California Senate Bill SB1310

California 2019-2020 Regular Session

• Introduced: 2/21/20
• Refer: 3/5/20

Caption

Corporate franchise taxes.

Impact

The impact of SB 1310 on state laws pertains primarily to the clarification of the conditions under which corporations that primarily receive dividends are taxed. By reinforcing the standards for what constitutes 'doing business' in California, the bill ensures that corporations engaged solely in passive investment activities will not be subject to the franchise tax. This has implications for tax liability and regulation of investment entities operating within California, as it may encourage more businesses to establish passive investment arms without incurring additional tax burdens.

Summary

Senate Bill No. 1310, introduced by Senator Atkins, aims to amend Section 23102 of the Revenue and Taxation Code concerning the definition of when a corporation is considered to be doing business in the state of California for tax purposes. The existing law stipulates that a corporation that only holds stock and bonds and engages in no other activities except receiving and distributing dividends is not deemed to be doing business in California. This bill proposes nonsubstantive changes to clarify this provision without altering the substantive legal meaning or effect of the existing law.

Contention

While the bill is largely seen as a technical adjustment, there could be points of contention related to how such clarifications might affect different types of businesses, especially those in the financial and investment sectors. Stakeholders in the area of corporate taxation may have varying opinions on whether such amendments could lead to potential abuses of tax classification, allowing corporations to exploit the definition and avoid paying franchise taxes when they perhaps should be subject to them.