HomeMy WebLinkAbout2021-03-09 - AGENDA REPORTS - STATE LEGISLATION AB 91 (2)O
Agenda Item: 4
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CITY OF SANTA CLARITA AGENDA REPORT
CONSENT CALENDAR
CITY MANAGER APPROVAL:1
DATE: March 9, 2021
SUBJECT: STATE LEGISLATION: ASSEMBLY BILL 91
DEPARTMENT: City Manager's Office
PRESENTER: Masis Hagobian
RECOMMENDED ACTION
City Council adopt the City Council Legislative Committee recommendation to support
Assembly Bill 91 (Valladares) and transmit position statements to Assemblywoman Valladares,
Santa Clarita's state legislative delegation, appropriate legislative committees, Governor
Newsom, League of California Cities, and other stakeholder organizations.
BACKGROUND
Authored by Assemblywoman Suzette Valladares (R-38-Santa Clarita), Assembly Bill 91
reduces the minimum state franchise tax for small businesses and microbusinesses.
Existing law imposes an annual minimum franchise tax of $800 on every corporation
incorporated in this state, qualified to transact intrastate business in this state, or doing business
in this state. Existing law also imposes an annual tax in an amount equal to the minimum
franchise tax on every limited partnership, limited liability partnership, and limited liability
company doing business in this state.
This bill, for taxable years beginning on or after January 1, 2021, reduces the minimum franchise
tax to $400 for small businesses and $200 for microbusinesses. The bill, for taxable years
beginning on or after January 1, 2021, would also reduce the annual tax for the limited liability
companies that are small businesses to $400 and that are microbusinesses to $200.
As defined in Section 14837 of the Government Code:
• A "Small Business" is an independently owned and operated business that has 100 or
fewer employees and averages annual gross receipts of $15 million or less over the
previous three years.
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• A "Microbusiness" is a small business that has average annual gross receipts of $5
million or less over the previous three years.
The recommendation to support is consistent with the City of Santa Clarita 2021 Executive and
Legislative Platform. Specifically, Component 33 under the "State" section advises that the City
Council "Advocate for measures that support the City's continued efforts to retain and promote
the growth or expansion of local businesses."
Assembly Bill 91 is pending a hearing in the Assembly Committee on Revenue and Taxation.
The City Council Legislative Committee met on February 26, 2021, and recommends that the
City Council adopt a "support" position on Assembly Bill 91.
ALTERNATIVE ACTION
1. Adopt an "oppose" position on Assembly Bill 91
2. Adopt a "neutral" position on Assembly Bill 91
3. Take no action on Assembly Bill 91
4. Refer Assembly Bill 91 back to the Legislative Committee
5. Other action, as determined by the City Council
FISCAL IMPACT
The resources required to implement the recommended action are contained within the City of
Santa Clarita's adopted FY 2020-21 budget.
ATTACHMENTS
Assembly Bill 91 - Bill Text
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CALIFORNIA LEGISLATURE-2021-22 REGULAR SESSION
ASSEMBLY BILL
No. 91
Introduced by Assembly Member Valladares
December 7, 2020
An act to amend Sections 17935, 17941, 17948, and 23153 of the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 91, as introduced, Valladares. Taxation: corporations: minimum
franchise tax: limited liability companies: annual tax: small businesses:
microbusinesses.
Existing law imposes an annual 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. Existing law also imposes an annual tax in an amount equal
to the minimum franchise tax on every limited partnership, limited
liability partnership, and limited liability company doing business in
this state, as specified. Existing law requires any bill authorizing a new
tax expenditure to contain, among other things, specific goals, purposes,
and objectives the tax expenditure will achieve, detailed performance
indicators, and data collection requirements.
This bill, for taxable years beginning on or after January 1, 2021,
would reduce the minimum franchise tax to $400 for small businesses,
as defined, and to $200 for microbusinesses, as defined. The bill, for
taxable years beginning on or after January 1, 2021, would also reduce
the annual tax for the limited liability companies described above that
are small businesses to $400 and that are microbusinesses to $200. The
bill would also state the intent of the Legislature to comply with the
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additional information requirement for any bill authorizing a new tax
expenditure.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State -mandated local program: no.
The people of the State of California do enact as follows:
1 SECTION 1. Section 17935 of the Revenue and Taxation Code
2 is amended to read:
3 17935. (a) For each
4 taxable year beginning on or after January 1, 1997, every limited
5 partnership doing business in this state (as defined by Section
6 23101) and required to file a return under Section 18633 shall pay
7 annually to this state a tax for the privilege of doing business in
8 this state in an amount equal to the applicable amount specified
9 in Section-244-5-3- 23153, except as otherwise provided in this
10 section.
