Bill Text: CA AB1836 | 2009-2010 | Regular Session | Amended
Bill Title: Personal income tax: rates.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-05-10 - In committee: Set, second hearing. Held under submission. [AB1836 Detail]
Download: California-2009-AB1836-Amended.html
BILL NUMBER: AB 1836 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 5, 2010
INTRODUCED BY Assembly Member Furutani
FEBRUARY 12, 2010
An act to amend Section 6390 of the Revenue and Taxation
Code, relating to taxation. An act to amend Sections
17041 and 17062 of the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1836, as amended, Furutani. Sales tax: exemption:
rentals. Personal income tax: rates.
The Personal Income Tax Law imposes a tax upon taxable income at
various rates depending upon the amount of that income, and also
imposes an alternative minimum tax based upon specified tax
preference items.
This bill would declare that it is the intent of the Legislature
to reinstate income tax brackets for the highest income earners to
address the state's budget problems.
This bill would, for any taxable year beginning on or after
January 1, 2011, and before January 1, 2016, increase the tax rate
applicable to taxable income over specified amounts to 10% and 11%,
and increase the alternative minimum tax rate to 8.5%.
This bill would result in a change in state taxes for the purpose
of increasing state revenues within the meaning of Section 3 of
Article XIII A of the California Constitution, and thus would
require for passage the approval of 2/3 of the membership of each
house of the Legislature.
This bill would take effect immediately as a tax levy.
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.
Existing law exempts from the computation of the amount of the sales
tax the rentals payable under a lease of tangible personal property,
under specified conditions.
This bill would make technical, nonsubstantive changes to those
provisions.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: no yes .
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all
of the following:
(a) For taxable years beginning on and after January 1, 1991, and
ending on or before January 1, 1996, the Legislature and Governor
Pete Wilson addressed the budget deficits during that period, in
part, by slightly increasing the personal income tax rates applied to
the state's highest income earners. Governor Wilson enacted a
temporary increase in personal income tax rates during a time of
severe recession in California, which was the last time California
experienced fiscal distress until now.
(b) The restoration of the higher personal income tax rates,
previously imposed for the period from January 1, 1991, to January 1,
1996, for the state's highest income earners would address the state'
s structural budget problems without adverse economic impact and to
protect education, health, and public safety funding for
Californians.
(c) In order to protect education funding and vital health and
safety services for all Californians, it is the intent of the
Legislature, for the taxable years beginning on or after January 1,
2011, and before January 1, 2016, to reinstate income tax brackets
for the highest income earners. An income tax rate of 10 percent will
be reinstated for the portion of the taxable income of an individual
that exceeds two hundred fifty thousand dollars ($250,000) and for
that portion of taxable income of married taxpayers filing jointly
that exceeds five hundred thousand dollars ($500,000). An income tax
rate of 11 percent will be reinstated for the portion of the taxable
income of an individual that exceeds four hundred thousand dollars
($400,000) and for that portion of the taxable income of married
persons filing jointly that exceeds eight hundred thousand dollars
($800,000). While similar to the tax brackets imposed by Governor
Wilson in the 1990s, the tax brackets temporarily established by this
legislation are less restrictive.
SEC. 2. Section 17041 of the Revenue
and Taxation Code is amended to read:
17041. (a) (1) There shall be imposed for each taxable year upon
the entire taxable income of every resident of this state who is not
a part-year resident, except the head of a household as defined in
Section 17042, taxes in the following amounts and at the following
rates upon the amount of taxable income computed for the taxable year
as if the resident were a resident of this state for the entire
taxable year and for all prior taxable years for any carryover items,
deferred income, suspended losses, or suspended deductions:
If the taxable income The tax is:
is:
Not over $3,650........ 1% of the taxable income
Over $3,650 but not
over $8,650.......... $36.50 plus 2% of the
excess
over $3,650
Over $8,650 but not
over $13,650......... $136.50 plus 4% of the
excess
over $8,650
Over $13,650 but not
over $18,950......... $336.50 plus 6% of the
excess
over $13,650
Over $18,950 but not
over $23,950......... $654.50 plus 8% of the
excess
over $18,950
$1,054.50 plus 9.3% of
Over $23,950........... the
excess
over $23,950
(2) (A) For taxable years beginning on or after January 1, 2009,
and before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.25 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
does not provide notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This subparagraph shall cease to be operative
for taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this subparagraph shall cease
to be operative for taxable years beginning on or after January 1,
2013.
