iIntroduction
As part of the 2020-21 fiscal year[1] California State Budget, Assembly Bill[2] 85 was enacted to make numerous changes to the California Revenue and Taxation Code[3]. According to the Senate Floor Analysis, AB 85 “is the revenue trailer bill for the 2020-21 Budget. This bill contains various statutory changes necessary to implement the Budget Act of 2020.”[4] AB 85[5] contains over two dozen code sections that have either been added or amended by the legislation.
The purpose of this article is to review the provisions of the new statutes and some insights into their enactment. At the outset, Governor Newsom had proposed a few of these tax law changes[6] as part of his January 10, 2020 required budget proposal[7] to the Legislature. The others were part of the Governor’s May Budget Revision[8].[9] The May Revision was released after the pandemic struck and the state’s General Fund revenues were estimated to be reduced.
AB 85 was part of the annual budget deal and is intended to generate significant revenue to help address the state’s General Fund deficit. According to the Senate Budget and Fiscal Review Committee analysis, “the provisions of this bill result in a net General Fund benefit of approximately $4.4 billion for the 2020-21 fiscal year.”[10] As such, the main purpose of enacting AB 85 was to generate significant new revenues for the state to help alleviate its budget deficit. Although some provisions have the effect of reducing state revenues, two major provisions of AB 85 general nearly $5 billion in new revenues for the 2020-21 fiscal year.
The Bill’s Provisions
Section 1 of the bill adds a new section[11] to the CRTC to impose specified penalties if a vehicle dealer makes an application to the Department of Motor Vehicles[12] that is not timely and imposes penalties and interest[13] if the vehicle dealer fails to make an application to the DMV, fails to pay the sales tax, or fails to timely file the return required by the Sales and Use Tax Law with the California Department of Tax and Fee Administration[14].[15]
In addition, the new law, when a vehicle required to be registered under the California Vehicle Code[16] is sold at retail on and after January 1, 2021[17], by any dealer[18] holding a license issued pursuant to the CVC, except a new motor vehicle dealer[19], requires the dealer to pay the applicable sales tax to the DMV acting for and on behalf of the CDTFA[20] within 30 days from the date of the sale.[21] These provisions are projected to result in an increase of $12 million in revenue.[22] The purpose of these provisions is to ensure that tax revenues due to the State are paid as soon as possible. While this revenue would accrue to the State, the Governor’s proposal was intended to accelerate collection of these tax dollars.
Section 2 of the bill amends an existing section[23] of the CRTC to extend the sales and use tax exemption for the sale of, or the storage, use, or other consumption of, diapers for infants, toddlers, and children from January 1, 2022 until July 1, 2023.[24] This provision is a continuation of an existing exemption intended to benefit families of children using diapers. Because the purchase of diapers is required and costly, the legislative intent of this provision is to provide financial assistance to families.
Section 3 of the bill amends an existing section[25] of the CRTC to extend the sales and use tax exemptions for the sale of, or the storage, use, or other consumption of, menstrual hygiene products from January 1, 2022 until July 1, 2023.[26] This provision is a continuation of an existing exemption intended to benefit women for tampons and related products. Because the purchase of these products is required for health purposes, the legislative intent of this provision is to provide equal treatment between feminine hygiene products and other medical products that are also exempt from sales tax.
Section 4 of the bill amends an existing section[27] of the CRTC that, for those amounts for which an irrevocable election is made by taxpayers in lieu of tax credits, beginning on or after January 1, 2020, and before January 1, 2023, there shall be applied to those in-lieu credit amounts that do not exceed five million dollars for that taxable year.[28] Some practitioners have raised question whether the language in this section allow the $5 million cap to be circumvented by applying it first against income tax owed and then against sales and use taxes imposed.[29] Note that this limitation does not apply to irrevocable elections made before June 29, 2020.[30] This provision affects taxpayers claiming the sales tax credit in lieu of the motion picture income tax credit. It makes this in lieu credit subject to the same $5 million cap as other business tax credits are subject to elsewhere in AB 85.
Section 5 of the bill adds a new section[31] to the CRTC provides that, for each taxable year beginning on or before January 1, 2020, and before January 1, 2023, the total credits otherwise allowable under the CRTC[32] for the taxable year may not reduce the taxes[33] imposed by those laws by more than $5,000,000.[34] These provisions related to the tax credit limits are projected to result in increased revenue of approximately $2 billion in the budget year.