11 (b) (1) In addition to any limited partnership that is doing
12 business in this state and therefore is subject to the tax imposed
13 by subdivision (a), for each taxable year beginning on or after
14 January 1, 1997, every limited partnership that has executed,
15 acknowledged, and filed a certificate of limited partnership with
16 the Secretary of State pursuant to Section 15621 or 15902.01 of
17 the Corporations Code, and every foreign limited partnership that
18 has registered with the Secretary of State pursuant to Section 15692
19 or 15909.01 of the Corporations Code, shall pay annually the tax
20 prescribed in subdivision (a). The tax shall be paid for each taxable
21 year, or part thereof, until a certificate of cancellation is filed on
22 behalf of the limited partnership with the office of the Secretary
23 of State pursuant to Section 15623, 15696, 15902.03, or 15909.07
24 of the Corporations Code.
25 (2) If a taxpayer files a return with the Franchise Tax Board that
26 is designated its final return, that board shall notify the taxpayer
27 that the tax imposed by this chapter is due annually until a
28 certificate of cancellation is filed with the Secretary of State
29 pursuant to Section 15623, 15696, 15902.03, or 15909.07 of the
30 Corporations Code.
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1 (c) The tax imposed by this chapter shall be due and payable
2 on the date the return is required to be filed under former Section
3 18432 or 18633.
4 (d) For purposes of this section, "limited partnership" means
5 any partnership formed by two or more persons under the laws of
6 this state or any other jurisdiction and having one or more general
7 partners and one or more limited partners.
8 (e) Notwithstanding subdivision (b), any limited partnership
9 that ceased doing business prior to January 1, 1997, filed a final
10 return with the Franchise Tax Board for a taxable year ending
11 before January 1, 1997, and filed a certificate of dissolution with
12 the Secretary of State pursuant to Section 15623 of the
13 Corporations Code prior to January 1, 1997, shall not be subject
14 to the tax imposed by this chapter for any period following the
15 date the certificate of dissolution was filed with the Secretary of
16 State, but only if the limited partnership files a certificate of
17 cancellation with the Secretary of State pursuant to Section 15623
18 of the Corporations Code. In the case where a notice of proposed
19 deficiency assessment of tax or a notice of tax due (whichever is
20 applicable) is mailed after January 1, 2001, the first sentence of
21 this subdivision shall not apply unless the certificate of cancellation
22 is filed with the Secretary of State not later than 60 days after the
23 date of the mailing of the notice.
24 (f) (1) Every limited partnership doing business in this state as
25 described in subdivision (a) that files a certificate of limited
26 partnership or registers with the Secretary of the State pursuant to
27 subdivision (b) on or after January 1, 2021, and before January 1,
28 2024, shall not be subject to the tax imposed under this section for
29 its first taxable year.
30 (2) This subdivision shall become operative only for a taxable
31 year in which any budget measure appropriates one dollar ($1) or
32 more to the Franchise Tax Board for the costs associated with
33 administration of this subdivision.
34 (g) (1) Except as otherwise provided, for taxable years
35 beginning on or after January 1, 2021, a limited partnership shall
36 pay to the state an annual tax of
37 (A) If the limited partnership is a small business, four hundred
38 dollars ($400).
39 (B) If the limited partnership is a microhusiness, two hundred
40 dollars ($200).
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1 (2) For purposes of this subdivision, both of the following
2 definitions shall apply:
3 (A) "Microbusiness " has the same meaning as that term is
4 defined in Section 14837 of the Government Code.
5 (B) "Small business" has the same meaning as that term is
6 defined in Section 14837 of the Government Code.
7 SEC. 2. Section 17941 of the Revenue and Taxation Code is
8 amended to read:
9 17941. (a) , For each
10 taxable year beginning on or after January 1, 1997, a limited
I I liability company doing business in this state (as defined in Section
12 23101) shall pay annually to this state a tax for the privilege of
13 doing business in this state in an amount equal to the applicable
14 amount specified in subdivision (d) of Section 23153 for the taxable
15 year, except as otherwise provided in this section.