(B) For taxable years beginning on or after January 1, 2009, and
before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.125 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
provides notification to the Joint Legislative Budget Committee on or
before April 1, 2009, pursuant to Section 99030 of the Government
Code. This subparagraph shall cease to be operative for taxable years
beginning on or after January 1, 2011, unless the Director of
Finance makes the notification pursuant to Section 99040 of the
Government Code, in which case this subparagraph shall cease to be
operative for taxable years beginning on or after January 1, 2013.
(3) (A) For any taxable year beginning on or after January 1,
2011, and before January 1, 2016, the income tax brackets and rates
set forth in paragraph (1) shall be modified each year by the
following:
(i) For that portion of taxable income that is over two hundred
fifty thousand dollars ($250,000) but not over four hundred thousand
dollars ($400,000) the tax rate is 10 percent of the excess over two
hundred fifty thousand dollars ($250,000).
(ii) For that portion of taxable income that is over four hundred
thousand dollars ($400,000), the rate is 11 percent of the excess
over four hundred thousand dollars ($400,000).
(B) The income tax brackets specified in this paragraph shall be
recomputed, as otherwise provided in subdivision (h), only for
taxable years beginning on and after January 1, 2012.
(b) (1) There shall be imposed for each taxable year upon the
taxable income of every nonresident or part-year resident, except the
head of a household as defined in Section 17042, a tax as calculated
in paragraph (2).
(2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income of a nonresident or part-year
resident," as defined in subdivision (i), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (a) on the
entire taxable income of the nonresident or part-year resident as if
the nonresident or part-year resident were a resident of this state
for the taxable year and as if the nonresident or part-year resident
were a resident of this state for all prior taxable years for any
carryover items, deferred income, suspended losses, or suspended
deductions, divided by the amount of that income.
(c) (1) There shall be imposed for each taxable year upon the
entire taxable income of every resident of this state who is not a
part-year resident for that taxable year, when the resident is the
head of a household, as defined in Section 17042, taxes in the
following amounts and at the following rates upon the amount of
taxable income computed for the taxable year as if the resident were
a resident of the state for the entire taxable year and for all prior
taxable years for carryover items, deferred income, suspended
losses, or suspended deductions:
If the taxable income The tax is:
is:
Not over $7,300......... 1% of the taxable income
Over $7,300 but not
over $17,300.......... $73 plus 2% of the
excess
over $7,300
Over $17,300 but not
over $22,300.......... $273 plus 4% of the
excess
over $17,300
Over $22,300 but not
over $27,600.......... $473 plus 6% of the
excess
over $22,300
Over $27,600 but not
over $32,600.......... $791 plus 8% of the
excess
over $27,600
$1,191 plus 9.3% of the
Over $32,600............ excess
over $32,600
(2) (A) For taxable years beginning on or after January 1, 2009,
and before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.25 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
does not provide notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This subparagraph shall cease to be operative
for taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this subparagraph shall cease
to be operative for taxable years beginning on or after January 1,
2013.
(B) For taxable years beginning on or after January 1, 2009, and
before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.125 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
provides notification to the Joint Legislative Budget Committee on or
before April 1, 2009, pursuant to Section 99030 of the Government
Code. This subparagraph shall cease to be operative for taxable years
beginning on or after January 1, 2011, unless the Director of
Finance makes the notification pursuant to Section 99040 of the
Government Code, in which case this subparagraph shall cease to be
operative for taxable years beginning on or after January 1, 2013.
(3) (A) For any taxable year beginning on or after January 1,
2011, and before January 1, 2016, the income tax brackets and rates
set forth in paragraph (1) shall be modified each year by the
following:
(i) For that portion of taxable income that is over four hundred
thousand dollars ($400,000) but not over six hundred thousand dollars
($600,000), the tax rate is 10 percent of the excess over four
hundred thousand dollars ($400,000).
(ii) For that portion of taxable income that is over six hundred
thousand dollars ($600,000), the tax rate is 11 percent of the excess
over six hundred thousand dollars ($600,000).
(B) The income tax brackets specified in this paragraph shall be
recomputed, as otherwise provided in subdivision (h), only for
taxable years beginning on and after January 1, 2012.
(d) (1) There shall be imposed for each taxable year upon the
taxable income of every nonresident or part-year resident when the
nonresident or part-year resident is the head of a household, as
defined in Section 17042, a tax as calculated in paragraph (2).
(2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income of a nonresident or part-year
resident," as defined in subdivision (i), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (c) on the
entire taxable income of the nonresident or part-year resident as if
the nonresident or part-year resident were a resident of this state
for the taxable year and as if the nonresident or part-year resident
were a resident of this state for all prior taxable years for any
carryover items, deferred income, suspended losses, or suspended
deductions, divided by the amount of that income.