There is also an interaction between these provisions and the net operating loss suspension provisions that are estimated to result in approximately $611 million in revenue.[35] This provision is one of two provisions of AB 85 that generates substantial revenue for the State’s General Fund. The purpose is to cap the amount of tax credits that large businesses are able to utilize for three tax years. If this provision were not in effect, then taxpayers could utilize all of their tax credits up to the point of eliminating any state tax liability. This provision anticipates that businesses will have adequate cash flow to pay these unanticipated higher taxes.
Additionally, the amended law provides that the amount of any credit otherwise allowable that is not allowed due to the application of this bill will remain a credit carryover amount.[36] It also provides that the carryover period for any credit that is not allowed due to the application of this bill will be increased by the number of taxable years the credit or any portion thereof was not allowed.[37]
In addition, the amount of any credit[38] that was not allowed to this section may be carried over to reduce the tax[39] for succeeding years until the credit amount is exhausted. Finally, the $5 million limitation does not apply to the credit for low-income housing.[40] The purpose of this provision is to ensure that taxpayers only lose the time value of the tax credits. In other words, taxpayers are “made whole” because they are able to fully utilize their tax credits in later years after the cap is lifted beginning with the 2023 tax year.
Section 6 of the bill adds a new section[41] of the CRTC, for taxpayers required[42] or not required to be included a combined report[43] or taxpayers authorized[44] or not authorized to be included in a combined report[45], the total of all business credits otherwise allowable under any provision of Chapter 2[46], including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,”[47] by more than five million dollars. This limitation is applicable for each taxable year beginning on or after January 1, 2020 and before January 1, 2023.[48] This provision ensures that affiliated taxpayers are included within the $5 million cap.
In addition, pursuant to this code section[49], “business credit” means a credit allowable under any provision of Chapter 2 other than the following credits[50]:
The credit for earned income.[51]
The credit for a young child.[52]
The credit for household and dependent care.[53]
The credit for adoption costs.[54]
The credit renter’s tax.[55]
The credit for personal exemption.[56]
The credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent.[57]
The credit for qualified senior head of household.[58]
The credit for low-income housing.[59]
The credit for refund pursuant to the Unemployment Insurance Code.[60]
The purpose of this section is to exclude certain non-business tax credits from the $5 million cap. They must be excluded or carve-out from the cap to ensure that they can continue to be used without limitation during the three tax years that business credits are capped.
Finally, the amount of any credit[61] that is not allowed due to this section remain a credit carryover amount.[62] The carryover period for any unallowed credit is then increased by the amount of taxable years that the credit was not allowed.[63] The FTB can issue any official guidance or determination under this section and it does not have to comply with California’s Administrative Procedure Act.[64] This provision ensures that the tax credits can be carried over and used during a future tax year.
Section 7 of the bill amends an existing section[65] of the CRTC extends the carryover period from 6 taxable years to 9 taxable years for the motion picture tax credit.[66] The legislative intent of this provision is to allow a longer carryover of this particular tax credit. The purpose is to ensure that these taxpayers can use a greater amount of the credit that they have generated by extending the carryover period. Without the extension, some taxpayers would not be able to fully utilize the credits that they have generated for producing motion pictures in California.
Section 8 of the bill adds a new section[67] to the CRTC to, subject to certain exceptions related to a taxpayer’s income[68], disallow a net operating loss deduction[69] for any taxable year beginning on or after January 1, 2020, and before January 1, 2023[70], and extend the carryover period for a net operating loss deduction disallowed by that provision.[71] These provisions are projected to result in increased revenue of approximately $1.8 billion.[72]
The purpose of this section is to generate substantial revenue for the state by prohibiting profitable taxpayers from utilizing the losses from prior tax years. Because of this provision, taxpayers will have to pay more over these three tax years while the suspension is in effect because they will pay taxes that they otherwise would not have had to pay. In other words, during these three tax years, because they cannot offset revenues with losses from prior years, they will have higher income and therefore higher taxes to pay. This provision anticipates that businesses will have adequate cash flow to pay these unanticipated higher taxes.