16 (b) (1) In addition to any limited liability company that is doing
17 business in this state and is therefore subject to the tax imposed
18 by subdivision (a), for each taxable year beginning on or after
19 January 1, 1997, a limited liability company shall pay annually
20 the tax prescribed in subdivision (a) if articles of organization have
21 been accepted, or a certificate of registration has been issued, by
22 the office of the Secretary of State. The tax shall be paid for each
23 taxable year, or part thereof, until a certificate of cancellation of
24 registration or of articles of organization is filed on behalf of the
25 limited liability company with the office of the Secretary of State.
26 (2) If a taxpayer files a return with the Franchise Tax Board that
27 is designated as its final return, the Franchise Tax Board shall
28 notify the taxpayer that the annual tax shall continue to be due
29 annually until a certificate of dissolution is filed with the Secretary
30 of State pursuant to Section 17707.08 of the Corporations Code
31 or a certificate of cancellation is filed with the Secretary of State
32 pursuant to Section 17708.06 of the Corporations Code.
33 (c) The tax assessed under this section shall be due and payable
34 on or before the 15th day of the fourth month of the taxable year.
35 (d) For purposes of this section, "limited liability company"
36 means an organization, other than a limited liability company that
37 is exempt from the tax and fees imposed under this chapter
38 pursuant to Section 23701h or Section 23701x, that is formed by
39 one or more persons under the law of this state, any other country,
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1 or any other state, as a "limited liability company" and that is not
2 taxable as a corporation for California tax purposes.
3 (e) Notwithstanding anything in this section to the contrary, if
4 the office of the Secretary of State files a certificate of cancellation
5 pursuant to Section 17707.02 of the Corporations Code for any
6 limited liability company, then paragraph (1) of subdivision (f) of
7 Section 23153 shall apply to that limited liability company as if
8 the limited liability company were properly treated as a corporation
9 for that limited purpose only, and paragraph (2) of subdivision (f)
10 of Section 23153 shall not apply. Nothing in this subdivision
11 entitles a limited liability company to receive a reimbursement for
12 any annual taxes or fees already paid.
13 (f) (1) Notwithstanding any provision of this section to the
14 contrary, for taxable years beginning on or after January 1, 2020,
15 a limited liability company that is a small business solely owned
16 by a deployed member of the United States Armed Forces shall
17 not be subject to the tax imposed under this section for any taxable
18 year the owner is deployed and the limited liability company
19 operates at a loss or ceases operation.
20 (2) The Franchise Tax Board may promulgate regulations as
21 necessary or appropriate to carry out the purposes of this
22 subdivision, including a definition for "ceases operation."
23 (3) For the purposes of this subdivision, all of the following
24 definitions apply:
25 (A) "Deployed" means being called to active duty or active
26 service during a period when a Presidential Executive order
27 specifies that the United States is engaged in combat or homeland
28 defense. "Deployed" does not include either of the following:
29 (i) Temporary duty for the sole purpose of training or processing.
30 (ii) A permanent change of station.
31 (B) "Operates at a loss" means a limited liability company's
32 expenses exceed its receipts.
33 (C) "Small business" means a limited liability company with
34 total income from all sources derived from, or attributable to, the
35 state of two hundred fifty thousand dollars ($250,000) or less.
36 (4) This subdivision shall become inoperative for taxable years
37 beginning on or after January 1, 2030.
38 (g) (1) Every limited liability company doing business in this
39 state as described in subdivision (a) that organizes or registers with
40 the Secretary of the State pursuant to subdivision (b) on or after
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1 January 1, 2021, and before January 1, 2024, shall not be subject
2 to the tax imposed under this section for its first taxable year.
3 (2) This subdivision shall become operative only for a taxable
4 year in which any budget measure appropriates one dollar ($1) or
5 more to the Franchise Tax Board for the costs associated with
6 administration of this subdivision.
7 (h) (1) Except as otherwise provided, for taxable years
8 beginning on or afterdanuary 1, 2021, a limited liability company
9 shall pay to the state an annual tax of
10 (A) If the limited liability company is a small business, four
11 hundred dollars ($400).
12 (B) If the limited liability company is a microhusiness, two
13 hundred dollars ($200).
14 (2) For purposes of this subdivision, both of the following
15 definitions shall apply:
16 (A) "Microhusiness " has the same meaning as that term is
17 defined in Section 14837 of the Government Code.
18 (B) "Small business" has the same meaning as that term is
19 defined in Section 14837 of the Government Code.
20 SEC. 3. Section 17948 of the Revenue and Taxation Code is
21 amended to read:
22 17948. (a) For each
23 taxable year beginning on or after January 1, 1997, every limited
24 liability partnership doing business in this state (as defined in
25 Section 23101) and required to file a return under Section 18633
26 shall pay annually to the Franchise Tax Board a tax for the privilege
27 of doing business in this state in an amount equal to the applicable
28 amount specified in paragraph (1) of subdivision (d) of Section
29 23153 for the taxable year. year, except as otherwise provided in
30 this section.
