AB 40 — Income taxes: exclusions: deductions: sales: single sales factor: sales and use taxes: manufacturing exemption.

Summary

(1) The Sales and Use Tax Law imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. That law provides various exemptions from those taxes. On and after March 1, 2012, this bill would provide partial exemptions equal to specified percentages of state sales and use taxes imposed at a combined rate of 5% for the sale of, and the storage, use, or other consumption in this state of, tangible personal property, as defined, purchased for use by a qualified person, as defined, primarily in any stage of manufacturing, processing, refining, fabricating, or recycling of tangible personal property; in research and development; to maintain, repair, measure, or test specified tangible personal property; and by a contractor for use in a construction contract with a qualified person, as specified. The bill would require the Franchise Tax Board and the State Board of Equalization to provide specified information to the Director of Finance and would require the director to make certain determinations regarding whether this act has caused or will cause a net increase or decrease in the amount of revenues and to correspondingly increase or decrease the exemption to certain taxpayers that received only a limited exemption, as specified. The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated in these laws. This bill would specify that this exemption does not apply to local sales and use taxes and transactions and use taxes. (2) The Personal Income Tax Law imposes taxes based upon taxable income. That law also allows specified credits, exemptions, and exclusions, and imposes an alternative minimum tax with respect to certain items of tax preferences. This bill would, for taxable years beginning on or after January 1, 2012, exclude from taxable income under this law an amount equal to 10% of the business income of a taxpayer, not to exceed $5,000, as specified, but would require the amount excluded to be included as an item of tax preferences for purposes of the alternative minimum tax. (3) The Personal Income Tax Law allows a standard deduction, as defined, in computing the income subject to tax. This bill would, for taxable years beginning on or after January 1, 2012, increase the standard deduction by 27%, as specified. (4) The Corporation Tax Law imposes taxes measured by income at a rate of 8.84%, as specified. The Corporation Tax Law imposes a minimum franchise tax of $800, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state, or doing business in this state, and a tax in an amount equal to the minimum franchise tax on every limited liability company registered, qualified to transact business, or doing business in this state, as specified. This bill would, for taxable years beginning on and after January 1, 2012, reduce that rate to 8.34% on the amount of net income that is less than or equal to $50,000 for the taxable year, except as specified. The bill would reduce the annual minimum franchise tax to $750 for taxable years beginning on or after January 1, 2012. (5) The Corporation Tax Law imposes taxes measured by income and, in the case of a business with income derived from or attributable to sources both within and without this state, apportions the income between this state and other states and foreign countries in accordance with a specified 4-factor formula based on the property, payroll, and sales within and without this state, except that in the case of an apportioning trade or business that derives more than 50% of its gross business receipts from conducting one or more qualified business activities, as defined, business income is apportioned in accordance with a specified 3-factor formula. That law, for taxable years beginning on or after January 1, 2011, allows a taxpayer to have that income apportioned in accordance with a single sales factor formula, except as provided, pursuant to an irrevocable annual election, as specified. That law also provides that sales of tangible and intangible personal property are in this state in accordance with specified criteria. This bill would, for taxable years beginning on or after January 1, 2012, revise the rules which determine whether a taxpayer is doing business within this state, revise the provisions which determine whether specific sales occur in this state, and require a taxpayer, except as provided, to apportion its income in accordance with a single sales factor. (6) This bill would include a change in state statute that would result in a taxpayer paying a higher tax the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature. (7) The California Constitution authorizes the Governor to declare a fiscal emergency and to call the Legislature into special session for that purpose. Governor Schwarzenegger issued a proclamation declaring a fiscal emergency, and calling a special session for this purpose, on December 6, 2010. Governor Brown issued a proclamation on January 20, 2011, declaring and reaffirming that a fiscal emergency exists and stating that his proclamation supersedes the earlier proclamation for purposes of that constitutional provision. This bill would state that it addresses the fiscal emergency declared and reaffirmed by the Governor by proclamation issued on January 20, 2011, pursuant to the California Constitution. (8) This bill would take effect immediately as a tax levy.

Bill Text

• Amended 09/08/11 - Amended Assembly Current pdf September 08, 2011
• Amended 09/01/11 - Amended Assembly pdf September 01, 2011
• Introduced 08/29/11 - Introduced pdf August 29, 2011
• AB40 View text html

Action History

1. September 14, 2011

   From Senate committee without further action.

2. September 10, 2011

   From committee: Do pass and re-refer to Com. on RLS. (Ayes 5. Noes 2.) (September 9). Re-referred to Com. on RLS.

3. September 08, 2011

   Referred to Com. on GOV. & F.

4. September 08, 2011

   In Senate. Read first time. To Com. on RLS. for assignment.

5. September 08, 2011

   Read third time. Urgency clause adopted. Passed. Ordered to the Senate. (Ayes 54. Noes 15. Page 323.).

6. September 08, 2011

   (Ayes 53. Noes 23. Page 322.)

7. September 08, 2011

   Motion to amend (set 2 incorporated into previous amendments).

8. September 08, 2011

   Assembly Rule 63 suspended. (Ayes 49. Noes 27. Page 313.)

9. September 08, 2011

   (Ayes 52. Noes 25. Page 313.)

10. September 08, 2011

    Amended.

11. September 08, 2011

    Ordered to third reading.

12. September 08, 2011

    (Ayes 50. Noes 27. Page 312.)

13. September 08, 2011

    Withdrawn from committee.

14. September 02, 2011

    Re-referred to Com. on BUDGET.

15. September 01, 2011

    From committee chair, with author's amendments: Amend, and re-refer to Com. on BUDGET. Read second time and amended.

16. August 31, 2011

    Referred to Com. on BUDGET.

17. August 30, 2011

    From printer.

18. August 29, 2011

    Read first time. To print.

Sponsors

• Smyth · Cosponsor
• Ma · Cosponsor
• Fuentes · Primary
• Feuer · Cosponsor
• Blumenfield · Cosponsor
• Fletcher · Cosponsor
• Travis Allen · Cosponsor

Votes

Subjects