Section 9 of the bill amends an existing section[73] of the CRTC to exempt a limited partnership[74] that files, registers, or organizes to do business in this state, from the payment of the annual tax in its first taxable year.[75] This change in the law is only available for taxable years beginning on or after January 1, 2020, and before January 1, 2024, in which a specified appropriation is made in any budget measure.[76] The purpose of this provision, as well as the next two provisions, is to ensure that, no matter what type of formal business entity is created, they will all be exempt from the first year payment of the minimum franchise tax.
Section 10 of the bill amends an existing section[77] of the CRTC to exempt a limited liability company[78] that files, registers, or organizes to do business in this state, from the payment of the annual tax in its first taxable year.[79] This change in the law is only available for taxable years beginning on or after January 1, 2020, and before January 1, 2024, in which a specified appropriation is made in any budget measure.[80]
Section 11 of the bill amends an existing section[81] of the CRTC to exempt a limited liability partnership[82] that files, registers, or organizes to do business in this state, from the payment of the annual tax in its first taxable year.[83] This change in the law is only available for taxable years beginning on or after January 1, 2020, and before January 1, 2024, in which a specified appropriation is made in any budget measure.[84] These three provisions related to the minimum franchise tax first year exemption are projected to result in a decrease of revenue of $50 million.[85]
Section 12 of the bill amends an existing section[86] of the CRTC requires the Franchise Tax Board to apply funds collected from a debtor toward payment of the Individual Shared Responsibility Penalty and overpaid advanced premium subsidies as a first priority. [87] The purpose of this provision is to ensure that the required health insurance penalty is paid in an effort to encourage taxpayers to either have health care coverage or to pay the required penalty.
Section 13 of the bill amends an existing section[88] of the CRTC to add to the ordering of business tax credit usage for taxable years beginning on or after January 1, 2020, and before January 1, 2026, the credit allowed by the new advanced strategic aircraft credit[89]. In addition, the law now allows, for taxable years beginning on or after January 1, 2020, and before January 1, 2026, strategic aircraft credit to reduce the regular tax below the tentative minimum tax.[90] The purpose of these two provisions is to enhance the tax benefits of this particular credit. This credit was created to encourage the building of this aircraft in California.
Section 14 of the bill adds a new section[91] to the CRTC, for taxpayers required[92] or not required[93] to be included a combined report[94], or taxpayers authorized[95] or not authorized[96] to be included in a combined report[97], the total of all business credits otherwise allowable under any provision of Chapter 2[98], including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,”[99] by more than five million dollars.[100] This limitation is applicable for each taxable year beginning on or after January 1, 2020 and before January 1, 2023.[101] These provisions are the same as those contained in Section 6, which is in the Personal Income Tax Law, while Section 14 is in the Corporate Tax Law.
In addition, the $5 million limitation does not apply to the credit for low-income housing[102].[103] The amount of any credit[104] that is not allowed due to this section remain a credit carryover amount.[105] The carryover period for any unallowed credit is then increased by the amount of taxable years that the credit was not allowed.[106] The FTB can issue any official guidance or determination under this section and it does not have to comply with California’s Administrative Procedure Act.[107]
Section 15 of the bill amends an existing section[108] of the CRTC to extend the carryover period from 6 taxable years to 9 taxable years for the motion picture tax credit.[109] These provisions are the same as those contained in Section 7, which is in the Personal Income Tax Law, while Section 15 is in the Corporate Tax Law.
Section 16 of the bill amends an existing section[110] of the CRTC to, subject to certain exceptions related to a taxpayer’s income[111], disallow a net operating loss deduction[112] for any taxable year beginning on or after January 1, 2020, and before January 1, 2023[113], and extend the carryover period for a net operating loss deduction disallowed by that provision.[114] These provisions are the same as those contained in Section 8, which is in the Personal Income Tax Law, while Section 16 is in the Corporate Tax Law.
Section 17 of the bill amends an existing section[115] of the CRTC to limit the maximum monthly penalty for a responsible individual with an applicable household size of 5 or more individuals to the maximum monthly penalty for a responsible individual with an applicable household size of 5 individuals.[116] The purpose of this section is to limit the amount of the monthly penalty for larger households and cap the penalty based upon the size of the household.
Section 18 of the bill amends an existing section[117] of the CRTC to make technical changes to the Individual Shared Responsibility Penalty.[118] These changes are technical changes and do not represent substantive changes.
Section 19 of the bill amends an existing section[119] of the CRTC to make a clarifying amendment to the rulemaking authority of the Franchise Tax Board pursuant to the Individual Shared Responsibility Penalty.[120] The purpose of this section is to ensure that the FTB has appropriate rulemaking authority.