31 (b) In addition to any limited liability partnership that is doing
32 business in this state and therefore is subject to the tax imposed
33 by subdivision (a), for each taxable year beginning on or after
34 January 1, 1997, every registered limited liability partnership that
35 has registered with the Secretary of State pursuant to Section 16953
36 of the Corporations Code and every foreign limited liability
37 partnership that has registered with the Secretary of State pursuant
38 to Section 16959 of the Corporations Code shall pay annually the
39 tax prescribed in subdivision (a). The tax shall be paid for each
40 taxable year, or part thereof, until any of the following occurs:
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(1) A notice of cessation is filed with the Secretary of State
pursuant to subdivision (b) of Section 16954 or 16960 of the
Corporations Code.
(2) A foreign limited liability partnership withdraws its
registration pursuant to subdivision (a) of Section 16960 of the
Corporations Code.
(3) The registered limited liability partnership or foreign limited
liability partnership has been dissolved and finally wound up.
(c) The tax assessed under this section shall be due and payable
on the date the return is required to be filed under Section 18633.
(d) If a taxpayer files a return with the Franchise Tax Board that
is designated as its final return, the Franchise Tax Board shall
notify the taxpayer that the annual tax shall continue to be due
annually until a certificate of cancellation is filed with the Secretary
of State pursuant to Section 16954 or 16960 of the Corporations
Code.
(e) (1) Every limited liability partnership doing business in this
state as described in subdivision (a) that registers with the Secretary
of the State pursuant to subdivision (b) on or after January 1, 2021,
and before January 1, 2024, shall not be subject to the tax imposed
under this section for its first taxable year.
(2) This subdivision shall become operative only for a taxable
year in which any budget measure appropriates one dollar ($1) or
more to the Franchise Tax Board for the costs associated with
administration of this subdivision.
(f) (1) Except as otherwise provided, for taxable years
beginning on or after January 1, 2021, a limited liability
partnership shall pay to the state an annual tax of
(A) If the limited liability partnership is a small business, four
hundred dollars ($400).
(B) If the limited liability partnership is a microhusiness, two
hundred dollars ($200).
(2) For purposes of this subdivision, both of the following
definitions shall apply:
(A) "Microhusiness " has the same meaning as that term is
defined in Section 14837 of the Government Code.
(B) "Small business" has the same meaning as that term is
defined in Section 14837 of the Government Code.
SEC. 4. Section 23153 of the Revenue and Taxation Code is
amended to read:
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1 23153. (a) Every corporation described in subdivision (b) shall
2 be subject to the minimum franchise tax specified in subdivision
3 (d) from the earlier of the date of incorporation, qualification, or
4 commencing to do business within this state, until the effective
5 date of dissolution or withdrawal as provided in Section 23331 or,
6 if later, the date the corporation ceases to do business within the
7 limits of this state.
8 (b) Unless expressly exempted by this part or the California
9 Constitution, subdivision (a) shall apply to each of the following:
10 (1) Every corporation that is incorporated under the laws of this
11 state.
12 (2) Every corporation that is qualified to transact intrastate
13 business in this state pursuant to Chapter 21 (commencing with
14 Section 2100) of Division 1 of Title 1 of the Corporations Code.
15 (3) Every corporation that is doing business in this state.
16 (c) The following entities are not subject to the minimum
17 franchise tax specified in this section:
18 (1) Credit unions.
19 (2) Nonprofit cooperative associations organized pursuant to
20 Chapter 1 (commencing with Section 54001) of Division 20 of the
21 Food and Agricultural Code that have been issued the certificate
22 of the board of supervisors prepared pursuant to Section 54042 of
23 the Food and Agricultural Code. The association shall be exempt
24 from the minimum franchise tax for five consecutive taxable years,
25 commencing with the first taxable year for which the certificate
26 is issued pursuant to subdivision (b) of Section 54042 of the Food
27 and Agricultural Code. This paragraph only applies to nonprofit
28 cooperative associations organized on or after January 1, 1994.
29 (d) (1) Except as provided in paragraph (2), paragraph (1) of
30 subdivision (f) of Section 23151, paragraph (1) of subdivision (f)
31 of Section 23181, and paragraph (1) of subdivision (c) of Section
32 23183, corporations subject to the minimum franchise tax shall
33 pay annually to the state a minimum franchise tax of eight httn
34 of
35 (A) Except as otherwise provided in subparagraph (B), eight
36 hundred dollars ($800).
