(1) The Administrative Procedure Act governs the procedure for the adoption, amendment, or repeal of regulations by state agencies and for the review of those regulatory actions by the Office of Administrative Law. Existing law makes the act inapplicable in certain circumstances, including pursuant to a legal ruling of counsel issued by the Franchise Tax Board or the State Board of Equalization.
This bill would also make the act inapplicable pursuant to a legal ruling of counsel issued by the California Department of Tax and Fee Administration.
(2) The California Tire Recycling Act, until January 1, 2034, requires a person who purchases a new tire, as defined, to pay a California tire fee of $1.75 per tire, for deposit, except for 112% retained by retailers and as provided below, in the California Tire Recycling Management Fund for expenditure by the Department of Resources Recycling and Recovery upon appropriation by the Legislature for prescribed purposes related to disposal and use of used tires. Commencing January 1, 2034, existing law reduces the California tire fee to $0.75 per tire and changes the retailers' share to 3%. Existing law authorizes the department, in carrying out the act, to solicit and use any and all expertise available in, and to contract or cooperate with, other state agencies, as provided. Existing law authorizes the department to contract with the California Department of Tax and Fee Administration to collect the California tire fee. Existing law requires the department, or its authorized agent, to be reimbursed for its costs of collection, auditing, and making refunds associated with the California Tire Recycling Management Fund, in an amount not to exceed 3% of the total annual revenue deposited in the fund.
Existing law requires the payment of sales and use taxes, and specified taxes, fees, and surcharges that are administered by the California Department of Tax and Fee Administration under the provisions of the Sales and Use Tax Law and the Fee Collection Procedures Law, respectively. A violation of the Fee Collection Procedures Law is a crime.
This bill would repeal the authorization to solicit and use any and all expertise available in, and to contract or cooperate with, other state agencies for purposes of the California Tire Recycling Act. The bill would also repeal the requirement that the department be reimbursed for its costs of collection, auditing, and making refunds associated with the California Tire Recycling Management Fund, as described. The bill would also require the California Department of Tax and Fee Administration to collect the fee imposed by the act pursuant to the Fee Collection Procedures Law. By expanding the scope of crimes, the bill would impose a state-mandated local program.
(3) The Sales and Use Tax Law (SUT) imposes taxes 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, measured by sales price. The SUT relieves a retailer of liability for sales and use tax, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off, either for income tax purposes or based on generally accepted accounting principles, as specified, and defines "retailer" for that purpose to include certain entities affiliated with the retailer, as specified. The SUT also, if an account is held by a lender, entitles a retailer or lender that makes a proper election, as specified, to a deduction or refund of the tax that the retailer has previously reported and paid if certain conditions are met, including that the account has been found worthless and written off by the lender pursuant to the provision described above.
This bill would sunset the definition of "retailer" described above on January 1, 2025, and would require an account to have been found worthless and written off by the lender before January 1, 2025, in order for the lender to be entitled to the deduction or refund described above. The bill would, on January 1, 2028, repeal the provision described above regarding accounts held by a lender.
(4) Under existing law, the taxes imposed by the Sales and Use Tax Law are due and payable to the California Department of Tax and Fee Administration on or before the last day of the month next succeeding each quarterly period. Existing law requires that a return for the preceding quarterly period be filed with the department on or before the last day of the month following each quarterly period, as provided. The Historic Venue Restoration and Resiliency Act requires a return filed with the department to report gross receipts for sales tax purposes to segregate the taxable sales on a line or a separate form, as prescribed by the department, if the place of sale in this state is on or within the real property of a confirmed historic venue, as defined, on the day of a qualified event and requires the department to report the amount of the total gross receipts segregated on the returns filed for the prior fiscal year to the Department of Finance on or before November 1 of each year, as prescribed. The act creates the Historic Venue Restoration and Resiliency Fund and continuously appropriates the moneys in the fund for transmission by the Controller to cities and counties with historic venues, as specified. The act requires an amount equal to 5% of the total amount of gross receipts, or adjusted gross receipts, for the prior fiscal year reported to the Department of Finance by the department to be included in the next annual Governor's Budget for deposit into the fund and requires the Controller to, no later than 30 days after the enactment of the annual Budget Act, transfer the amount appropriated by the Legislature to the Controller, as described above, to the fund. Existing law repeals these provisions on July 1, 2030.
This bill would, among other changes related to the administration of the act, require that the return filed with the department, and the report to the Department of Finance, as described above, specify the taxable sales made at a qualified event for each confirmed historic venue. The bill would extend operation of the act's provisions until November 1, 2030, but would limit the requirement to segregate taxable sales on the return to qualified events that occur on or before June 30, 2029. The bill would additionally require, no later than 15 days after enactment of the annual Budget Act, the Department of Finance to, for each confirmed historic venue located within the geographic boundaries of a city or county, report to the Controller the amounts to be allocated from the fund to each city and county, as prescribed.
