Amended IN Assembly March 19, 2018 CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION Assembly Bill No. 2529Introduced by Assembly Member ChuFebruary 14, 2018 An act to amend Section 53 of Sections 17035, 17222, 18662, 19002, 19355, 19361, 19709, and 23036 of, and to add Section 18662.5 to, the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGESTAB 2529, as amended, Chu. Property taxes. Income taxation: like kind exchanges: withholding.Existing law authorizes the Franchise Tax Board to require any person to withhold for income tax purposes an amount of a taxpayers income, as specified, that reasonably represents the amount of tax due, as determined by the board. Existing law requires the transferee of a California real property interest, in specified circumstances, to withhold for income tax purposes 31/3% of the sales price of the property when the property is acquired from an individual, or a partnership or corporation without a permanent place of business, as specified. Existing law allows a credit against the tax to the recipient of the income for the taxable year in which that amount was withheld under these provisions. Existing law exempts from the withholding requirements real property that is exchanged, or will be exchanged, for property of like kind, as defined, and that qualifies for nonrecognition treatment under California income or franchise tax purposes.This bill would require income tax withholding, as provided, for like kind transfers for out-of-state properties that occur on or after January 1, 2019.Under existing law, failure to withhold as required by the above-described provisions is a crime. This bill would also make a violation of its provisions a crime. By expanding the scope of a crime, the bill imposes a state-mandated local program.The bill also would state the intent of the Legislature in this regard and would make conforming changes.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.The California Constitution exempts grapevines from property taxation until 3 years after the season in which they were planted in vineyard form. Existing statutory provisions authorize a county board of supervisors to provide by ordinance that, thereafter, the property tax base year value of replacement grapevines that are planted to replace certain grapevines that were removed solely as a result of a phylloxera infestation or Pierces Disease, be the property tax base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines.This bill would make a nonsubstantive change to that provision.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NOYES Local Program: NOYES Bill TextThe people of the State of California do enact as follows:SECTION 1. It is the intent of the Legislature to require tax withholding for properties in which the gain or loss from the property exchange was not recognized for income tax purposes because of Section 1031 of the Internal Revenue Code in order to address the avoidance of income taxes otherwise due and payable to the state when the gain or loss from the property is recognized in a property outside of California.SEC. 2. Section 17035 of the Revenue and Taxation Code is amended to read:17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.SEC. 3. Section 17222 of the Revenue and Taxation Code is amended to read:17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.SEC. 4. Section 18662 of the Revenue and Taxation Code is amended to read:18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.(e) (1) This subdivision applies to any disposition of a California real property interest by:(A) Any person, other than either of the following:(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:(i) It is not organized and existing under the laws of California.(ii) It does not qualify with the office of the Secretary of State to transact business in California.(iii) It does not maintain and staff a permanent office in California.(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.(v) The transferor is a corporation with a permanent place of business in California.(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).(8) For purposes of this subdivision, sales price means the sum of all of the following:(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.(B) The fair market value of other property transferred, or to be transferred.(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.SEC. 5. Section 18662.5 is added to the Revenue and Taxation Code, to read:18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.SEC. 6. Section 19002 of the Revenue and Taxation Code is amended to read:19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.(c)(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).(d)(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.(e)(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.SEC. 7. Section 19355 of the Revenue and Taxation Code is amended to read:19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.SEC. 8. Section 19361 of the Revenue and Taxation Code is amended to read:19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.SEC. 9. Section 19709 of the Revenue and Taxation Code is amended to read:19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.SEC. 10. Section 23036 of the Revenue and Taxation Code is amended to read:23036. (a) (1) The term tax includes any of the following:(A) The tax imposed under Chapter 2 (commencing with Section 23101).(B) The tax imposed under Chapter 3 (commencing with Section 23501).(C) The tax on unrelated business taxable income, imposed under Section 23731.(D) The tax on S corporations imposed under Section 23802.(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).(3) The tax on built-in gains of S corporations, imposed under Section 23809.(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:(1) Credits that do not contain carryover provisions.(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.(3) The minimum tax credit allowed by Section 23453.(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.(d) Notwithstanding any other provision of this part, each of the following applies:(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:(A) The credit allowed by former Section 23601 (relating to solar energy).(B) The credit allowed by former Section 23601.4 (relating to solar energy).(C) The credit allowed by former Section 23601.5 (relating to solar energy).(D) The credit allowed by Section 23609 (relating to research expenditures).(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).(F) The credit allowed by Section 23610.5 (relating to low-income housing).(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).(L) The credit allowed by former Section 23623 (relating to program area hiring credit).(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).(Q) The credit allowed by former Section 23649 (relating to qualified property).(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.SEC. 11. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.SECTION 1.Section 53 of the Revenue and Taxation Code is amended to read:53.(a)Except as provided in subdivision (b), the initial base year value for fruit and nut trees and grapevines subject to exemption pursuant to subdivision (i) of Section 3 of Article XIII of the California Constitution shall be the full cash value of those properties as of the lien date of their first taxable year.(b)A county board of supervisors may, after consulting with affected local agencies within the countys jurisdiction, provide by ordinance that the initial base year value for replacement grapevines that are planted to replace grapevines less than 15 years of age that were removed solely as a result of phylloxera infestation or Pierces Disease, and are planted on the same parcel as the replaced grapevines, as certified in writing by the county agricultural commissioner, shall be the base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines. The assignment of base year replacement value shall be limited to that portion of the replacement grapevines that are substantially equivalent to the grapevines that were replaced, if the replacement grapevines are planted at a greater density.