(e) There shall be imposed for each taxable year upon the taxable
income of every estate, trust, or common trust fund taxes equal to
the amount computed under subdivision (a) for an individual having
the same amount of taxable income.
(f) The tax imposed by this part is not a surtax.
(g) (1) Section 1(g) of the Internal Revenue Code, relating to
certain unearned income of minor children taxed as if the parent's
income, shall apply, except as otherwise provided.
(2) Section 1(g)(7)(B)(ii)(II) of the Internal Revenue Code,
relating to income included on parent's return, is modified, for
purposes of this part, by substituting "1 percent" for "15 percent."
(h) For each taxable year beginning on or after January 1, 1988,
the Franchise Tax Board shall recompute the income tax brackets
prescribed in subdivisions (a) and (c). That computation shall be
made as follows:
(1) The California Department of Industrial
Relations shall transmit annually to the Franchise Tax Board the
percentage change in the California Consumer Price Index for all
items from June of the prior calendar year to June of the current
calendar year, no later than August 1 of the current calendar year.
(2) The Franchise Tax Board shall do both of the following:
(A) Compute an inflation adjustment factor by adding 100 percent
to the percentage change figure that is furnished pursuant to
paragraph (1) and dividing the result by 100.
(B) Multiply the preceding taxable year income tax brackets by the
inflation adjustment factor determined in subparagraph (A) and round
off the resulting products to the nearest one dollar ($1).
(i) (1) For purposes of this part, the term "taxable income of a
nonresident or part-year resident" includes each of the following:
(A) For any part of the taxable year during which the taxpayer was
a resident of this state (as defined by Section 17014), all items of
gross income and all deductions, regardless of source.
(B) For any part of the taxable year during which the taxpayer was
not a resident of this state, gross income and deductions derived
from sources within this state, determined in accordance with Article
9 of Chapter 3 (commencing with Section 17301) and Chapter 11
(commencing with Section 17951).
(2) For purposes of computing "taxable income of a nonresident or
part-year resident" under paragraph (1), the amount of any net
operating loss sustained in any taxable year during any part of which
the taxpayer was not a resident of this state shall be limited to
the sum of the following:
(A) The amount of the loss attributable to the part of the taxable
year in which the taxpayer was a resident.
(B) The amount of the loss which, during the part of the taxable
year the taxpayer is not a resident, is attributable to California
source income and deductions allowable in arriving at taxable income
of a nonresident or part-year resident.
(3) For purposes of computing "taxable income of a nonresident or
part-year resident" under paragraph (1), any carryover items,
deferred income, suspended losses, or suspended deductions shall only
be includable or allowable to the extent that the carryover item,
deferred income, suspended loss, or suspended deduction was derived
from sources within this state, calculated as if the nonresident or
part-year resident, for the portion of the year he or she was a
nonresident, had been a nonresident for all prior years.
(j) Notwithstanding any other law to the contrary, the amount of
tax imposed by this section for the taxable year upon the taxable
income of a taxpayer shall be reduced by an amount equal to the tax
imposed by Section 17043 upon that same taxable income.
SEC. 3. Section 17062 of the Revenue
and Taxation Code is amended to read:
17062. (a) In addition to the other taxes imposed by this part,
there is hereby imposed for each taxable year, a tax equal to the
excess, if any, of--
(1) The tentative minimum tax for the taxable year, over
(2) The regular tax for the taxable year.
(b) For purposes of this chapter, each of the following shall
apply:
(1) The tentative minimum tax shall be computed in accordance with
Sections 55 to 59, inclusive, of the Internal Revenue Code, except
as otherwise provided in this part.
(2) The regular tax shall be the amount of tax imposed by Section
17041 or 17048, before reduction for any credits against the tax,
less any amount imposed under paragraph (1) of subdivision (d) and
paragraph (1) of subdivision (e) of Section 17560.
(3) (A) The provisions of Section 55(b)(1) of the Internal Revenue
Code shall be modified to provide that the tentative minimum tax for
the taxable year shall be equal to the following percent of so much
of the alternative minimum taxable income for the taxable year as
exceeds the exemption amount, before reduction for any credits
against the tax:
(i) For any taxable year beginning on or after January 1, 1991,
and before January 1, 1996, 8.5 percent.
(ii) For any taxable year beginning on or after January 1, 1996,
and before January 1, 2009, 7 percent.
