SB 1372, as amended, DeSaulnier. Corporation taxes: tax rates: publicly held corporations.
The Corporation Tax Law imposes taxes according to or measured by net income at a rate of 8.84%, or for financial institutions, at a rate of 10.84%, as specified.
This bill would, for taxable years beginning on and after January 1, 2015, revise that rate for taxpayers that are publicly held corporations, as defined, and instead impose an applicable tax rate from 7% to 13%, or for financial institutions, from 9% to 15%, based on the compensation ratio, as defined, of the corporation. This bill would increase the applicable tax rate by 50% for those taxpayers that have a specified decrease in full-time employees employed in the United States as compared to an increase in contracted and foreign full-time employees, as described.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax 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 act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
Vote: 2⁄3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 23151 of the Revenue and Taxation Code
2 is amended to read:
(a) With the exception of banks and financial
4corporations, every corporation doing business within the limits
5of this state and not expressly exempted from taxation by the
6provisions of the Constitution of this state or by this part, shall
7annually pay to the state, for the privilege of exercising its
8corporate franchises within this state, a tax according to or
9measured by its net income, to be computed at the rate of 7.6
10percent upon the basis of its net income for the next preceding
11income year, or if greater, the minimum tax specified in Section
1223153.
13(b) For calendar or fiscal years ending after June 30, 1973, the
14rate of tax shall be 9
percent instead of 7.6 percent as provided by
15subdivision (a).
16(c) For calendar or fiscal years ending in 1980 to 1986, inclusive,
17the rate of tax shall be 9.6 percent.
18(d) For calendar or fiscal years ending in 1987 to 1996,
19inclusive, and for any income year beginning before January 1,
201997, the tax rate shall be 9.3 percent.
21(e) For any income year beginning on or after January 1, 1997,
22the tax rate shall be 8.84 percent. The change in rate provided in
23this subdivision shall be made without proration otherwise required
24by Section 24251.
25(f) (1) For the first taxable year beginning on or after January
261, 2000, the tax imposed under
this section shall be the sum of
27both of the following:
28(A) A tax according to or measured by net income, to be
29computed at the rate of 8.84 percent upon the basis of the net
30income for the next preceding income year, but not less than the
31minimum tax specified in Section 23153.
32(B) A tax according to or measured by net income, to be
33computed at the rate of 8.84 percent upon the basis of the net
34income for the first taxable year beginning on or after January 1,
352000, but not less than the minimum tax specified in Section 23153.
P3 1(2) Except as provided in paragraph (1) and subdivision (g), for
2taxable years beginning on or after January 1, 2000, the tax
3imposed under this section shall be a tax according to or measured
4by
net income, to be computed at the rate of 8.84 percent upon the
5basis of the net income for that taxable year, but not less than the
6minimum tax specified in Section 23153.
7(g) (1) For taxable years beginning on or after January 1, 2015,
8the tax imposed under this section upon a publicly held corporation,
9as defined in Section 162(m)(2), relating to publicly held
10corporation, of the Internal Revenue Code, shall be a tax according
11to or measured by net income, to be computed at the applicable
12tax rate upon the basis of the net income for that taxable year, as
13determined by paragraph (2), but not less than the minimum tax
14specified in Section 23153.
15(2) The applicable tax rate shall be determined as follows:
16
| If the compensation ratio is: | The applicable tax rate is: |
| Over zero but not over 25 | 7% upon the basis of net income |
| Over 25 but not over 50 | 7.5% upon the basis of net income |
| Over 50 but not over 100 | 8% upon the basis of net income |
| Over 100 but not over 150 | 9% upon the basis of net income |
| Over 150 but not over 200 | 9.5% upon the basis of net income |
| Over 200 but not over 250 | 10% upon the basis of net income |
| Over 250 but not over 300 | 11% upon the basis of net income |
| Over 300 but not over 400 | 12% upon the basis of net income |
| Over 400 | 13% upon the basis of net income |
28(3) For purposes of this subdivision:
begin insert
29(A) “Client employer” means an individual or entity that
30receives workers to perform labor or services within the usual
31course of business of the individual or entity from a labor
32contractor.
36 33(A)
end delete
34begin insert(B)end insert (i) “Compensation,” in the case of employees of the
35taxpayer other than the chief operating officer or the highest paid
36employee, means wages as defined in Section 3121(a) of the
37Internal Revenue Code, relating to wages, paid by the taxpayer
38during a calendar year to employees of the taxpayer.
