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| 1 | + | CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION Assembly Bill No. 2065Introduced by Assembly Member Blanca RubioFebruary 14, 2022 An act to add and repeal Sections 17276.24 and 24416.24 of the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGESTAB 2065, as introduced, Blanca Rubio. Income taxes: net operating losses: businesses.Existing law, the Personal Income Tax Law and Corporation Tax Law, in modified conformity with federal income tax laws, generally allows various deductions in computing the income that is subject to taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law suspends the deduction for a net operating loss, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill would, for taxable years beginning on or after January 1, 2023, authorize a net operating loss carryback, as described, for a net operating loss or carryover of net operating loss for which a deduction was suspended as described above for a qualified taxpayer. The bill would define a qualified taxpayer as a taxpayer that owned or operated a business in the state and that completed a specified substantial sale of fixed assets or other property held or used in the regular course of their trade or business during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. The bill would repeal those provisions on December 1, 2025.The bill also would include additional information required for any bill authorizing a new tax expenditure.This bill would also make findings and declarations related to a gift of public funds.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. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) In order to ensure that Californias acute revenue needs are satisfied while also ensuring these taxpayers are not unfairly taxed, it is the intent of the Legislature to authorize qualified taxpayers, beginning on January 1, 2023, to carry back net operating losses denied by Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to the 2020, 2021, and 2022 taxable years. SEC. 2. Section 17276.24 is added to the Revenue and Taxation Code, to read:17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed.SEC. 3. Section 24416.24 is added to the Revenue and Taxation Code, to read:24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year.(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed.SEC. 4. The Legislature hereby finds and declares that the deductions and other tax benefits authorized by the amendments to Sections 17276.24 and 24416.24 of the Revenue and Taxation Code made by this bill serve the public purpose of securing the financial condition of businesses that were economically harmed by the COVID-19 pandemic, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution. | |
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| 3 | + | CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION Assembly Bill No. 2065Introduced by Assembly Member Blanca RubioFebruary 14, 2022 An act to add and repeal Sections 17276.24 and 24416.24 of the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGESTAB 2065, as introduced, Blanca Rubio. Income taxes: net operating losses: businesses.Existing law, the Personal Income Tax Law and Corporation Tax Law, in modified conformity with federal income tax laws, generally allows various deductions in computing the income that is subject to taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law suspends the deduction for a net operating loss, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill would, for taxable years beginning on or after January 1, 2023, authorize a net operating loss carryback, as described, for a net operating loss or carryover of net operating loss for which a deduction was suspended as described above for a qualified taxpayer. The bill would define a qualified taxpayer as a taxpayer that owned or operated a business in the state and that completed a specified substantial sale of fixed assets or other property held or used in the regular course of their trade or business during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. The bill would repeal those provisions on December 1, 2025.The bill also would include additional information required for any bill authorizing a new tax expenditure.This bill would also make findings and declarations related to a gift of public funds.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO | |
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| 5 | - | Amended IN Assembly March 17, 2022 | |
| 6 | 5 | ||
| 7 | - | Amended IN Assembly March 17, 2022 | |
| 6 | + | ||
| 7 | + | ||
| 8 | 8 | ||
| 9 | 9 | CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION | |
| 10 | 10 | ||
| 11 | 11 | Assembly Bill | |
| 12 | 12 | ||
| 13 | 13 | No. 2065 | |
| 14 | 14 | ||
| 15 | 15 | Introduced by Assembly Member Blanca RubioFebruary 14, 2022 | |
| 16 | 16 | ||
| 17 | 17 | Introduced by Assembly Member Blanca Rubio | |
| 18 | 18 | February 14, 2022 | |
| 19 | 19 | ||
| 20 | 20 | An act to add and repeal Sections 17276.24 and 24416.24 of the Revenue and Taxation Code, relating to taxation. | |
| 21 | 21 | ||
| 22 | 22 | LEGISLATIVE COUNSEL'S DIGEST | |
| 23 | 23 | ||
| 24 | 24 | ## LEGISLATIVE COUNSEL'S DIGEST | |
| 25 | 25 | ||
| 26 | - | AB 2065, as | |
| 26 | + | AB 2065, as introduced, Blanca Rubio. Income taxes: net operating losses: businesses. | |
| 27 | 27 | ||