(iii) For taxable years beginning on and after January 1, 2009,
and before January 1, 2011, or January 1, 2013, as applicable, 7.25
percent. This clause shall become operative only if the Director of
Finance does not provide notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This clause shall cease to be operative for
taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this clause shall cease to be
operative for taxable years beginning on or after January 1, 2013.
(iv) For taxable years beginning on and after January 1, 2009, and
before January 1, 2011, or January 1, 2013, as applicable, 7.125
percent. This clause shall become operative only if the Director of
Finance provides notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This clause shall cease to be operative for
taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this clause shall cease to be
operative for taxable years beginning on or after January 1, 2013.
(v) For any taxable year beginning on or after January 1, 2011, or
January 1, 2013, as applicable, for which clause (iii) or (iv)
ceases to be operative, 7 percent and before
January 1, 2016, 8.5 percent .
(vi) For any taxable year beginning on or after January 1, 2016, 7
percent.
(B) In the case of a nonresident or part-year resident, the
tentative minimum tax shall be computed by multiplying the
alternative minimum taxable income of the nonresident or part-year
resident, as defined in subparagraph (C), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (b) on the
alternative minimum taxable income of the nonresident or part-year
resident as if the nonresident or part-year resident were a resident
of this state for the taxable year and as if the nonresident or
part-year resident were a resident of this state for all prior
taxable years for any carryover items, deferred income, suspended
losses, or suspended deductions, divided by the amount of that
income.
(C) For purposes of this section, the term "alternative minimum
taxable income of a nonresident or part-year resident" includes each
of the following:
(i) For any period during which the taxpayer was a resident of
this state (as defined by Section 17014), all items of alternative
minimum taxable income (as modified for purposes of this chapter),
regardless of source.
(ii) For any period during which the taxpayer was not a resident
of this state, alternative minimum taxable income (as modified for
purposes of this chapter) which were derived from sources within this
state, determined in accordance with Article 9 of Chapter 3
(commencing with Section 17301) and Chapter 11 (commencing with
Section 17951).
(iii) For purposes of computing "alternative minimum taxable
income of a nonresident or part-year resident," any carryover items,
deferred income, suspended losses, or suspended deductions shall only
be allowable to the extent that the carryover item, suspended loss,
or suspended deduction was derived from sources within this state.
(4) The provisions of Section 55(b)(2) of the Internal Revenue
Code, relating to alternative minimum taxable income, shall be
modified to provide that alternative minimum taxable income shall not
include the income, adjustments, and items of tax preference
attributable to any trade or business of a qualified taxpayer.
(A) For purposes of this paragraph, "qualified taxpayer" means a
taxpayer who meets both of the following:
(i) Is the owner of, or has an ownership interest in, a trade or
business.
(ii) Has aggregate gross receipts, less returns and allowances, of
less than one million dollars ($1,000,000) during the taxable year
from all trades or businesses of which the taxpayer is the owner or
has an ownership interest, in the amount of that taxpayer's
proportionate interest in each trade or business.
(B) For purposes of this paragraph, "aggregate gross receipts,
less returns and allowances" means the sum of the gross receipts of
the trades or businesses that the taxpayer owns and the proportionate
interest of the gross receipts of the trades or businesses that the
taxpayer owns and of pass-through entities in which the taxpayer
holds an interest.
(C) For purposes of this paragraph, "gross receipts, less returns
and allowances" means the sum of the gross receipts from the
production of business income, as defined in subdivision (a) of
Section 25120, and the gross receipts from the production of
nonbusiness income, as defined in subdivision (d) of Section 25120.
(D) For purposes of this paragraph, "proportionate interest"
means:
(i) In the case of a pass-through entity that reports a profit for
the taxable year, the taxpayer's profit interest in the entity at
the end of the taxpayer's taxable year.
(ii) In the case of a pass-through entity that reports a loss for
the taxable year, the taxpayer's loss interest in the entity at the
end of the taxpayer's taxable year.
(iii) In the case of a pass-through entity that is sold or
liquidates during the taxable year, the taxpayer's capital account
interest in the entity at the time of the sale or liquidation.
(E) (i) For purposes of this paragraph, "proportionate interest"
includes an interest in a pass-through entity.
(ii) For purposes of this paragraph, "pass-through entity" means
any of the following:
(I) A partnership, as defined by Section 17008.
(II) An "S corporation," as provided in Chapter 4.5 (commencing
with Section 23800) of Part 11.
(III) A regulated investment company, as provided in Section
24871.
(IV) A real estate investment trust, as provided in Section 24872.