Section 20 of the bill amends an existing section[121] of the California Vehicle Code to add additional cross references to the definition of “new motor vehicle dealer.”[122] The purpose of this section is to ensure that necessary cross references are made to the law.
Section 21 of the bill amends an existing section[123] of the CVC to require, for retail sales of vehicles occurring on and after January 1, 2021, a dealer, other than a new motor vehicle dealer[124], to also submit with the application payment of the applicable sales tax to the DMV.[125] This must be done within 30 days from the date of sale.[126] The applicable sales tax is measured by the gross receipts from the sale of the vehicle.[127] Similar to Section 1, the purpose of this provision is to accelerate collection of these tax dollars.
Section 22 of the bill amends an existing section[128] of the CVC to require the DMV to transmit to the CDTFA all collections of sales tax and penalty within 30 days.[129] It also requires the DMV to withhold the registration or the transfer of registration of any vehicle sold at retail on and after January 1, 2021, to any applicant by any dealer holding a license issued pursuant to the CVC, other than a new motor vehicle dealer, until the dealer pays to the DMV the sales tax and any penalties.[130] In addition, the law requires the CDTFA to reimburse the DMV for its costs incurred.[131] The purpose of this provision is to accelerate collection by the state of revenues properly due with the retail sale of a vehicle.
Section 23 amends an existing statute that was enacted last Session[132] to extend the due date of a specified Legislative Analyst Report that was due on January 1, 2021 to now be due July 1, 2022.[133] The purpose of this provision is to allow the Legislative Analyst to have additional time to complete a required report to the Legislature.
Section 24 provides a statement of legislative intent. Specifically, this section provides that it is the intent of the Legislature to apply Section 41[134] to specified provisions of AB 85.[135] Section 41 specifies metrics by which tax incentives, such as credits or exemptions, are to be reviewed and examined to determine whether they are effective and are a good expenditure of taxpayer dollars.
Section 25 of the bill provides standardized bill language[136] that specifies that local governments cannot be reimbursed for any lost sales and use tax revenues due to this bill.[137] This provision is required to be contained in a bill if the state does not want to required reimbursement to local governments for foregone revenues.
Section 26 of the bill confirms that AB 85 is a budget trailer bill.[138] As such, it took effect immediately upon chaptering on June 29. Note that the $5 million credit limitation and the NOL suspension are retroactive to January 1, 2020. This provision contains standardized language to comply with the constitutional requirements for budget bills.[139]
Comments
The two most significant provisions of AB 85 are the NOL suspension and the limit on tax credit usage, from policy, fiscal and political views. Although proponents of the bill argued that California had previously make these two tax law changes during the last economic downturn, the California business community argued the pandemic-induced downtown is different and the prior budget act was for two years, not three years as contained in AB 85.
For example, the NOL suspension will prevent businesses from applying their NOLs to deduct against taxable income during tax years 2020 through 2022. Further, this suspension is retroactive to January 1, 2020, causing a major disruption for businesses that already made planning decisions for 2020. A net operating loss occurs when a business’ expenses exceed its income within a single tax year. Broadly speaking, the NOL deduction makes it possible for businesses to manage their losses by allowing them to offset or deduct one tax year’s losses from another tax year’s profits.
The NOL deduction is not a tax break or incentive. Rather, the purpose is to resolve an inequity in the tax structure that arises because businesses experience losses and profits according to timeframes or cycles that do not necessarily coincide with government tax filing deadlines that are arbitrary to begin with. Moreover, this 3-year suspension to help solve the state’s budget problems translates into a direct tax increase for businesses.
Because employers tend to make business plans over the long term, unexpected changes to tax laws can have drastic consequences, even for medium and large businesses – operations that could emerge from the pandemic as small businesses, if they survive at all. Many businesses that have had long-term growth cycles are, for the first time in decades – or ever – expecting to operate at a loss in 2020 because of COVID-19. As businesses hopefully begin to recover in 2021 and later, it may take years for these businesses to restore what was lost in 2020.
In addition, the limit on business tax credit usage is particularly harmful at this time. The largest business tax credit is the research and development tax credit[140] comes at a particularly dire time. This proposal would set back the ability for a taxpayer to claim credits under a typical five-year business plan over those years. Research projects are long-term investments that can take years from conception to fruition. A temporary deferral would dampen this wellspring of innovation and jobs.