| 28 | - | Existing law, the Personal Income Tax Law and Corporation Tax Law, in modified conformity with federal income tax laws, generally allows various deductions in computing the income that is subject to taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law suspends the deduction for a net operating loss, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2023 | |
| 28 | + | Existing law, the Personal Income Tax Law and Corporation Tax Law, in modified conformity with federal income tax laws, generally allows various deductions in computing the income that is subject to taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law suspends the deduction for a net operating loss, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill would, for taxable years beginning on or after January 1, 2023, authorize a net operating loss carryback, as described, for a net operating loss or carryover of net operating loss for which a deduction was suspended as described above for a qualified taxpayer. The bill would define a qualified taxpayer as a taxpayer that owned or operated a business in the state and that completed a specified substantial sale of fixed assets or other property held or used in the regular course of their trade or business during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. The bill would repeal those provisions on December 1, 2025.The bill also would include additional information required for any bill authorizing a new tax expenditure.This bill would also make findings and declarations related to a gift of public funds. | |
| 29 | 29 | ||
| 30 | - | Existing law, the Personal Income Tax Law and Corporation Tax Law, in modified conformity with federal income tax laws, generally allows various deductions in computing the income that is subject to taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law suspends the deduction for a net operating loss, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. | |
| 30 | + | Existing law, the Personal Income Tax Law and Corporation Tax Law, in modified conformity with federal income tax laws, generally allows various deductions in computing the income that is subject to taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law suspends the deduction for a net operating loss, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. | |
| 31 | 31 | ||
| 32 | - | This bill would, for taxable years beginning on or after January 1, 2023, authorize a net operating loss carryback, as described, for a net operating loss or carryover of net operating loss for which a deduction was suspended as described above for a qualified taxpayer. The bill would define a qualified taxpayer as a taxpayer that owned or operated a business in the state and that completed a specified substantial sale of fixed assets or other property held or used in the regular course of their trade or business during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. | |
| 32 | + | This bill would, for taxable years beginning on or after January 1, 2023, authorize a net operating loss carryback, as described, for a net operating loss or carryover of net operating loss for which a deduction was suspended as described above for a qualified taxpayer. The bill would define a qualified taxpayer as a taxpayer that owned or operated a business in the state and that completed a specified substantial sale of fixed assets or other property held or used in the regular course of their trade or business during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. The bill would repeal those provisions on December 1, 2025. | |
| 33 | 33 | ||
| 34 | 34 | The bill also would include additional information required for any bill authorizing a new tax expenditure. | |
| 35 | 35 | ||
| 36 | 36 | This bill would also make findings and declarations related to a gift of public funds. | |
| 37 | 37 | ||
| 38 | 38 | ## Digest Key | |
| 39 | 39 | ||
| 40 | 40 | ## Bill Text | |
| 41 | 41 | ||
| 42 | - | The people of the State of California do enact as follows:SECTION 1. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) On | |
| 42 | + | The people of the State of California do enact as follows:SECTION 1. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) In order to ensure that Californias acute revenue needs are satisfied while also ensuring these taxpayers are not unfairly taxed, it is the intent of the Legislature to authorize qualified taxpayers, beginning on January 1, 2023, to carry back net operating losses denied by Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to the 2020, 2021, and 2022 taxable years. SEC. 2. Section 17276.24 is added to the Revenue and Taxation Code, to read:17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed.SEC. 3. Section 24416.24 is added to the Revenue and Taxation Code, to read:24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year.(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed.SEC. 4. The Legislature hereby finds and declares that the deductions and other tax benefits authorized by the amendments to Sections 17276.24 and 24416.24 of the Revenue and Taxation Code made by this bill serve the public purpose of securing the financial condition of businesses that were economically harmed by the COVID-19 pandemic, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution. | |
| 43 | 43 | ||
| 44 | 44 | The people of the State of California do enact as follows: | |
| 45 | 45 | ||
| 46 | 46 | ## The people of the State of California do enact as follows: | |
| 47 | 47 | ||
| 48 | - | SECTION 1. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) | |