The act requires a city or county with a confirmed historic venue to notify, within 90 days of any qualified event at the confirmed historic venue, any retailers subject to the return requirement described above making sales at the confirmed historic venue.
This bill would instead require a city or county, or its designee, to, at least 10 days before a qualified event scheduled to take place at a confirmed historic venue within the geographic boundaries of that city or county, notify any retailers subject to the return requirement described above that the city or county, or its designee, knows, or has reason to know, will be making sales during that qualified event of that return requirement.
The act requires, on or before January 1, 2027, and annually thereafter, a city or county, as defined, that receives money from the fund to deliver a report to the department regarding how that money is being used.
This bill would delete that provision.
The act requires the department to annually deliver a report to specified committees of the Legislature concerning, among other things, the amount of revenue transmitted to a city or county with respect to each confirmed historic venue.
This bill would specify that this annual report is due November 1 of each year. The bill would require the Controller to provide the department with the information related to the allocation of revenue to cities and counties, as described above, on or before September 1 of each year.
(5) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions in computing the income that is subject to the taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law disallows the net operating loss deduction, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2022.
This bill would disallow the net operating loss deduction for taxable years beginning on or after January 1, 2024, and before January 1, 2027.
(6) The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws. Existing law, for taxable years beginning on or after January 1, 2020, and before January 1, 2022, limits the total tax reduction by all business credits, as defined, to $5,000,000 per taxable year, and allows the amounts disallowed by that limit to be carried over, as specified.
This bill would similarly apply a $5,000,000 business credit limit and related carryover provisions to taxable years beginning on or after January 1, 2024, and before January 1, 2027, as provided, unless a specified exception applies. The bill would also state the intent of the Legislature to enact legislation allowing taxpayers to utilize their credits after the limitation period ends by electing to receive a refund of those tax credits, as specified.
(7) The Sales and Use Tax Law, in lieu of specified credits allowed under the Personal Income Tax Law and the Corporation Tax Law for qualified expenditures paid or incurred by a taxpayer for the production of a qualified motion picture, allows a qualified taxpayer or affiliate to make an irrevocable election to apply that income tax credit amount against qualified sales and use taxes imposed on the qualified taxpayer in the reporting periods in the following 5 years. Under existing law, amounts included in the election are excluded from the $5,000,000 business credit limitation described above.
Existing law, for irrevocable elections made on and after June 29, 2020, imposes, until January 1, 2022, a cap of $5,000,000 per taxable year on those tax credit amounts the taxpayer would otherwise be allowed to apply against those sales and use taxes for taxable years beginning on or after January 1, 2020, and before January 1, 2022, as specified.
This bill similarly, for irrevocable elections made on and after the operative date of this bill, would impose, until January 1, 2027, that $5,000,000 per taxable year cap for taxable years beginning on or after January 1, 2024, and before January 1, 2027, as specified.
(8) The Personal Income Tax Law, beginning on or after January 1, 2015, in modified conformity with federal income tax laws, allows an Earned Income Tax Credit against personal income tax and a payment from the Tax Relief and Refund Account for an allowable credit in excess of tax liability to an eligible individual that is equal to that portion of the Earned Income Tax Credit allowed by federal law, as determined by the earned income tax credit adjustment factor, as specified. That credit phases out based on specified tables as the qualified taxpayer's income increases.
The Personal Income Tax Law also allows a refundable young child tax credit against the taxes imposed under that law for each taxable year beginning on or after January 1, 2019, and a refundable foster youth tax credit for taxable years beginning on or after January 1, 2022, to a qualified taxpayer in a specified amount multiplied by the earned income tax credit adjustment factor, as provided. Those credits are reduced by a specified amount for each $100 the qualified taxpayer earns beyond a threshold amount.
This bill would require the Franchise Tax Board to calculate a graduated reduction amount for the young child tax credit and the foster youth tax credit so that the amount of those credits is equal to zero for a qualified taxpayer that earns more than the maximum amount of earned income that results in a California Earned Income Tax Credit greater than $0. The bill would apply that new graduated reduction amount for taxable years beginning on or after January 1, 2024. By increasing the payments from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.