Amended IN Assembly March 19, 2018 CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION Assembly Bill No. 2529Introduced by Assembly Member ChuFebruary 14, 2018 An act to amend Section 53 of Sections 17035, 17222, 18662, 19002, 19355, 19361, 19709, and 23036 of, and to add Section 18662.5 to, the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGESTAB 2529, as amended, Chu. Property taxes. Income taxation: like kind exchanges: withholding.Existing law authorizes the Franchise Tax Board to require any person to withhold for income tax purposes an amount of a taxpayers income, as specified, that reasonably represents the amount of tax due, as determined by the board. Existing law requires the transferee of a California real property interest, in specified circumstances, to withhold for income tax purposes 31/3% of the sales price of the property when the property is acquired from an individual, or a partnership or corporation without a permanent place of business, as specified. Existing law allows a credit against the tax to the recipient of the income for the taxable year in which that amount was withheld under these provisions. Existing law exempts from the withholding requirements real property that is exchanged, or will be exchanged, for property of like kind, as defined, and that qualifies for nonrecognition treatment under California income or franchise tax purposes.This bill would require income tax withholding, as provided, for like kind transfers for out-of-state properties that occur on or after January 1, 2019.Under existing law, failure to withhold as required by the above-described provisions is a crime. This bill would also make a violation of its provisions a crime. By expanding the scope of a crime, the bill imposes a state-mandated local program.The bill also would state the intent of the Legislature in this regard and would make conforming changes.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.The California Constitution exempts grapevines from property taxation until 3 years after the season in which they were planted in vineyard form. Existing statutory provisions authorize a county board of supervisors to provide by ordinance that, thereafter, the property tax base year value of replacement grapevines that are planted to replace certain grapevines that were removed solely as a result of a phylloxera infestation or Pierces Disease, be the property tax base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines.This bill would make a nonsubstantive change to that provision.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NOYES Local Program: NOYES
Amended IN Assembly March 19, 2018
Amended IN Assembly March 19, 2018
CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION
Assembly Bill No. 2529
Introduced by Assembly Member ChuFebruary 14, 2018
Introduced by Assembly Member Chu
February 14, 2018
An act to amend Section 53 of Sections 17035, 17222, 18662, 19002, 19355, 19361, 19709, and 23036 of, and to add Section 18662.5 to, the Revenue and Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
## LEGISLATIVE COUNSEL'S DIGEST
AB 2529, as amended, Chu. Property taxes. Income taxation: like kind exchanges: withholding.
Existing law authorizes the Franchise Tax Board to require any person to withhold for income tax purposes an amount of a taxpayers income, as specified, that reasonably represents the amount of tax due, as determined by the board. Existing law requires the transferee of a California real property interest, in specified circumstances, to withhold for income tax purposes 31/3% of the sales price of the property when the property is acquired from an individual, or a partnership or corporation without a permanent place of business, as specified. Existing law allows a credit against the tax to the recipient of the income for the taxable year in which that amount was withheld under these provisions. Existing law exempts from the withholding requirements real property that is exchanged, or will be exchanged, for property of like kind, as defined, and that qualifies for nonrecognition treatment under California income or franchise tax purposes.This bill would require income tax withholding, as provided, for like kind transfers for out-of-state properties that occur on or after January 1, 2019.Under existing law, failure to withhold as required by the above-described provisions is a crime. This bill would also make a violation of its provisions a crime. By expanding the scope of a crime, the bill imposes a state-mandated local program.The bill also would state the intent of the Legislature in this regard and would make conforming changes.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.The California Constitution exempts grapevines from property taxation until 3 years after the season in which they were planted in vineyard form. Existing statutory provisions authorize a county board of supervisors to provide by ordinance that, thereafter, the property tax base year value of replacement grapevines that are planted to replace certain grapevines that were removed solely as a result of a phylloxera infestation or Pierces Disease, be the property tax base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines.This bill would make a nonsubstantive change to that provision.
Existing law authorizes the Franchise Tax Board to require any person to withhold for income tax purposes an amount of a taxpayers income, as specified, that reasonably represents the amount of tax due, as determined by the board. Existing law requires the transferee of a California real property interest, in specified circumstances, to withhold for income tax purposes 31/3% of the sales price of the property when the property is acquired from an individual, or a partnership or corporation without a permanent place of business, as specified. Existing law allows a credit against the tax to the recipient of the income for the taxable year in which that amount was withheld under these provisions. Existing law exempts from the withholding requirements real property that is exchanged, or will be exchanged, for property of like kind, as defined, and that qualifies for nonrecognition treatment under California income or franchise tax purposes.
