund. This election may not be amended or revoked unless a new election, signed by both parties, is prepared and retained by the retailer and the lender. SEC. 3. Section 6203.5 of the Revenue and Taxation Code is amended to read: 6203.5. (a) A retailer is relieved from liability to collect use tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the amount of the tax may, under rules and regulations prescribed by the board, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the amount of the tax shall be paid with the return. For purposes of this subdivision, the term "retailer" shall include any entity affiliated with the retailer under Section 1504 of Title 26 of the United States Code. (b) (1) In the case of accounts held by a lender, a retailer or lender that makes a proper election under paragraph (4) shall be entitled to a deduction or refund of the tax that the retailer has previously reported and paid if all of the following conditions are met: (A) A deduction was not previously claimed or allowed on any portion of the accounts. (B) The accounts have been found worthless and written off by the lender in accordance with the requirements of subdivision (a). (C) The contract between the retailer and the lender contains an irrevocable relinquishment of all rights to the account from the retailer to the lender. (D) The retailer remitted the tax on or after January 1, 2000. (E) The party electing to claim the deduction or refund under paragraph (4) files a claim in a manner prescribed by the board. (2) If the retailer or the lender thereafter collects in whole or in part any accounts, one of the following shall apply: (A) If the retailer is entitled to the deduction or refund under the election specified in paragraph (4), the retailer shall include the amount collected in its first return filed after the collection and pay tax on that amount with the return. (B) If the lender is entitled to the deduction or refund under the election specified in paragraph (4), the lender shall pay the tax to the board in accordance with Section 6451. (3) For purposes of this subdivision, the term "lender" means any of the following: (A) Any person that holds a retail account which that person purchased directly from a retailer who reported the tax. (B) Any person that holds a retail account pursuant to that person' s contract directly with the retailer that reported the tax. (C) Any person that is either an affiliated entity, under Section 1504 of Title 26 of the United States Code, of a person described in subparagraph (A) or (B), or an assignee of a person described in subparagraph (A) or (B). (4) For purposes of this section, a "proper election" shall be established when the retailer that reported the tax and the lender prepare and retain an election form, signed by both parties, designating which party is entitled to claim the deduction or refund. This election may not be amended or revoked unless a new election, signed by both parties, is prepared and retained by the retailer and the lender.