The R&D credit supports labor expenses, supplies and materials (except equipment) used for research performed in California. R&D involves highly compensated research jobs that boost personal income, sales and property tax revenue for the state. For higher education, this investment also creates jobs that benefit California’s universities and colleges.
When the provisions of AB 85 expire at the end of the 2022 tax year, it will be interesting to examine the state’s economy and its business tax climate to determine whether the provisions adversely impacted economic growth the business activities of high-tech and biotech companies in particular.
[1] California’s fiscal year is July 1 through June 30, as opposed to the federal government’s fiscal year of October 1 through September 30.
[2] Hereinafter referred to as AB.
[3] Hereinafter referred to as CRTC. All further references are to the CRTC unless otherwise noted.
[4] Senate Floor Analysis, page 1, 6/15/20.
[5] The bill was approved by the Governor on June 29, 2020 and chaptered by the Secretary of State that same day. It is Chapter 8, Statutes of 2020.
[6] For example, the Governor’s January 10 budget contained the first-year exemption from the $800 minimum franchise tax for LPs, LLCs, and LLPs. https://esd.dof.ca.gov/dofpublic/public/trailerBill/pdf/13; increase the film tax credit carryforward. https://esd.dof.ca.gov/dofpublic/public/trailerBill/pdf/15; and, extend the sales tax exemption for diapers and menstrual products. https://esd.dof.ca.gov/dofpublic/public/trailerBill/pdf/17
[7] This is required pursuant to Article IV, Section 12(a), which reads: (a) Within the first 10 days of each calendar year, the Governor shall submit to the Legislature, with an explanatory message, a budget for the ensuing fiscal year containing itemized statements for recommended state expenditures and estimated state revenues. If recommended expenditures exceed estimated revenues, the Governor shall recommend the sources from which the additional revenues should be provided.
[8] See Government Code Section 13308, which requires an update of the Governor’s January budget to reflect updated revenue estimates and expenditures for the forthcoming fiscal year.
[9] These proposals include suspending the net operating loss deduction. https://esd.dof.ca.gov/dofpublic/public/trailerBill/pdf/164; require used car dealers to remit sales tax to DMV with registration fees. https://esd.dof.ca.gov/dofpublic/public/trailerBill/pdf/165; create a rebuttal presumption of market value for determining the price for private auto sales. https://esd.dof.ca.gov/dofpublic/trailerBill.html; and, limiting tax credits. https://esd.dof.ca.gov/dofpublic/public/trailerBill/pdf/203
[10] Senate Floor Analysis, pages 4-5, 6/15/20.
[11] CRTC Section 6295 is added.
[12] Hereinafter referred to as DMV.
[13] As specified in Section 6451.
[14] Hereinafter referred to as CDTFA.
[15] See Subdivision (b).
[16] Hereinafter referred to CVC.
[17] See Subdivision (f).
[18] A dealer must hold a license issued pursuant to Chapter 4 (commencing with Section 11700) of Division 5 of the CVC.
[19] Subdivision (e) specifies exclusions from the term “dealer.”
[20] This is done pursuant to Sections 4456 and 4750.6 of the CVC.
[21] See Subdivision (a).
[22] Senate Floor Analysis, page 4, 6/15/20.
[23] CRTC Section 6363.9 is amended.
[24] It amended subdivision (b).
[25] CRTC Section 6363.10 is amended.
[26] It amended subdivision (c).
[27] CRTC Section 6902.5 is amended.
[28] See Subdivision (c)(3)(A).
[29] The following language found in Subdivision (f) is vague: Notwithstanding subdivision (d) and paragraph (1) of subdivision (e), for those amounts for which an irrevocable election is made in lieu of tax credits allowed pursuant to Section 17053.85, 17053.95, 17053.98, 23685, 23695, or 23698 that would otherwise be allowed for any taxable year beginning on or after January 1, 2020, and before January 1, 2023, that are in excess of five million dollars ($5,000,000) for that taxable year, the claimant may offset that excess credit amount, or assigned portion, against the qualified sales and use taxes imposed during the reporting periods in the five years following and including the reporting period beginning on and after January 1, 2024.
[30] The language of Subdivision (j) provides: The amendments made to this section by the act adding this subdivision shall not apply to irrevocable elections made before the operative date of the act adding this subdivision.