| 48 | + | SECTION 1. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) In order to ensure that Californias acute revenue needs are satisfied while also ensuring these taxpayers are not unfairly taxed, it is the intent of the Legislature to authorize qualified taxpayers, beginning on January 1, 2023, to carry back net operating losses denied by Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to the 2020, 2021, and 2022 taxable years. | |
| 49 | 49 | ||
| 50 | - | SECTION 1. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) | |
| 50 | + | SECTION 1. The Legislature finds and declares all of the following:(a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn.(b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income.(c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses.(d) In order to ensure that Californias acute revenue needs are satisfied while also ensuring these taxpayers are not unfairly taxed, it is the intent of the Legislature to authorize qualified taxpayers, beginning on January 1, 2023, to carry back net operating losses denied by Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to the 2020, 2021, and 2022 taxable years. | |
| 51 | 51 | ||
| 52 | 52 | SECTION 1. The Legislature finds and declares all of the following: | |
| 53 | 53 | ||
| 54 | 54 | ### SECTION 1. | |
| 55 | 55 | ||
| 56 | 56 | (a) In early 2020, the COVID-19 viral pandemic reached California. On March 4, Governor Gavin Newsom declared a state of emergency on account of that pandemic. COVID-19, and the government measures taken to contain its spread, resulted in an unprecedented economic downturn. | |
| 57 | 57 | ||
| 58 | 58 | (b) In anticipation of revenue impacts likely to result from the pandemic, California enacted Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to make various adjustments to the Revenue and Taxation Code, including suspending net operating loss deductions for the 2020, 2021, and 2022 taxable years. Net operating loss deductions reflect the tax policy of matching expenses to income that for many businesses occurs over several years of the business cycle. Balancing the states need for revenues in the short term without abandoning this tax policy objective, Chapter 8 of the Statutes of 2020 extended commensurately the years to which a suspended net operating loss could be carried over to offset future income. | |
| 59 | 59 | ||
| 60 | 60 | (c) For some taxpayers, however, the extension of carryover periods provides no ultimate relief because their losses, accumulated over years of investment, cannot be used to offset a substantial nonrecurring gain, such as in the sale of a significant portion of a business enterprise. For such taxpayers, extending the period of carryover for the denied net operating losses provides no matching of investment expense to income recognition because their subsequent income will be insufficient to offset the accumulated and carried over net operating losses. | |
| 61 | 61 | ||
| 62 | - | (d) | |
| 62 | + | (d) In order to ensure that Californias acute revenue needs are satisfied while also ensuring these taxpayers are not unfairly taxed, it is the intent of the Legislature to authorize qualified taxpayers, beginning on January 1, 2023, to carry back net operating losses denied by Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to the 2020, 2021, and 2022 taxable years. | |
| 63 | 63 | ||
| 64 | - | (d) | |
| 65 | - | ||
| 66 | - | ||
| 67 | - | ||
| 68 | - | (e) In order to ensure that Californias acute revenue needs are satisfied while also ensuring these taxpayers are not unfairly taxed, it is the intent of the Legislature to authorize qualified taxpayers, beginning on January 1, 2023, to carry back net operating losses denied by Chapter 8 of the Statutes of 2020 (Assembly Bill 85) to the 2020, 2021, and 2022 2020 and 2021 taxable years. | |
| 69 | - | ||
| 70 | - | SEC. 2. Section 17276.24 is added to the Revenue and Taxation Code, to read:17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years. taxable years beginning on or after January 1, 2020, but before January 1, 2022.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. 2022.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, 2024, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 64 | + | SEC. 2. Section 17276.24 is added to the Revenue and Taxation Code, to read:17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 71 | 65 | ||
| 72 | 66 | SEC. 2. Section 17276.24 is added to the Revenue and Taxation Code, to read: | |
| 73 | 67 | ||
| 74 | 68 | ### SEC. 2. | |
| 75 | 69 | ||
| 76 | - | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 70 | + | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 77 | 71 | ||
| 78 | - | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 72 | + | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 79 | 73 | ||
| 80 | - | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 74 | + | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended.(2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code.(d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 81 | 75 | ||
| 82 | 76 | ||
| 83 | 77 | ||
| 84 | - | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years. | |
| 78 | + | 17276.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 17276.23 shall be a net operating loss carryback to each of the three preceding taxable years. | |
| 85 | 79 | ||
| 86 | 80 | (b) For purposes of this section, the following shall apply: | |
| 87 | 81 | ||
| 88 | - | (1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. | |
| 82 | + | (1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 17276.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. | |
