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| 1 | + | Amended IN Assembly April 30, 2018 Amended IN Assembly March 22, 2018 CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION Assembly Bill No. 2574Introduced by Assembly Member BloomFebruary 15, 2018An act to amend Section 23036 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. An act to add Section 6378.5 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.LEGISLATIVE COUNSEL'S DIGESTAB 2574, as amended, Bloom. Corporation taxes: research credit: alternative minimum tax. Sales and use taxes: exemption: research and development: design: digital interactive media.Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes.This bill would exempt from those taxes, on and after January 1, 2019, the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property purchased for use by a qualified person primarily in the research and development and design of digital interactive media, and tangible personal property purchased for use by a qualified person primarily to maintain, repair, measure, or test that property.The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in conformity with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated into these laws.This bill would specify that this exemption does not apply to local sales and use taxes and transactions and use taxes.This bill would take effect immediately as a tax levy.The Corporation Tax Law allows various credits against the taxes imposed by that law, including, in modified conformity with federal law, a credit for qualified research, as provided. Existing law defines tax for these purposes as several different taxes, including the franchise tax and the corporation income tax. The Corporation Tax Law, in modified conformity with federal law, makes a corporation subject to the alternative minimum tax under specified circumstances. This bill, for each taxable year beginning on or after January 1, 2019, would include the alternative minimum tax in the definition of tax for purposes of allowing the credit for qualified research.This bill would take effect immediately as a tax levy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 6378.5 is added to the Revenue and Taxation Code, to read:6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following:(1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media.(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.(c) For purposes of this section:(1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage.(2) (A) Digital interactive media means interactive software that meets all of the following requirements:(i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed.(ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives.(iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry.(B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code.(3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).(4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition.(5) Research and development shall have the same meaning as basic research under Section 23609.(6) (A) Tangible personal property includes, but is not limited to, all of the following:(i) Machinery and equipment, including component parts.(ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.(B) Tangible personal property does not include furniture, inventory, or equipment used to store products.(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.(2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale.SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.SECTION 1.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)For each taxable year beginning on or after January 1, 2019, for purposes of Section 23609, the term tax shall also include the alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400). (d)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.(e)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).(f)Any credit which is partially or totally denied under subdivision (e) 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.(g)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.(h)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.(i)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.(j)(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 (e), (f), and (g).(k)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible passthrough 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 passthrough 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 Chapter 920 of the Statutes of 2001.SEC. 2.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. | |
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| 3 | + | Amended IN Assembly April 30, 2018 Amended IN Assembly March 22, 2018 CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION Assembly Bill No. 2574Introduced by Assembly Member BloomFebruary 15, 2018An act to amend Section 23036 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. An act to add Section 6378.5 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.LEGISLATIVE COUNSEL'S DIGESTAB 2574, as amended, Bloom. Corporation taxes: research credit: alternative minimum tax. Sales and use taxes: exemption: research and development: design: digital interactive media.Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes.This bill would exempt from those taxes, on and after January 1, 2019, the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property purchased for use by a qualified person primarily in the research and development and design of digital interactive media, and tangible personal property purchased for use by a qualified person primarily to maintain, repair, measure, or test that property.The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in conformity with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated into these laws.This bill would specify that this exemption does not apply to local sales and use taxes and transactions and use taxes.This bill would take effect immediately as a tax levy.The Corporation Tax Law allows various credits against the taxes imposed by that law, including, in modified conformity with federal law, a credit for qualified research, as provided. Existing law defines tax for these purposes as several different taxes, including the franchise tax and the corporation income tax. The Corporation Tax Law, in modified conformity with federal law, makes a corporation subject to the alternative minimum tax under specified circumstances. This bill, for each taxable year beginning on or after January 1, 2019, would include the alternative minimum tax in the definition of tax for purposes of allowing the credit for qualified research.This bill would take effect immediately as a tax levy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO | |
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| 5 | + | Amended IN Assembly April 30, 2018 Amended IN Assembly March 22, 2018 | |
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| 7 | - | Amended IN Assembly May 16, 2018 | |
| 8 | 7 | Amended IN Assembly April 30, 2018 | |
| 9 | 8 | Amended IN Assembly March 22, 2018 | |
| 10 | 9 | ||
| 11 | 10 | CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION | |
| 12 | 11 | ||
| 13 | 12 | Assembly Bill No. 2574 | |
| 14 | 13 | ||
| 15 | 14 | Introduced by Assembly Member BloomFebruary 15, 2018 | |
| 16 | 15 | ||
| 17 | 16 | Introduced by Assembly Member Bloom | |
| 18 | 17 | February 15, 2018 | |
| 19 | 18 | ||
| 20 | - | An act to add Section 6378.5 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. | |
| 19 | + | An act to amend Section 23036 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. An act to add Section 6378.5 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. | |
| 21 | 20 | ||
| 22 | 21 | LEGISLATIVE COUNSEL'S DIGEST | |
| 23 | 22 | ||
| 24 | 23 | ## LEGISLATIVE COUNSEL'S DIGEST | |
| 25 | 24 | ||
| 26 | - | AB 2574, as amended, Bloom. Sales and use taxes: exemption: research and development: design: digital interactive media. | |
| 25 | + | AB 2574, as amended, Bloom. Corporation taxes: research credit: alternative minimum tax. Sales and use taxes: exemption: research and development: design: digital interactive media. | |
| 27 | 26 | ||
| 28 | - | Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes.This bill would exempt from those taxes, on and after January 1, 2019 | |
| 27 | + | Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes.This bill would exempt from those taxes, on and after January 1, 2019, the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property purchased for use by a qualified person primarily in the research and development and design of digital interactive media, and tangible personal property purchased for use by a qualified person primarily to maintain, repair, measure, or test that property.The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in conformity with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated into these laws.This bill would specify that this exemption does not apply to local sales and use taxes and transactions and use taxes.This bill would take effect immediately as a tax levy.The Corporation Tax Law allows various credits against the taxes imposed by that law, including, in modified conformity with federal law, a credit for qualified research, as provided. Existing law defines tax for these purposes as several different taxes, including the franchise tax and the corporation income tax. The Corporation Tax Law, in modified conformity with federal law, makes a corporation subject to the alternative minimum tax under specified circumstances. This bill, for each taxable year beginning on or after January 1, 2019, would include the alternative minimum tax in the definition of tax for purposes of allowing the credit for qualified research.This bill would take effect immediately as a tax levy. | |
| 29 | 28 | ||
| 30 | 29 | Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes. | |
| 31 | 30 | ||
| 32 | - | This bill would exempt from those taxes, on and after January 1, 2019 | |
| 31 | + | This bill would exempt from those taxes, on and after January 1, 2019, the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property purchased for use by a qualified person primarily in the research and development and design of digital interactive media, and tangible personal property purchased for use by a qualified person primarily to maintain, repair, measure, or test that property. | |
| 33 | 32 | ||
| 34 | 33 | The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in conformity with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated into these laws. | |
| 35 | 34 | ||
| 36 | 35 | This bill would specify that this exemption does not apply to local sales and use taxes and transactions and use taxes. | |
| 37 | 36 | ||
| 38 | 37 | This bill would take effect immediately as a tax levy. | |
| 39 | 38 | ||
| 39 | + | The Corporation Tax Law allows various credits against the taxes imposed by that law, including, in modified conformity with federal law, a credit for qualified research, as provided. Existing law defines tax for these purposes as several different taxes, including the franchise tax and the corporation income tax. The Corporation Tax Law, in modified conformity with federal law, makes a corporation subject to the alternative minimum tax under specified circumstances. | |
| 40 | 40 | ||
| 41 | 41 | ||