[31] CRTC Section 12209 is added.
[32] Pursuant to CRTC Sections 12207 and 12208.
[33] As described by CRTC Section 12201.
[34] See Subdivision (a).
[35] Senate Floor Analysis, page 5, 6/15/20.
[36] See Subdivision (b)(1). It remains a credit carryover under CRTC Section 12207.
[37] See Subdivision (b)(2).
[38] Under Section 12208.
[39] As described by Section 12201.
[40] Allowed by Section 12206.
[41] CRTC Section 17039.3 is added.
[42] See Subdivision (b).
[43] Under CRTC Sections 25101 or 25110
[44] See Subdivision (b).
[45] Under CRTC Section 25101.15.
[46] Commending with CRTC Section 17041.
[47] Which is defined in CRTC Section 17039.
[48] See Subdivision (a).
[49] See Subdivision (c).
[50] As a result, the ten credits listed in Subdivision (c) are to be applied after any business credits are applied up to the $5 million credit limitation. This is pursuant to Subdivision (g).
[51] Allowed by CRTC Section 17052.
[52] Allowed by CRTC Section 17052.1.
[53] Allowed by CRTC Section 17052.6.
[54] Allowed by CRTC Section 17052.25.
[55] Allowed by CRTC Section 17053.5.
[56] Allowed by CRTC Section 17054.
[57] Allowed by CRTC Section 17054.5.
[58] Allowed by CRTC Section 17054.7.
[59] Allowed by CRTC Section 17058.
[60] Allowed by CRTC Section 17061.
[61] Under Section 17039.
[62] See Subdivision (e).
[63] See Subdivision (f).
[64] Subdivision (h) provides that Chapter 3.5 ((commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section
[65] CRTC Section 17053.95 is amended.
[66] It does so by amending subdivision (c)(3) and changing “succeeding five taxable years” to “succeeding eight taxable years.”
[67] CRTC Section 17276.23 is added.
[68] See Subdivision (c), which specifies that the NOL suspension does not apply to a taxpayer with a net business income of less than one million dollars for the taxable year or to a taxpayer with a modified adjusted gross income of less than one million dollars for the taxable year.
[69] The CRTC generally conforms to Internal Revenue Code Section 172.
[70] See Subdivision (a).
[71] See Subdivision (b).
[72] Senate Floor Analysis, page 5, 6/15/20.
[73] CRC Section 17935 is amended.
[74] Which is defined in Subdivision (a).
[75] See Subdivision (f)(1).
[76] See Subdivision (f)(2).
[77] CRTC Section 17941 is amended.
[78] Which is defined in Subdivision (a).
[79] See Subdivision (g)(1).
[80] See Subdivision (g)(2).
[81] CRTC Section 17948 is amended.
[82] Which is defined in Subdivision (a).
[83] See Subdivision (e)(1).
[84] See Subdivision (e)(2).
[85] Senate Floor Analysis, page 5, 6/15/20.
[86] CRTC Section 19533 is amended.
[87] Subdivision (a)(1) is amended to include payment of advanced premium subsides in excess of the amount allowed under Title 25 (commencing with Section 100800) of the Government Code.
[88] CRTC Section 23036 is amended.
[89] See CRTC Section 23636.
[90] It does so by adding subdivision (d)(1)(W) as follows: For taxable years beginning on or after January 1, 2020, and before January 1, 2026, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
[91] CRTC Section 23036.3 is added.
[92] See Subdivision (b).
[93] See Subdivision (a).
[94] Under CRTC Sections 25101or 25110.
[95] See Subdivision (b).
[96] See Subdivision (a).
[97] Under CRTC Section 25101.15.
[98] Commending with CRTC Section 17041.
[99] Which is defined in CRTC Section 17039.
[100] See Subdivision (a).
[101] Id.
[102] Allowed by CRTC Section 23610.5.
[103] See Subdivision (d).
[104] Under Section 23036.
[105] See Subdivision (e).
[106] See Subdivision (f).
[107] Subdivision (g) provides that Chapter 3.5 ((commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section
[108] CRTC Section 23695 is amended.
[109] It does so by amending subdivision (c)(4) and changing “succeeding five taxable years” to “succeeding eight taxable years.”
[110] CRTC Section 24416.23 is amended.
[111] See Subdivision (c), which specifies that the NOL suspension does not apply to a taxpayer with income subject to tax of less than one million dollars for the taxable year.