This bill would require income tax withholding, as provided, for like kind transfers for out-of-state properties that occur on or after January 1, 2019.
Under existing law, failure to withhold as required by the above-described provisions is a crime. This bill would also make a violation of its provisions a crime. By expanding the scope of a crime, the bill imposes a state-mandated local program.
The bill also would state the intent of the Legislature in this regard and would make conforming changes.
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.
The California Constitution exempts grapevines from property taxation until 3 years after the season in which they were planted in vineyard form. Existing statutory provisions authorize a county board of supervisors to provide by ordinance that, thereafter, the property tax base year value of replacement grapevines that are planted to replace certain grapevines that were removed solely as a result of a phylloxera infestation or Pierces Disease, be the property tax base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines.
This bill would make a nonsubstantive change to that provision.
## Digest Key
## Bill Text
The people of the State of California do enact as follows:SECTION 1. It is the intent of the Legislature to require tax withholding for properties in which the gain or loss from the property exchange was not recognized for income tax purposes because of Section 1031 of the Internal Revenue Code in order to address the avoidance of income taxes otherwise due and payable to the state when the gain or loss from the property is recognized in a property outside of California.SEC. 2. Section 17035 of the Revenue and Taxation Code is amended to read:17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.SEC. 3. Section 17222 of the Revenue and Taxation Code is amended to read:17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.SEC. 4. Section 18662 of the Revenue and Taxation Code is amended to read:18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.(e) (1) This subdivision applies to any disposition of a California real property interest by:(A) Any person, other than either of the following:(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:(i) It is not organized and existing under the laws of California.(ii) It does not qualify with the office of the Secretary of State to transact business in California.(iii) It does not maintain and staff a permanent office in California.(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.(v) The transferor is a corporation with a permanent place of business in California.(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).(8) For purposes of this subdivision, sales price means the sum of all of the following:(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.(B) The fair market value of other property transferred, or to be transferred.(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.SEC. 5. Section 18662.5 is added to the Revenue and Taxation Code, to read:18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.SEC. 6. Section 19002 of the Revenue and Taxation Code is amended to read:19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.(c)(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).(d)(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.(e)(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.SEC. 7. Section 19355 of the Revenue and Taxation Code is amended to read:19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.SEC. 8. Section 19361 of the Revenue and Taxation Code is amended to read:19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.SEC. 9. Section 19709 of the Revenue and Taxation Code is amended to read:19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.SEC. 10. Section 23036 of the Revenue and Taxation Code is amended to read:23036. (a) (1) The term tax includes any of the following:(A) The tax imposed under Chapter 2 (commencing with Section 23101).(B) The tax imposed under Chapter 3 (commencing with Section 23501).(C) The tax on unrelated business taxable income, imposed under Section 23731.(D) The tax on S corporations imposed under Section 23802.(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).(3) The tax on built-in gains of S corporations, imposed under Section 23809.(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:(1) Credits that do not contain carryover provisions.(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.(3) The minimum tax credit allowed by Section 23453.(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.(d) Notwithstanding any other provision of this part, each of the following applies:(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:(A) The credit allowed by former Section 23601 (relating to solar energy).(B) The credit allowed by former Section 23601.4 (relating to solar energy).(C) The credit allowed by former Section 23601.5 (relating to solar energy).(D) The credit allowed by Section 23609 (relating to research expenditures).(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).(F) The credit allowed by Section 23610.5 (relating to low-income housing).(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).(L) The credit allowed by former Section 23623 (relating to program area hiring credit).(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).(Q) The credit allowed by former Section 23649 (relating to qualified property).(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.SEC. 11. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.SECTION 1.Section 53 of the Revenue and Taxation Code is amended to read:53.(a)Except as provided in subdivision (b), the initial base year value for fruit and nut trees and grapevines subject to exemption pursuant to subdivision (i) of Section 3 of Article XIII of the California Constitution shall be the full cash value of those properties as of the lien date of their first taxable year.(b)A county board of supervisors may, after consulting with affected local agencies within the countys jurisdiction, provide by ordinance that the initial base year value for replacement grapevines that are planted to replace grapevines less than 15 years of age that were removed solely as a result of phylloxera infestation or Pierces Disease, and are planted on the same parcel as the replaced grapevines, as certified in writing by the county agricultural commissioner, shall be the base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines. The assignment of base year replacement value shall be limited to that portion of the replacement grapevines that are substantially equivalent to the grapevines that were replaced, if the replacement grapevines are planted at a greater density.
The people of the State of California do enact as follows:
## The people of the State of California do enact as follows:
SECTION 1. It is the intent of the Legislature to require tax withholding for properties in which the gain or loss from the property exchange was not recognized for income tax purposes because of Section 1031 of the Internal Revenue Code in order to address the avoidance of income taxes otherwise due and payable to the state when the gain or loss from the property is recognized in a property outside of California.