| 42 | - | This bill would take effect immediately as a tax levy, but its operative date would depend on its effective date. | |
| 42 | + | ||
| 43 | + | This bill, for each taxable year beginning on or after January 1, 2019, would include the alternative minimum tax in the definition of tax for purposes of allowing the credit for qualified research. | |
| 44 | + | ||
| 45 | + | ||
| 46 | + | ||
| 47 | + | This bill would take effect immediately as a tax levy. | |
| 48 | + | ||
| 49 | + | ||
| 43 | 50 | ||
| 44 | 51 | ## Digest Key | |
| 45 | 52 | ||
| 46 | 53 | ## Bill Text | |
| 47 | 54 | ||
| 48 | - | The people of the State of California do enact as follows:SECTION 1. Section 6378.5 is added to the Revenue and Taxation Code, to read:6378.5. (a) On and after January 1, 2019, there | |
| 55 | + | The people of the State of California do enact as follows:SECTION 1. Section 6378.5 is added to the Revenue and Taxation Code, to read:6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following:(1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media.(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.(c) For purposes of this section:(1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage.(2) (A) Digital interactive media means interactive software that meets all of the following requirements:(i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed.(ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives.(iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry.(B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code.(3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).(4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition.(5) Research and development shall have the same meaning as basic research under Section 23609.(6) (A) Tangible personal property includes, but is not limited to, all of the following:(i) Machinery and equipment, including component parts.(ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.(B) Tangible personal property does not include furniture, inventory, or equipment used to store products.(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.(2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale.SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.SECTION 1.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)For each taxable year beginning on or after January 1, 2019, for purposes of Section 23609, the term tax shall also include the alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400). (d)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.(e)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).(f)Any credit which is partially or totally denied under subdivision (e) 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.(g)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.(h)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.(i)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.(j)(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 (e), (f), and (g).(k)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible passthrough 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 passthrough 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 Chapter 920 of the Statutes of 2001.SEC. 2.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. | |
| 49 | 56 | ||
| 50 | 57 | The people of the State of California do enact as follows: | |
| 51 | 58 | ||
| 52 | 59 | ## The people of the State of California do enact as follows: | |
| 53 | 60 | ||
| 54 | - | SECTION 1. Section 6378.5 is added to the Revenue and Taxation Code, to read:6378.5. (a) On and after January 1, 2019, there | |
| 61 | + | SECTION 1. Section 6378.5 is added to the Revenue and Taxation Code, to read:6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following:(1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media.(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.(c) For purposes of this section:(1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage.(2) (A) Digital interactive media means interactive software that meets all of the following requirements:(i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed.(ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives.(iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry.(B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code.(3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).(4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition.(5) Research and development shall have the same meaning as basic research under Section 23609.(6) (A) Tangible personal property includes, but is not limited to, all of the following:(i) Machinery and equipment, including component parts.(ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.(B) Tangible personal property does not include furniture, inventory, or equipment used to store products.(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.(2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale. | |
| 55 | 62 | ||
| 56 | 63 | SECTION 1. Section 6378.5 is added to the Revenue and Taxation Code, to read: | |
| 57 | 64 | ||
| 58 | 65 | ### SECTION 1. | |
| 59 | 66 | ||
| 60 | - | 6378.5. (a) On and after January 1, 2019, | |