(V) A real estate mortgage investment conduit, as provided in
Section 24874.
(5) For taxable years beginning on or after January 1, 1998,
Section 55(d)(1) of the Internal Revenue Code, relating to exemption
amount for taxpayers other than corporations is modified, for
purposes of this part, to provide the following exemption amounts in
lieu of those contained therein:
(A) Fifty-seven thousand two hundred sixty dollars ($57,260) in
the case of either of the following:
(i) A joint return.
(ii) A surviving spouse.
(B) Forty-two thousand nine hundred forty-five dollars ($42,945)
in the case of an individual who is both of the following:
(i) Not a married individual.
(ii) Not a surviving spouse.
(C) Twenty-eight thousand six hundred thirty dollars ($28,630) in
the case of either of the following:
(i) A married individual who files a separate return.
(ii) An estate or trust.
(6) For taxable years beginning on or after January 1, 1998,
Section 55(d)(3) of the Internal Revenue Code, relating to the
phaseout of exemption amount for taxpayers other than corporations is
modified, for purposes of this part, to provide the following
phaseout of exemption amounts in lieu of those contained therein:
(A) Two hundred fourteen thousand seven hundred twenty-five
dollars ($214,725) in the case of a taxpayer described in
subparagraph (A) of paragraph (5).
(B) One hundred sixty-one thousand forty-four dollars ($161,044)
in the case of a taxpayer described in subparagraph (B) of paragraph
(5).
(C) One hundred seven thousand three hundred sixty-two dollars
($107,362) in the case of a taxpayer described in subparagraph (C) of
paragraph (5).
(7) For each taxable year beginning on or after January 1, 1999,
the Franchise Tax Board shall recompute the exemption amounts
prescribed in paragraph (5) and the phaseout of exemption amounts
prescribed in paragraph (6). Those computations shall be made as
follows:
(A) The California Department of Industrial
Relations shall transmit annually to the Franchise Tax Board the
percentage change in the California Consumer Price Index for all
items from June of the prior calendar year to June of the current
calendar year, no later than August 1 of the current calendar year.
(B) The Franchise Tax Board shall do both of the following:
(i) Compute an inflation adjustment factor by adding 100 percent
to the percentage change figure that is furnished pursuant to
subparagraph (A) and dividing the result by 100.
(ii) Multiply the preceding taxable year exemption amounts and the
phaseout of exemption amounts by the inflation adjustment factor
determined in clause (i) and round off the resulting products to the
nearest one dollar ($1).
(c) (1) (A) Section 56(a)(6) of the Internal Revenue Code as in
effect on January 1, 1997, relating to installment sales of certain
property, shall not apply to payments received in taxable years
beginning on or after January 1, 1997, with respect to dispositions
occurring in taxable years beginning after December 31, 1987.
(B) This paragraph shall not apply to taxable years beginning on
or after January 1, 1998.
(2) Section 56(b)(1)(E) of the Internal Revenue Code, relating to
standard deduction and deduction for personal exemptions not allowed,
is modified, for purposes of this part, to deny the standard
deduction allowed by Section 17073.5.
(3) Section 56(b)(3) of the Internal Revenue Code, relating to
treatment of incentive stock options, shall be modified to
additionally provide the following:
(A) Section 421 of the Internal Revenue Code shall not apply to
the transfer of stock acquired pursuant to the exercise of a
California qualified stock option under Section 17502.
(B) Section 422
(c)(2) of the Internal Revenue Code shall apply in any case where the
disposition and inclusion of a California qualified stock option for
purposes of this chapter are within the same taxable year and that
section shall not apply in any other case.
(C) The adjusted basis of any stock acquired by the exercise of a
California qualified stock option shall be determined on the basis of
the treatment prescribed by this paragraph.
(d) The provisions of Section 57(a)(5) of the Internal Revenue
Code, relating to tax-exempt interest shall not apply.
(e) Section 57(a) of the Internal Revenue Code, relating to items
of tax preference, is modified to include as an item of tax
preference an amount equal to one-half of the amount excluded from
gross income for the taxable year under Section 18152.5.
(f) The provisions of Section 59(a) of the Internal Revenue Code,
relating to the alternative minimum tax foreign tax credit, shall not
apply.
SEC. 4. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SECTION 1. Section 6390 of the Revenue and
Taxation Code is amended to read:
6390. There are exempted from the computation of the amount of
the sales tax the rentals payable under a lease of tangible personal
property in either of the following cases:
(a) When the rentals are required to be included in the measure
of the use tax.
(b) When the property is situated outside this state.