SECTION 1. It is the intent of the Legislature to require tax withholding for properties in which the gain or loss from the property exchange was not recognized for income tax purposes because of Section 1031 of the Internal Revenue Code in order to address the avoidance of income taxes otherwise due and payable to the state when the gain or loss from the property is recognized in a property outside of California.
SECTION 1. It is the intent of the Legislature to require tax withholding for properties in which the gain or loss from the property exchange was not recognized for income tax purposes because of Section 1031 of the Internal Revenue Code in order to address the avoidance of income taxes otherwise due and payable to the state when the gain or loss from the property is recognized in a property outside of California.
### SECTION 1.
SEC. 2. Section 17035 of the Revenue and Taxation Code is amended to read:17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.
SEC. 2. Section 17035 of the Revenue and Taxation Code is amended to read:
### SEC. 2.
17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.
17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.
17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.
17035. The term withholding agent means any person required to deduct and withhold any tax under Section 18662. Sections 18662 and 18662.5.
SEC. 3. Section 17222 of the Revenue and Taxation Code is amended to read:17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.
SEC. 3. Section 17222 of the Revenue and Taxation Code is amended to read:
### SEC. 3.
17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.
17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.
17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.
17222. No deduction shall be allowed for the tax deducted and withheld under Section 18662 Sections 18662 and 18662.5 of this code and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.
SEC. 4. Section 18662 of the Revenue and Taxation Code is amended to read:18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.(e) (1) This subdivision applies to any disposition of a California real property interest by:(A) Any person, other than either of the following:(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:(i) It is not organized and existing under the laws of California.(ii) It does not qualify with the office of the Secretary of State to transact business in California.(iii) It does not maintain and staff a permanent office in California.(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.(v) The transferor is a corporation with a permanent place of business in California.(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).(8) For purposes of this subdivision, sales price means the sum of all of the following:(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.(B) The fair market value of other property transferred, or to be transferred.(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.
SEC. 4. Section 18662 of the Revenue and Taxation Code is amended to read:
### SEC. 4.
18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.(e) (1) This subdivision applies to any disposition of a California real property interest by:(A) Any person, other than either of the following:(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:(i) It is not organized and existing under the laws of California.(ii) It does not qualify with the office of the Secretary of State to transact business in California.(iii) It does not maintain and staff a permanent office in California.(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.(v) The transferor is a corporation with a permanent place of business in California.(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).(8) For purposes of this subdivision, sales price means the sum of all of the following:(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.(B) The fair market value of other property transferred, or to be transferred.(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.
18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.(e) (1) This subdivision applies to any disposition of a California real property interest by:(A) Any person, other than either of the following:(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:(i) It is not organized and existing under the laws of California.(ii) It does not qualify with the office of the Secretary of State to transact business in California.(iii) It does not maintain and staff a permanent office in California.(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.(v) The transferor is a corporation with a permanent place of business in California.(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).(8) For purposes of this subdivision, sales price means the sum of all of the following:(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.(B) The fair market value of other property transferred, or to be transferred.(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.
18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.(e) (1) This subdivision applies to any disposition of a California real property interest by:(A) Any person, other than either of the following:(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:(i) It is not organized and existing under the laws of California.(ii) It does not qualify with the office of the Secretary of State to transact business in California.(iii) It does not maintain and staff a permanent office in California.(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.(v) The transferor is a corporation with a permanent place of business in California.(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).(8) For purposes of this subdivision, sales price means the sum of all of the following:(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.(B) The fair market value of other property transferred, or to be transferred.(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.
18662. (a) The Franchise Tax Board may, by regulation, require any person, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and any officer or department of the state, or any political subdivision or agency of the state, or any city organized under a freeholders charter, or any political body not a subdivision or agency of the state, having the control, receipt, custody, disposal, or payment of items of income specified in subdivision (b), to withhold an amount, determined by the Franchise Tax Board to reasonably represent the amount of tax due when the items of income are included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at the time as it may designate.
(b) The items of income referred to in subdivision (a) are interest, dividends, rents, prizes and winnings, premiums, annuities, emoluments, compensation for services, including bonuses, partnership income or gains, and other fixed or determinable annual or periodical gains, profits, and income.
(c) The Franchise Tax Board may authorize the tax under subdivision (a) to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.
(d) Any person that fails to withhold from any payments any amounts required to be withheld by this section or fails to remit the taxes withheld is liable for the amount specified in Section 18668.
(e) (1) This subdivision applies to any disposition of a California real property interest by:
(A) Any person, other than either of the following:
(i) Except as otherwise provided in this subdivision, a corporation, including an entity classified for tax purposes as a corporation under Part 11 (commencing with Section 23001).
(ii) Except as otherwise provided in this subdivision, a partnership, as determined in accordance with Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, including an entity classified as a partnership for tax purposes under Part 10 (commencing with Section 17001).