39(ii) “Compensation,” in the case of the chief operating officer
40and the highest paid employee of the taxpayer, means total
P4 1compensation as reported in the Summary Compensation Table
2reported to the Securities and Exchange Commission pursuant to
3Item 402 of Regulation S-K of the Securities and Exchange
4Commission.
7 5(B)
end delete
6begin insert(C)end insert (i) “Compensation ratio” for a taxable year means a ratio
7where the numerator is the amount equal to the greater of the
8compensation of the chief operating officer or the highest paid
9employee of the taxpayer for the calendar year preceding the
10beginning of the taxable year and the denominator is the amount
11equal to the median compensation of all employees employed by
12the taxpayerbegin insert, including all contracted employees under contract
13with the taxpayer,end insert in the United States for the calendar year
14preceding the beginning of the taxable year.
15(ii) For taxpayers that are required to be
included in a combined
16report under Section 25101 or authorized to be included in a
17combined report under Section 25101.15, the calculation of the
18ratio in clause (i) shall be made by treating all taxpayers that are
19required to be or authorized to be included in a combined report
20as a single taxpayer.
21(D) “Contracted employee” means an employee who works for
22a labor contractor.
23(E) “Labor contractor” means an individual or entity that
24 contracts with a client employer to supply workers to perform
25labor or services or otherwise provides workers to perform labor
26or services within the usual course of business for the client
27employer.
28(4) A taxpayer subject to this subdivision shall furnish a detailed
29compensation report to the Franchise Tax Board with its timely
30filed original return.
31(5) (A) If the total number of full-time employees, determined
32on an annual full-time equivalent basis, employed by the taxpayer
33in the United States for a taxable year is reduced by more than 10
34percent, as compared to the total number of full-time employees,
35determined on an annual full-time equivalent basis, employed by
36the taxpayer in the United States for the preceding taxable year
37and the total number of contracted employees or foreign full-time
38employees, determined on an annual full-time equivalent basis, of
39the taxpayer for that taxable year has increased, as compared with
40the total number of contracted
employees or foreign full-time
P5 1employees, determined on an annual full-time equivalent basis, of
2the taxpayer for the preceding taxable year, then the applicable
3tax rate determined under paragraph (2) shall be increased by 50
4percent. For taxpayers who first commence doing business in this
5state during the taxable year, the number of full-time employees,
6contracted employees, and foreign full-time employees for the
7immediately preceding prior taxable year shall be zero.
8(B) For purposes of this paragraph:
9(i) “Annual full-time equivalent” means either of the following:
10(I) In the case of a full-time employee paid hourly qualified
11wages, “annual full-time equivalent” means the total number of
12hours worked for the
qualified taxpayer by the employee, not to
13exceed 2,000 hours per employee, divided by 2,000.
14(II) In the case of a salaried full-time employee, “annual
15full-time equivalent” means the total number of weeks worked for
16the qualified taxpayer by the employee divided by 52.
17(ii) “Contracted full-time employee” means an individual
18engaged by the taxpayer to provide a specific set of services
19established pursuant to the terms and conditions of a written
20employment contract that delineates the length of employment,
21the salary and bonuses (if any) to be paid, and the benefits that
22accrue to that individual.
16 23(iii)
end delete
24begin insert(ii)end insert “Foreign full-time employee” means a full-time employee
25of the taxpayer that is employed at a location other than the United
26States.
19 27(iv)
end delete
28begin insert(iii)end insert “Full-time employee” means an employee of the taxpayer
29that satisfies either of the following requirements:
30(I) Is paid compensation by the taxpayer for services of not less
31than an average ofbegin delete 35end deletebegin insert
30end insert hours per week.
32(II) Is a salaried employee of the taxpayer and is paid
33compensation during the taxable year for full-time employment,
34within the meaning of Section 515 of the Labor Code.
35(6) The Franchise Tax Board may prescribe rules, guidelines,
36or procedures necessary or appropriate to carry out the purposes
37of this subdivision, including any guidelines regarding the
38determination of wages, average compensation, and compensation
39ratio. Chapter 3.5 (commencing with Section 11340) of Part 1 of
40Division 3 of Title 2 of the Government Code shall not apply to
P6 1any rule, guideline, or procedure prescribed by the Franchise Tax
2Board pursuant to this subdivision.
This act provides for a tax levy within the meaning of
4Article IV of the Constitution and shall go into immediate effect.
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