[112] The CRTC generally conforms to Internal Revenue Code Section 172.
[113] See Subdivision (a).
[114] See Subdivision (b).
[115] CRTC Section 61015 is amended.
[116] It does so by adding the following language as subdivision (c)(3): The maximum monthly penalty, under paragraph (1) or (2) of subdivision (a), for a responsible individual with an applicable household size of five or more individuals equals the maximum monthly penalty for a responsible individual with an applicable household size of five individuals.
[117] CRTC Section 61020 is amended.
[118] The technical changes are mainly to subdivisions (a)(1) and (a)(3) by changing the word employee to applicable household member.
[119] CRTC Section 61030 is amended.
[120] It does so by simply add the word regulation to subdivision (c).
[121] CVC Section 426 is amended.
[122] The additional cross-references added are Sections 4456, 4750.6.
[123] CVC Section 4456 is amended.
[124] The term “dealer” does not include specific individuals pursuant to Subdivision (a)(3)(B).
[125] See Subdivision (a)(3)(A).
[126] Id.
[127] This is required by Part 1, commencing with Section 6001, of Division 2 of the CRTC.
[128] CVC Section 4750.6 is amended.
[129] See Subdivision (b).
[130] See Subdivision (a)(1).
[131] See Subdivision (c).
[132] Chapter 34, Statutes of 2019, Section 12.
[133] It did so by amending subdivisions (b)(2)(B) and (c)(2)(B).
[134] CRTC Section 41 provides: “(a) Notwithstanding any other law, any bill, introduced on or after January 1, 2020, that would authorize a new tax expenditure under Part 10 (commencing with Section 17001) of Division 2, Part 11 (commencing with Section 23001) of Division 2, or both, or that would authorize an exemption from the taxes imposed by Part 1 (commencing with Section 6001) of Division 2, shall contain all of the following:
(1) Specific goals, purposes, and objectives that the tax expenditure will achieve.
(2) Detailed performance indicators for the Legislature to use when measuring whether the tax expenditure meets the goals, purposes, and objectives stated in the bill.
(3) Data collection requirements to enable the Legislature to determine whether the tax expenditure is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. The requirements shall include the specific data and baseline measurements to be collected and remitted in each year the tax expenditure is in effect, in order for the Legislature to measure the change in performance indicators, and the specific taxpayers, state agencies, or other entities required to collect and remit data.
(b) For purposes of this section, “tax expenditure” means a credit, deduction, exclusion, exemption, or any other tax benefit as provided for by the state.
(c) Taxpayer information collected pursuant to this section is subject to Sections 7056.5 and 19542.
[135] The full statement is set forth as follows: a) It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to Sections 9, 10, and 11 of this act. (b) With respect to Sections 17935, 17941, and 17948 of the Revenue and Taxation Code, as amended by this act, the Legislature finds and declares as follows: (1) The goal of this act is to help and reduce costs for first-year California small businesses. Existing law imposes an annual minimum franchise tax of eight hundred dollars ($800) on every corporation, and an annual tax of eight hundred dollars ($800) on every limited liability company (LLC), limited partnership (LP), and limited liability partnership (LLP), which may be difficult to afford for first-year businesses. As such, these taxes may stifle economic growth and job creation and may inhibit the formation of many small businesses. (2) The performance indicator for this act is the number of first-year businesses that are affected by the act. (3) Notwithstanding Section 19542 of the Revenue and Taxation Code, on or before January 1, 2023, and on or before January 1 each year thereafter through, and including, January 1, 2024, the Franchise Tax Board shall submit an annual report to the Legislature on the performance of first-year corporations, LLC, LPs, and LLPs in the state using the data in paragraph (2). The report required by this paragraph shall be submitted pursuant to Section 9795 of the Government Code.
[136] Referred to as a Section 2230 waiver.
[137] It does so by using the following language: Notwithstanding Section 2230 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any sales and use tax revenues lost by it under Sections 2 and 3 of this act as required by Section 2230 of the Revenue and Taxation Code.
[138] It does so by using the following language: This act is a bill providing for appropriations related to the Budget Bill within the meaning of subdivision (e) of Section 12 of Article IV of the California Constitution, has been identified as related to the budget in the Budget Bill, and shall take effect immediately.
[139] See Article IV, Section 12(e)(1).
[140] See CRTC Section 23609.