(B) A corporation or partnership, if that corporation or partnership immediately after the transfer of the title to the California real property has no permanent place of business in California. For purposes of this subdivision, a corporation or partnership has no permanent place of business in California if all of the following apply:
(i) It is not organized and existing under the laws of California.
(ii) It does not qualify with the office of the Secretary of State to transact business in California.
(iii) It does not maintain and staff a permanent office in California.
(2) (A) Except as provided in subparagraph (B), in the case of any disposition of a California real property interest by a transferor described in paragraph (1), the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 31/3 percent of the sales price of the California real property conveyed.
(B) If the transferor makes an election under this subparagraph, the transferee, including any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to an amount certified by the transferor in writing under penalty of perjury. The amount certified shall not be less than the gain required to be recognized under Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001) on the disposition of the California real property multiplied by the rate specified in either Section 23151 or Section 23186, as applicable, for transferors that are corporations, or the highest rate specified in Section 17041 for transferors other than corporations. For purposes of applying the previous sentence, the following shall apply:
(i) The highest rate specified in Section 17041 is determined without regard to any other tax rate specified under Part 10 (commencing with Section 17001) irrespective of whether the applicable statute provides that tax shall be treated as if imposed under Section 17041.
(ii) For corporations that are S corporations subject to the modified tax rate specified in Section 23802, the rate shall be the sum of the rate specified in subdivision (b) of Section 23802 and the highest rate specified in Section 17041, as described in clause (i).
(C) (i) The written certification required by subparagraph (B) shall be in a form, as prescribed by the Franchise Tax Board. The form shall provide as follows:
Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.
(ii) The Franchise Tax Board shall make this form available electronically on its Web site in a format that allows a transferor to complete and print the form. The Franchise Tax Board shall also provide electronic means to enable the transferor to estimate the amount of gain required to be recognized by the transferor in the transaction. Any form or worksheet, electronic or otherwise, developed for this purpose shall provide as follows:
Title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose.
(3) Notwithstanding any other provision of this subdivision, all of the following shall apply:
(A) No transferee is required to withhold any amount under this subdivision unless the sales price of the California real property conveyed exceeds one hundred thousand dollars ($100,000).
(B) No transferee, other than an intermediary or an accommodator in a deferred exchange, is required to withhold any amount under this subdivision unless written notification of the withholding requirements of this subdivision has been provided by the real estate escrow person.
(C) (i) No transferee, trustee under a deed of trust, or mortgagee under a mortgage with a power of sale is required to withhold under this subdivision when the transferee has acquired California real property at a sale pursuant to a power of sale under a mortgage or deed of trust or a sale pursuant to a decree of foreclosure or has acquired the property by a deed in lieu of foreclosure.
(ii) No transferee is required to withhold under this subdivision when the transferor is a bank acting as trustee other than a trustee of a deed of trust.
(D) No transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold any amount under this subdivision if the transferee, in good faith and based on all the information of which he or she has knowledge, relies on a written certificate executed by the transferor, certifying, under penalty of perjury, one of the following:
(i) (I) The California real property being conveyed is the sellers or decedents principal residence, within the meaning of Section 121 of the Internal Revenue Code.
(II) The last use of the property being conveyed was use by the transferor as the transferors principal residence within the meaning of Section 121 of the Internal Revenue Code.
(ii) (I) The California real property being conveyed is being exchanged, or will be exchanged, for property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, but only to the extent of the amount of the gain not required to be recognized for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code. On and after January 1, 2019, this subclause shall only apply to property located within the state.
(II) Subclause (I) may not apply if an exchange does not qualify for nonrecognition treatment for California income or franchise tax purposes under Section 1031 of the Internal Revenue Code, in whole or in part, due to the failure of the transaction to comply with the provisions of Section 1031(a)(3) of the Internal Revenue Code, relating to the requirement that property be identified and that the exchange be completed not more than 180 days after the transfer of the exchanged property.
(III) In any case where clause (ii) applies, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to notify the Franchise Tax Board in writing within 10 days of the expiration of the statutory periods specified in Section 1031(a)(3) of the Internal Revenue Code and thereafter remit the applicable withholding amounts determined under this subdivision in accordance with paragraph (4).
(iii) The California real property has been compulsorily or involuntarily converted, within the meaning of Section 1033 of the Internal Revenue Code, and the transferor intends to acquire property similar or related in service or use so as to be eligible for nonrecognition of gain for California income tax purposes under Section 1033 of the Internal Revenue Code.
(iv) The transaction will result in either a net loss or a net gain not required to be recognized for California income or franchise tax purposes.
(v) The transferor is a corporation with a permanent place of business in California.
(E) (i) In the case of any transaction otherwise subject to this subdivision that qualifies as an installment sale, within the meaning of Section 453(b) of the Internal Revenue Code, for California income tax purposes, the provisions of this subdivision shall be separately applied to each principal payment to be made under the terms of the installment sale agreement between the parties.