| 67 | + | 6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following:(1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media.(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.(c) For purposes of this section:(1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage.(2) (A) Digital interactive media means interactive software that meets all of the following requirements:(i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed.(ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives.(iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry.(B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code.(3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).(4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition.(5) Research and development shall have the same meaning as basic research under Section 23609.(6) (A) Tangible personal property includes, but is not limited to, all of the following:(i) Machinery and equipment, including component parts.(ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.(B) Tangible personal property does not include furniture, inventory, or equipment used to store products.(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.(2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale. | |
| 61 | 68 | ||
| 62 | - | 6378.5. (a) On and after January 1, 2019, | |
| 69 | + | 6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following:(1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media.(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.(c) For purposes of this section:(1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage.(2) (A) Digital interactive media means interactive software that meets all of the following requirements:(i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed.(ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives.(iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry.(B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code.(3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).(4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition.(5) Research and development shall have the same meaning as basic research under Section 23609.(6) (A) Tangible personal property includes, but is not limited to, all of the following:(i) Machinery and equipment, including component parts.(ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.(B) Tangible personal property does not include furniture, inventory, or equipment used to store products.(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.(2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale. | |
| 63 | 70 | ||
| 64 | - | 6378.5. (a) On and after January 1, 2019, | |
| 71 | + | 6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following:(1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media.(2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1).(b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing.(c) For purposes of this section:(1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage.(2) (A) Digital interactive media means interactive software that meets all of the following requirements:(i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed.(ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives.(iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry.(B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code.(3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a).(4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition.(5) Research and development shall have the same meaning as basic research under Section 23609.(6) (A) Tangible personal property includes, but is not limited to, all of the following:(i) Machinery and equipment, including component parts.(ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party.(B) Tangible personal property does not include furniture, inventory, or equipment used to store products.(d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a).(e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws.(2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption.(f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale. | |
| 65 | 72 | ||
| 66 | 73 | ||
| 67 | 74 | ||
| 68 | - | 6378.5. (a) On and after January 1, 2019, | |
| 75 | + | 6378.5. (a) On and after January 1, 2019, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, any of the following: | |
| 69 | 76 | ||
| 70 | - | (1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, | |
| 77 | + | (1) Tangible personal property purchased for use by a qualified person to be used primarily in the research and development, and design of digital interactive media. | |
| 71 | 78 | ||
| 72 | 79 | (2) Tangible personal property purchased for use by a qualified person to be used primarily to maintain, repair, measure, or test any property described in paragraph (1). | |
| 73 | 80 | ||
| 74 | 81 | (b) This exemption shall not apply to any tangible personal property that is used primarily in administration, general management, or marketing. | |
| 75 | 82 | ||
| 76 | 83 | (c) For purposes of this section: | |
| 77 | 84 | ||
| 78 | 85 | (1) Design means the process of designing the content and rules of digital interactive media in the preproduction stage and designing the game play environment, storytime, and characters in the production stage. | |
| 79 | 86 | ||
| 80 | 87 | (2) (A) Digital interactive media means interactive software that meets all of the following requirements: | |
| 81 | 88 | ||
| 82 | - | (i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed. | |
| 89 | + | (i) Is produced for distribution on or accessed via electronic media, including, but not limited to, software that may be accessed via or downloaded from the Internet or mobile networks and software that is distributed on optical media or embedded in or downloadable to electronic devices, including, but not limited to, mobile phones, game systems, personal digital assistants, or other handheld electronic devices or similar technology in existence now or hereafter developed. | |
| 83 | 90 | ||
| 84 | - | (ii) Users may | |
| 91 | + | (ii) Users may interact with the software via an electronic device, which may include, but is not limited to, a computer, a game system, a mobile phone, a personal digital assistant, or other handheld electronic devices, in order to achieve a goal or set of goals and objectives. | |