(9) The Corporation Tax Law, for taxable years beginning on or after January 1, 2016, and before January 1, 2031, allows, with regard to the manufacture of a new advanced strategic aircraft for the United States Air Force, a credit against the taxes imposed under that law for 1712% of qualified wages, as defined, paid or incurred by the qualified taxpayer to qualified full-time employees, subject to specified limitations. The Corporation Tax Law provides for an alternative minimum tax and provides that, except for specified credits, no credit shall reduce the regular tax, as defined, below the tentative minimum tax. Existing law, for taxable years beginning on or after January 1, 2020, and before January 1, 2026, authorizes the strategic aircraft credit to reduce the regular tax below the tentative minimum tax.
This bill would extend that authorization through taxable years beginning before January 1, 2031.
(10) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow a credit calculated based on a taxpayers qualified enhanced oil recovery costs, as defined.
This bill would provide the above-referenced credit applies for taxable years beginning before January 1, 2024, and would repeal the credit effective December 1, 2024.
(11) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow a deduction for intangible drilling and development costs in the case of oil and gas wells and geothermal wells, and a deduction for depletion of natural resource deposits. That law calculates the deduction for depletion of natural resource deposits as a percentage of gross income from the property in the case of specified natural resources, including oil, gas, and shale.
This bill would disallow the deduction for intangible drilling and development costs in the case of oil and gas wells paid or incurred on or after January 1, 2024. The bill would also disallow, for taxable years beginning on or after January 1, 2024, the calculation of depletion as a percentage of gross income from the property for specified natural resources, including coal, oil, oil shale, and gas.
(12) Existing federal law provides that refiners of crude oil with average daily refinery runs for a taxable year that are greater than 75,000 barrels cannot calculate a depletion deduction as a percentage of gross income, as described above. Existing state law does not conform to this exception for large producers.
This bill would repeal the provision that provides state law does not conform to the above-described exception.
(13) The Personal Income Tax Law conforms as of a specified date to federal income tax laws with respect to itemized deductions, including business deductions and items not deductible, except as specifically provided. The Corporation Tax Law does not conform to those federal income tax provisions, but specifically provides for deductions for purposes of that law.
Existing federal income tax laws disallow a deduction or credit for business expenses of a trade or business whose activities consist of trafficking specified controlled substances, including marijuana. For taxable years beginning on or after January 1, 2020, and before January 1, 2025, the Personal Income Tax Law does not conform to those federal income tax law provisions with respect to deductions.
This bill would extend the provisions of the Personal Income Tax Law that specifically do not conform to federal income tax law with respect to the above-referenced deductions through taxable years beginning before January 1, 2030.
(14) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax law, allow a deduction for qualified conservation contributions, as defined. Existing federal law, the Consolidated Appropriations Act, 2023, among other things, imposed limitations and reporting requirements upon the deduction for qualified conservation contributions. That act also made conforming changes relating to statute of limitations and penalties, as specified.
This bill, for contributions made on or after January 1, 2024, would conform state law to the above-referenced changes in federal law, except as provided, and would make additional conforming changes.
(15) Existing law authorizes the Franchise Tax Board to implement an alternative communication method that would allow the Franchise Tax Board to provide notification to the taxpayer in a preferred electronic communication method designated by the taxpayer that a specified notice, statement, bill, or other communication is available for viewing in the taxpayer's folder on the Franchise Tax Board's internet website, and would allow the taxpayer to file a protest, notification, and other communication to the Franchise Tax Board in a secure manner. This provision ceases to be operative and is repealed on January 1, 2025.
This bill would extend that provision indefinitely.
(16) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, provide for the postponement of certain tax-related deadlines in the case of a declared state of emergency. Under existing law, the Franchise Tax Board determines whether a taxpayer is affected by a state of emergency declared by the Governor.
This bill would instead require the Director of Finance to determine whether a taxpayer is affected by a state of emergency. The bill would require the above-described federal income tax laws, relating to the postponement of certain tax-related deadlines, to apply to an impacted taxpayer during an additional relief period that requests relief, as specified. The bill would define various terms for these purposes, including an impacted taxpayer to mean a taxpayer who, among other things, requests relief, as specified, and who is required, upon request, to submit supporting documentation related to the declared disaster, as provided. The bill would define supporting documentation to mean, among other things, a statement, signed under penalty of perjury, from a tax professional indicating the impacted taxpayer's books and records, as described, were destroyed in the disaster area or jurisdiction for which the Governor has proclaimed a state of emergency. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would authorize the Franchise Tax Board to adopt regulations that are necessary or appropriate to implement these provisions, as specified. The bill would state that its provisions apply to any federally declared disaster or Governor-proclaimed state of emergency on or after the effective date of the bill.
(17) The Personal Income Tax Law and the Corporation Tax Law authorize the Franchise Tax Board to enter an agreement for purposes of collecting delinquent accounts with respect to amounts assessed or imposed under those laws. Existing law requires the Franchise Tax Board to notify the C