(ii) For purposes of clause (i), subparagraph (A) of paragraph (3) does not apply to each individual payment to be received under the terms of the installment sale agreement.
(4) (A) Amounts withheld and payments made in accordance with this subdivision shall be reported and remitted to the Franchise Tax Board in the form and manner and at the time specified by the Franchise Tax Board. Notwithstanding the foregoing, funds withheld on individual transactions by real estate escrow persons may, at the option of the real estate escrow person, be remitted by the 20th day of the month following the close of escrow for the individual transaction, or may be remitted on a monthly basis in combination with other transactions closed during that month.
(B) The transferor shall submit a copy of the written certificate and supporting documentation for the reduced withholding specified in subparagraph (B) of paragraph (2) or subparagraph (D) of paragraph (3), executed by the transferor, to the Franchise Tax Board upon request.
(5) For purposes of this subdivision, California real property interest means an interest in real property located in California and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.
(6) For purposes of this subdivision, real estate escrow person means any of the following persons involved in the real estate transaction:
(A) The person, including any attorney, escrow company, or title company, responsible for closing the transaction.
(B) If no person described in subparagraph (A) is responsible for closing the transaction, then any other person who receives and disburses the consideration or value for the interest or property conveyed.
(7) (A) Unless the real estate escrow person provides assistance, it shall be unlawful for any real estate escrow person to charge any customer for complying with the requirements of this subdivision.
(B) For purposes of this paragraph, assistance includes, but is not limited to, helping the parties clarify with the Franchise Tax Board the issue of whether withholding is required under this subdivision or, upon request of the parties, withholding an amount under this subdivision and remitting that amount to the Franchise Tax Board.
(C) For purposes of this paragraph, assistance does not include providing the written notification of the withholding requirements of this subdivision.
(D) In a case where the real estate escrow person provides assistance in complying with the withholding requirements of this subdivision, it shall be unlawful for the real estate escrow person to charge any customer a fee that exceeds forty-five dollars ($45).
(8) For purposes of this subdivision, sales price means the sum of all of the following:
(A) The cash paid, or to be paid, but excluding for this purpose any stated or unstated interest or original issue discount, as determined under Sections 1271 through 1275, inclusive, of the Internal Revenue Code.
(B) The fair market value of other property transferred, or to be transferred.
(C) The outstanding amount of any liability assumed by the transferee or to which the California real property interest is subject immediately before and after the transfer.
(9) The Franchise Tax Board may prescribe, by forms, instructions, published notices, or regulations, any requirements necessary for the efficient administration of this subdivision relating to the treatment of de minimis amounts otherwise required under this section.
(f) Withholding is not required under this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors meeting.
(g) In the case of any payment described in subdivision (f), the person making the payment shall do each of the following:
(1) File a return with the Franchise Tax Board at the time and in the form and manner specified by the Franchise Tax Board.
(2) Provide the payee with a statement at the time and in the form and manner specified by the Franchise Tax Board.
(h) (1) The amendments to this section made by Chapter 488 of the Statutes of 2002 apply to dispositions of California real property interests that occur on or after January 1, 2003.
(2) In the case of any payments received on or after January 1, 2003, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2003, the amendments to this section made by Chapter 488 of the Statutes of 2002 do not apply to those payments.
(i) (1) The amendments made to this section by the act adding this subdivision shall apply to dispositions of California real property interests that occur on or after January 1, 2009.
(2) In the case of any payments received on or after January 1, 2009, pursuant to an installment sale agreement relating to a disposition occurring before January 1, 2009, the amendments made to this section by the act adding this subdivision do not apply to those payments.
SEC. 5. Section 18662.5 is added to the Revenue and Taxation Code, to read:18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.
SEC. 5. Section 18662.5 is added to the Revenue and Taxation Code, to read:
### SEC. 5.
18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.
18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.
18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.
18662.5. On and after January 1, 2019, in the case of any disposition of a California real property interest by a transferor where the gain or loss from the exchange of the property is not recognized for California income or franchise tax purposes under Section 18031 of this code, because of Section 1031 of the Internal Revenue Code, for a taxable year and the property acquired in that exchange that is located outside of this state, the transferee shall withhold, an amount equal to 31/3 percent of the sales price of the California real property conveyed.
SEC. 6. Section 19002 of the Revenue and Taxation Code is amended to read:19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.(c)(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).(d)(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.(e)(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.
SEC. 6. Section 19002 of the Revenue and Taxation Code is amended to read:
### SEC. 6.
19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.(c)(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).(d)(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.(e)(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.
19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.(c)(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).(d)(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.(e)(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.
19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.(c)(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).(d)(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.(e)(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.
19002. (a) The amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code during any calendar year shall be allowed to the recipient of the income as a credit against the tax for the taxable year with respect to which the amount was withheld.