| 85 | 92 | ||
| 86 | - | (iii) Include Includes an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry. | |
| 87 | - | ||
| 88 | - | (iv) Is intended primarily for entertainment purposes. | |
| 93 | + | (iii) Include an appreciable quantity of text, sound, music, fixed images, animated images, or 3-D geometry. | |
| 89 | 94 | ||
| 90 | 95 | (B) Digital interactive media does not include media that contains obscene matter. For purposes of this subparagraph, obscene matter means any media that depicts sexually explicit conduct as enumerated in Section 2256 of Title 18 of the United States Code and as defined in Section 311 of the Penal Code. | |
| 91 | 96 | ||
| 92 | 97 | (3) Primarily means tangible personal property used 50 percent or more of the time in an activity described in subdivision (a). | |
| 93 | 98 | ||
| 94 | 99 | (4) Qualified person means any person that is primarily engaged in research and development and design of digital interactive media that are described in Codes 511210, 512191, and 54151 of the North American Industry Classification System Manual published by the United States Office of Management and Budget, 2017 edition. | |
| 95 | 100 | ||
| 96 | 101 | (5) Research and development shall have the same meaning as basic research under Section 23609. | |
| 97 | 102 | ||
| 98 | 103 | (6) (A) Tangible personal property includes, but is not limited to, all of the following: | |
| 99 | 104 | ||
| 100 | 105 | (i) Machinery and equipment, including component parts. | |
| 101 | 106 | ||
| 102 | - | (ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers | |
| 107 | + | (ii) All equipment or devices used or required to research and develop and design, operate, control, regulate, or maintain the machinery for digital interactive media, including, but not limited to, computers, data processing equipment, computer servers, workstations, server racks, hard drives, optical drives, monitors, keyboards, integrated video and audio equipment, networking routers, switches, network cabling, and computer software, and other similar technology now or hereafter developed, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayers or another party. | |
| 103 | 108 | ||
| 104 | 109 | (B) Tangible personal property does not include furniture, inventory, or equipment used to store products. | |
| 105 | 110 | ||
| 106 | - | (d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board | |
| 111 | + | (d) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery and equipment that is exempt pursuant to subdivision (a). | |
| 107 | 112 | ||
| 108 | 113 | (e) (1) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of these laws. | |
| 109 | 114 | ||
| 110 | 115 | (2) The exemption established by this section shall not apply to any sale or use of property that, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption. | |
| 111 | 116 | ||
| 112 | 117 | (f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale. | |
| 113 | 118 | ||
| 114 | - | (g) This section shall remain in effect only until January 1, 2024, and as of that date is repealed. | |
| 119 | + | SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. | |
| 120 | + | ||
| 121 | + | SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. | |
| 122 | + | ||
| 123 | + | SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. | |
| 124 | + | ||
| 125 | + | ### SEC. 2. | |
| 126 | + | ||
| 127 | + | ||
| 128 | + | ||
| 129 | + | ||
| 130 | + | ||
| 131 | + | (a)(1)The term tax includes any of the following: | |
| 132 | + | ||
| 133 | + | ||
| 134 | + | ||
| 135 | + | (A)The tax imposed under Chapter 2 (commencing with Section 23101). | |
| 136 | + | ||
| 137 | + | ||
| 138 | + | ||
| 139 | + | (B)The tax imposed under Chapter 3 (commencing with Section 23501). | |
| 140 | + | ||
| 141 | + | ||
| 142 | + | ||
| 143 | + | (C)The tax on unrelated business taxable income, imposed under Section 23731. | |
| 144 | + | ||
| 145 | + | ||
| 146 | + | ||
| 147 | + | (D)The tax on S corporations imposed under Section 23802. | |
| 148 | + | ||
| 149 | + | ||
| 150 | + | ||
| 151 | + | (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. | |
| 152 | + | ||
| 153 | + | ||
| 154 | + | ||
| 155 | + | (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: | |
| 156 | + | ||
| 157 | + | ||
| 158 | + | ||
| 159 | + | (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. | |
| 160 | + | ||
| 161 | + | ||
| 162 | + | ||
| 163 | + | (2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400). | |
| 164 | + | ||
| 165 | + | ||
| 166 | + | ||
| 167 | + | (3)The tax on built-in gains of S corporations, imposed under Section 23809. | |
| 168 | + | ||
| 169 | + | ||
| 170 | + | ||
| 171 | + | (4)The tax on excess passive investment income of S corporations, imposed under Section 23811. | |
| 172 | + | ||
| 173 | + | ||
| 174 | + | ||
| 175 | + | (c)For each taxable year beginning on or after January 1, 2019, for purposes of Section 23609, the term tax shall also include the alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400). | |
| 176 | + | ||
| 177 | + | ||
| 178 | + | ||
| 179 | + | (d)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order: | |
| 180 | + | ||
| 181 | + | ||
| 182 | + | ||
| 183 | + | (1)Credits that do not contain carryover provisions. | |
| 184 | + | ||
| 185 | + | ||
| 186 | + | ||
| 187 | + | (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. | |
| 188 | + | ||
| 189 | + | ||
| 190 | + | ||
| 191 | + | (3)The minimum tax credit allowed by Section 23453. | |
| 192 | + | ||
| 193 | + | ||
| 194 | + | ||
| 195 | + | (4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. | |
| 196 | + | ||
| 197 | + | ||
| 198 | + | ||