| 89 | 83 | ||
| 90 | 84 | (B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation. | |
| 91 | 85 | ||
| 92 | 86 | (2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. | |
| 93 | 87 | ||
| 94 | 88 | (c) (1) For the purposes of complying with Section 41, with respect to this section and Section 24416.24, the Legislature finds and declares that the purposes, goals, and objectives of this measure are to resolve a misalignment of expenses and income created by Chapter 8 of the Statutes of 2020 (Assembly Bill 85), which cannot be remedied by an extension of the carryover term of net operating losses suspended. | |
| 95 | 89 | ||
| 96 | - | (2) On or before January 1, 2023 | |
| 90 | + | (2) On or before January 1, 2023, the Franchise Tax Board, notwithstanding Section 19542, shall provide the estimated General Fund impact of this section and Section 24416.24 to the Legislature and the relevant committees in a report, submitted pursuant to Section 9795 of the Government Code. | |
| 97 | 91 | ||
| 98 | 92 | (d) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 99 | 93 | ||
| 100 | - | SEC. 3. Section 24416.24 is added to the Revenue and Taxation Code, to read:24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 94 | + | SEC. 3. Section 24416.24 is added to the Revenue and Taxation Code, to read:24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year.(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 101 | 95 | ||
| 102 | 96 | SEC. 3. Section 24416.24 is added to the Revenue and Taxation Code, to read: | |
| 103 | 97 | ||
| 104 | 98 | ### SEC. 3. | |
| 105 | 99 | ||
| 106 | - | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 100 | + | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year.(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 107 | 101 | ||
| 108 | - | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 102 | + | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year.(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 109 | 103 | ||
| 110 | - | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years | |
| 104 | + | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years.(b) For purposes of this section, the following shall apply:(1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023.(B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.(2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year.(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 111 | 105 | ||
| 112 | 106 | ||
| 113 | 107 | ||
| 114 | - | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years. | |
| 108 | + | 24416.24. (a) Notwithstanding any other law, for taxable years beginning on or after January 1, 2023, for a qualified taxpayer, a net operating loss or carryover of net operating loss for which a deduction was disallowed by subdivision (a) of Section 24416.23 shall be a net operating loss carryback to each of the three preceding taxable years. | |
| 115 | 109 | ||
| 116 | 110 | (b) For purposes of this section, the following shall apply: | |
| 117 | 111 | ||
| 118 | - | (1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. | |
| 112 | + | (1) (A) Qualified taxpayer means a taxpayer that owned or operated a business in this state during any portion of the years in which a deduction was disallowed by subdivision (a) of Section 24416.23, and that completed a substantial sale of fixed assets or other property held or used in the regular course of their trade or business, including the sale of ownership interests in a legal entity, during the taxable year beginning on or after January 1, 2020, but before January 1, 2023. | |
| 119 | 113 | ||
| 120 | 114 | (B) In the case of a pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any carryback of net operating loss under this section shall be passed through to the partners or shareholders in accordance with the applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation. | |
| 121 | 115 | ||
| 122 | 116 | (2) Substantial sale means one or more sales in which the total amount realized exceeds 5 percent of the taxpayers gross receipts for the taxable year. | |
| 123 | 117 | ||
| 124 | 118 | (c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed. | |
| 125 | 119 | ||
| 126 | 120 | SEC. 4. The Legislature hereby finds and declares that the deductions and other tax benefits authorized by the amendments to Sections 17276.24 and 24416.24 of the Revenue and Taxation Code made by this bill serve the public purpose of securing the financial condition of businesses that were economically harmed by the COVID-19 pandemic, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution. | |
| 127 | 121 | ||
| 128 | 122 | SEC. 4. The Legislature hereby finds and declares that the deductions and other tax benefits authorized by the amendments to Sections 17276.24 and 24416.24 of the Revenue and Taxation Code made by this bill serve the public purpose of securing the financial condition of businesses that were economically harmed by the COVID-19 pandemic, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution. | |
| 129 | 123 | ||
| 130 | 124 | SEC. 4. The Legislature hereby finds and declares that the deductions and other tax benefits authorized by the amendments to Sections 17276.24 and 24416.24 of the Revenue and Taxation Code made by this bill serve the public purpose of securing the financial condition of businesses that were economically harmed by the COVID-19 pandemic, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution. | |
| 131 | 125 | ||
| 132 | 126 | ### SEC. 4. |