(b) In the case of a partnership, limited liability company classified as a partnership for California income tax purposes, or S corporation filing a group return as agent for electing nonresident partners or shareholders in accordance with Section 18535, for purposes of this part, the amount withheld under Article 5 (commencing with Section 18661) of Chapter 2 during any taxable year shall be allowed as a credit attributable to the partnership, limited liability company, or S corporation on the group return for the taxable year with respect to which that amount was withheld.
(c) Notwithstanding subdivision (a) or (b), the amount withheld pursuant to Section 18662.5 for the exchange of property of like kind, within the meaning of Section 1031 of the Internal Revenue Code, located outside of this state shall be allowed to the recipient of the income as a credit against the tax for the taxable year in which the gain or loss from that exchange is recognized.
(c)
(d) (1) For purposes of Section 19306, any tax actually deducted and withheld during any calendar year under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code shall, in respect of the recipient of the income, be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return), with respect to which the tax is allowable as a credit under subdivision (a) or (b).
(2) For purposes of Sections 19306 and 19340, any amount paid as estimated tax under Section 19025 or 19136 of this code or Section 13043 of the Unemployment Insurance Code for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under Article 1 (commencing with Section 18501) or Article 2 (commencing with Section 18601) of Chapter 2 (without regard to any extension of time for filing the return).
(d)
(e) Notwithstanding subdivision (b) or (c), (d), for purposes of Section 19306 with respect to any tax deducted and withheld under Article 5 (commencing with Section 18661) of Chapter 2 or Section 13020 of the Unemployment Insurance Code both of the following shall apply:
(1) If a return is filed before the due date for that return, the return shall be considered filed on the due date.
(2) If a tax with respect to an amount paid is paid before the due date for that return, the tax shall be considered paid on the due date.
(e)
(f) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.
SEC. 7. Section 19355 of the Revenue and Taxation Code is amended to read:19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.
SEC. 7. Section 19355 of the Revenue and Taxation Code is amended to read:
### SEC. 7.
19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.
19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.
19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.
19355. Any action of the Franchise Tax Board in refunding the excess of tax withheld under Section 18662 18662, 18662.5, or 18666 or estimated tax paid pursuant to Section 19136 or any action of the Employment Development Department in refunding to the employer the excess tax withheld under Section 13020 of the Unemployment Insurance Code shall not constitute a determination of the correctness of the return of the taxpayer for purposes of this part.
SEC. 8. Section 19361 of the Revenue and Taxation Code is amended to read:19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.
SEC. 8. Section 19361 of the Revenue and Taxation Code is amended to read:
### SEC. 8.
19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.
19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.
19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.
19361. In the case of an overpayment of tax imposed by Section 18662 18662, 18662.5, or 18666, refund or credit shall be made to the employer or to the withholding agent, as the case may be, only to the extent that the amount of the overpayment was not deducted and withheld by the employer or withholding agent. No interest shall be allowed on the overpayment.
SEC. 9. Section 19709 of the Revenue and Taxation Code is amended to read:19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.
SEC. 9. Section 19709 of the Revenue and Taxation Code is amended to read:
### SEC. 9.
19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.
19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.
19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.
19709. Any person who, with or without intent to evade, fails to withhold, pursuant to Section 18662 18662, 18662.5, or 18666, or pay over any tax withheld, is guilty of a misdemeanor, and, upon conviction be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for not more than one year, or both, at the discretion of the court.
SEC. 10. Section 23036 of the Revenue and Taxation Code is amended to read:23036. (a) (1) The term tax includes any of the following:(A) The tax imposed under Chapter 2 (commencing with Section 23101).(B) The tax imposed under Chapter 3 (commencing with Section 23501).(C) The tax on unrelated business taxable income, imposed under Section 23731.(D) The tax on S corporations imposed under Section 23802.(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).(3) The tax on built-in gains of S corporations, imposed under Section 23809.(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:(1) Credits that do not contain carryover provisions.(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.(3) The minimum tax credit allowed by Section 23453.(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.(d) Notwithstanding any other provision of this part, each of the following applies:(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:(A) The credit allowed by former Section 23601 (relating to solar energy).(B) The credit allowed by former Section 23601.4 (relating to solar energy).(C) The credit allowed by former Section 23601.5 (relating to solar energy).(D) The credit allowed by Section 23609 (relating to research expenditures).(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).(F) The credit allowed by Section 23610.5 (relating to low-income housing).(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).(L) The credit allowed by former Section 23623 (relating to program area hiring credit).(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).(Q) The credit allowed by former Section 23649 (relating to qualified property).(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
SEC. 10. Section 23036 of the Revenue and Taxation Code is amended to read:
### SEC. 10.
23036. (a) (1) The term tax includes any of the following:(A) The tax imposed under Chapter 2 (commencing with Section 23101).(B) The tax imposed under Chapter 3 (commencing with Section 23501).(C) The tax on unrelated business taxable income, imposed under Section 23731.(D) The tax on S corporations imposed under Section 23802.(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).(3) The tax on built-in gains of S corporations, imposed under Section 23809.(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:(1) Credits that do not contain carryover provisions.(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.(3) The minimum tax credit allowed by Section 23453.(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.(d) Notwithstanding any other provision of this part, each of the following applies:(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:(A) The credit allowed by former Section 23601 (relating to solar energy).(B) The credit allowed by former Section 23601.4 (relating to solar energy).(C) The credit allowed by former Section 23601.5 (relating to solar energy).(D) The credit allowed by Section 23609 (relating to research expenditures).(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).(F) The credit allowed by Section 23610.5 (relating to low-income housing).(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).(L) The credit allowed by former Section 23623 (relating to program area hiring credit).(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).(Q) The credit allowed by former Section 23649 (relating to qualified property).(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
23036. (a) (1) The term tax includes any of the following:(A) The tax imposed under Chapter 2 (commencing with Section 23101).(B) The tax imposed under Chapter 3 (commencing with Section 23501).(C) The tax on unrelated business taxable income, imposed under Section 23731.(D) The tax on S corporations imposed under Section 23802.(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).(3) The tax on built-in gains of S corporations, imposed under Section 23809.(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:(1) Credits that do not contain carryover provisions.(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.(3) The minimum tax credit allowed by Section 23453.(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.(d) Notwithstanding any other provision of this part, each of the following applies:(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:(A) The credit allowed by former Section 23601 (relating to solar energy).(B) The credit allowed by former Section 23601.4 (relating to solar energy).(C) The credit allowed by former Section 23601.5 (relating to solar energy).(D) The credit allowed by Section 23609 (relating to research expenditures).(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).(F) The credit allowed by Section 23610.5 (relating to low-income housing).(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).(L) The credit allowed by former Section 23623 (relating to program area hiring credit).(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).(Q) The credit allowed by former Section 23649 (relating to qualified property).(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
23036. (a) (1) The term tax includes any of the following:(A) The tax imposed under Chapter 2 (commencing with Section 23101).(B) The tax imposed under Chapter 3 (commencing with Section 23501).(C) The tax on unrelated business taxable income, imposed under Section 23731.(D) The tax on S corporations imposed under Section 23802.(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).(3) The tax on built-in gains of S corporations, imposed under Section 23809.(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:(1) Credits that do not contain carryover provisions.(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.(3) The minimum tax credit allowed by Section 23453.(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.(d) Notwithstanding any other provision of this part, each of the following applies:(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:(A) The credit allowed by former Section 23601 (relating to solar energy).(B) The credit allowed by former Section 23601.4 (relating to solar energy).(C) The credit allowed by former Section 23601.5 (relating to solar energy).(D) The credit allowed by Section 23609 (relating to research expenditures).(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).(F) The credit allowed by Section 23610.5 (relating to low-income housing).(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).(L) The credit allowed by former Section 23623 (relating to program area hiring credit).(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).(Q) The credit allowed by former Section 23649 (relating to qualified property).(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
23036. (a) (1) The term tax includes any of the following:
(A) The tax imposed under Chapter 2 (commencing with Section 23101).
(B) The tax imposed under Chapter 3 (commencing with Section 23501).
(C) The tax on unrelated business taxable income, imposed under Section 23731.
(D) The tax on S corporations imposed under Section 23802.
(2) The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3) The tax on built-in gains of S corporations, imposed under Section 23809.
(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c) Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1) Credits that do not contain carryover provisions.
(2) Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3) The minimum tax credit allowed by Section 23453.
(4) Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455.
(5) Credits for taxes withheld under Section 18662. Sections 18662 and 18662.5.
(d) Notwithstanding any other provision of this part, each of the following applies:
(1) A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A) The credit allowed by former Section 23601 (relating to solar energy).
(B) The credit allowed by former Section 23601.4 (relating to solar energy).
(C) The credit allowed by former Section 23601.5 (relating to solar energy).
(D) The credit allowed by Section 23609 (relating to research expenditures).
(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F) The credit allowed by Section 23610.5 (relating to low-income housing).
(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L) The credit allowed by former Section 23623 (relating to program area hiring credit).
(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q) The credit allowed by former Section 23649 (relating to qualified property).
(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.
(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2) For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
SEC. 11. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 11. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 11. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
### SEC. 11.
(a)Except as provided in subdivision (b), the initial base year value for fruit and nut trees and grapevines subject to exemption pursuant to subdivision (i) of Section 3 of Article XIII of the California Constitution shall be the full cash value of those properties as of the lien date of their first taxable year.
(b)A county board of supervisors may, after consulting with affected local agencies within the countys jurisdiction, provide by ordinance that the initial base year value for replacement grapevines that are planted to replace grapevines less than 15 years of age that were removed solely as a result of phylloxera infestation or Pierces Disease, and are planted on the same parcel as the replaced grapevines, as certified in writing by the county agricultural commissioner, shall be the base year value of the removed grapevines factored to the lien date of the first taxable year of the replacement grapevines. The assignment of base year replacement value shall be limited to that portion of the replacement grapevines that are substantially equivalent to the grapevines that were replaced, if the replacement grapevines are planted at a greater density.