| 199 | + | (5)Credits for taxes withheld under Section 18662. | |
| 200 | + | ||
| 201 | + | ||
| 202 | + | ||
| 203 | + | (e)Notwithstanding any other provision of this part, each of the following applies: | |
| 204 | + | ||
| 205 | + | ||
| 206 | + | ||
| 207 | + | (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: | |
| 208 | + | ||
| 209 | + | ||
| 210 | + | ||
| 211 | + | (A)The credit allowed by former Section 23601 (relating to solar energy). | |
| 212 | + | ||
| 213 | + | ||
| 214 | + | ||
| 215 | + | (B)The credit allowed by former Section 23601.4 (relating to solar energy). | |
| 216 | + | ||
| 217 | + | ||
| 218 | + | ||
| 219 | + | (C)The credit allowed by former Section 23601.5 (relating to solar energy). | |
| 220 | + | ||
| 221 | + | ||
| 222 | + | ||
| 223 | + | (D)The credit allowed by Section 23609 (relating to research expenditures). | |
| 224 | + | ||
| 225 | + | ||
| 226 | + | ||
| 227 | + | (E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses). | |
| 228 | + | ||
| 229 | + | ||
| 230 | + | ||
| 231 | + | (F)The credit allowed by Section 23610.5 (relating to low-income housing). | |
| 232 | + | ||
| 233 | + | ||
| 234 | + | ||
| 235 | + | (G)The credit allowed by former Section 23612 (relating to sales and use tax credit). | |
| 236 | + | ||
| 237 | + | ||
| 238 | + | ||
| 239 | + | (H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit). | |
| 240 | + | ||
| 241 | + | ||
| 242 | + | ||
| 243 | + | (I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit). | |
| 244 | + | ||
| 245 | + | ||
| 246 | + | ||
| 247 | + | (J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit). | |
| 248 | + | ||
| 249 | + | ||
| 250 | + | ||
| 251 | + | (K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit). | |
| 252 | + | ||
| 253 | + | ||
| 254 | + | ||
| 255 | + | (L)The credit allowed by former Section 23623 (relating to program area hiring credit). | |
| 256 | + | ||
| 257 | + | ||
| 258 | + | ||
| 259 | + | (M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit). | |
| 260 | + | ||
| 261 | + | ||
| 262 | + | ||
| 263 | + | (N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit). | |
| 264 | + | ||
| 265 | + | ||
| 266 | + | ||
| 267 | + | (O)The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit). | |
| 268 | + | ||
| 269 | + | ||
| 270 | + | ||
| 271 | + | (P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit). | |
| 272 | + | ||
| 273 | + | ||
| 274 | + | ||
| 275 | + | (Q)The credit allowed by former Section 23649 (relating to qualified property). | |
| 276 | + | ||
| 277 | + | ||
| 278 | + | ||
| 279 | + | (R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures). | |
| 280 | + | ||
| 281 | + | ||
| 282 | + | ||
| 283 | + | (S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit). | |
| 284 | + | ||
| 285 | + | ||
| 286 | + | ||
| 287 | + | (T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures). | |
| 288 | + | ||
| 289 | + | ||
| 290 | + | ||
| 291 | + | (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). | |
| 292 | + | ||
| 293 | + | ||
| 294 | + | ||
| 295 | + | (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). | |
| 296 | + | ||
| 297 | + | ||
| 298 | + | ||
| 299 | + | (2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101). | |
| 300 | + | ||
| 301 | + | ||
| 302 | + | ||
| 303 | + | (f)Any credit which is partially or totally denied under subdivision (e) 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. | |
| 304 | + | ||
| 305 | + | ||
| 306 | + | ||
| 307 | + | (g)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. | |
| 308 | + | ||
| 309 | + | ||
| 310 | + | ||
| 311 | + | (h)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. | |
| 312 | + | ||
| 313 | + | ||
| 314 | + | ||
| 315 | + | (i)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. | |
| 316 | + | ||
| 317 | + | ||
| 318 | + | ||
| 319 | + | (j)(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). | |
| 320 | + | ||
| 321 | + | ||
| 322 | + | ||
| 323 | + | (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. | |
| 324 | + | ||
| 325 | + | ||
| 326 | + | ||
| 327 | + | (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 (e), (f), and (g). | |
| 328 | + | ||
| 329 | + | ||
| 330 | + | ||
| 331 | + | (k)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible passthrough 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. | |
| 332 | + | ||
| 333 | + | ||
| 334 | + | ||
| 335 | + | (2)For purposes of this subdivision, eligible passthrough 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. | |
| 336 | + | ||
| 337 | + | ||
| 338 | + | ||
| 339 | + | (3)This subdivision applies to credits that become inoperative on or after the operative date of Chapter 920 of the Statutes of 2001. | |
| 340 | + | ||
| 341 | + | ||
| 115 | 342 | ||
| 116 | 343 | ||
| 117 | 344 | ||
| 118 | 345 | This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. | |
| 119 | - | ||
| 120 | - | ||
| 121 | - | ||
| 122 | - | SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. However, the provisions of this act shall become operative on the first day of the first calendar quarter commencing more than 90 days after the effective date of this act. | |
| 123 | - | ||
| 124 | - | SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. However, the provisions of this act shall become operative on the first day of the first calendar quarter commencing more than 90 days after the effective date of this act. | |
| 125 | - | ||
| 126 | - | SEC. 2. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect. However, the provisions of this act shall become operative on the first day of the first calendar quarter commencing more than 90 days after the effective date of this act. | |
| 127 | - | ||
| 128 | - | ### SEC. 2. |