37 (B) (i) For taxable years beginning on or after January], 2021:
38 (I) If the corporation is a small business, four hundred dollars
39 ($400).
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(II) If the corporation is a microbusiness, two hundred dollars
($200).
(ii) For purposes of this subparagraph, both of the following
definitions shall apply:
(I) "Microbusiness " has the same meaning as that term is
defined in Section 14837 of the Government Code.
(II) "Small business" has the same meaning as that term is
defined in Section 14837 of the Government Code.
(2) The minimum franchise tax shall be twenty-five dollars
($25) for each of the following:
(A) A corporation formed under the laws of this state whose
principal business when formed was gold mining, which is inactive
and has not done business within the limits of the state since 1950.
(B) A corporation formed under the laws of this state whose
principal business when formed was quicksilver mining, which is
inactive and has not done business within the limits of the state
since 1971, or has been inactive for a period of 24 consecutive
months or more.
(3) For purposes of paragraph (2), a corporation shall not be
considered to have done business if it engages in business other
than mining.
(e) Notwithstanding subdivision (a), for taxable years beginning
on or after January 1, 1999, and before January 1, 2000, every
"qualified new corporation" shall pay annually to the state a
minimum franchise tax of five hundred dollars ($500) for the
second taxable year. This subdivision shall apply to any corporation
that is a qualified new corporation and is incorporated on or after
January 1, 1999, and before January 1, 2000.
(1) The determination of the gross receipts of a corporation, for
purposes of this subdivision, shall be made by including the gross
receipts of each member of the commonly controlled group, as
defined in Section 25105, of which the corporation is a member.
(2) "Gross receipts, less returns and allowances reportable to
this state," 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.
(3) "Qualified new corporation" means a corporation that is
incorporated under the laws of this state or has qualified to transact
intrastate business in this state, that begins business operations at
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1 or after the time of its incorporation and that reasonably estimates
2 that it will have gross receipts, less returns and allowances,
3 reportable to this state for the taxable year of one million dollars
4 ($1,000,000) or less. "Qualified new corporation" does not include
5 any corporation that began business operations as a sole
6 proprietorship, a partnership, or any other form of business entity
7 prior to its incorporation. This subdivision shall not apply to any
8 corporation that reorganizes solely for the purpose of reducing its
9 minimum franchise tax.
10 (4) This subdivision shall not apply to limited partnerships, as
11 defined in Section 17935, limited liability companies, as defined
12 in Section 17941, limited liability partnerships, as described in
13 Section 17948, charitable organizations, as described in Section
14 23703, regulated investment companies, as defined in Section 851
15 of the Internal Revenue Code, real estate investment trusts, as
16 defined in Section 856 of the Internal Revenue Code, real estate
17 mortgage investment conduits, as defined in Section 860D of the
18 Internal Revenue Code, qualified Subchapter S subsidiaries, as
19 defined in Section 1361(b)(3) of the Internal Revenue Code, or to
20 the formation of any subsidiary corporation, to the extent
21 applicable.
22 (5) For any taxable year beginning on or after January 1, 1999,
23 and before January 1, 2000, if a corporation has qualified to pay
24 five hundred dollars ($500) for the second taxable year under this
25 subdivision, but in its second taxable year, the corporation's gross
26 receipts, as determined under paragraphs (1) and (2), exceed one
27 million dollars ($1,000,000), an additional tax in the amount equal
28 to three hundred dollars ($300) for the second taxable year shall
29 be due and payable by the corporation on the due date of its return,
30 without regard to extension, for that year.
31 (f) (1) Notwithstanding subdivision (a), every corporation that
32 incorporates or qualifies to do business in this state on or after
33 January 1, 2000, shall not be subject to the minimum franchise tax
34 for its first taxable year.
35 (2) This subdivision shall not apply to limited partnerships, as
36 defined in Section 17935, limited liability companies, as defined
37 in Section 17941, limited liability partnerships, as described in
38 Section 17948, charitable organizations, as described in Section
39 23703, regulated investment companies, as defined in Section 851
40 of the Internal Revenue Code, real estate investment trusts, as
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1 defined in Section 856 of the Internal Revenue Code, real estate
2 mortgage investment conduits, as defined in Section 860D of the
3 Internal Revenue Code, and qualified Subchapter S subsidiaries,
4 as defined in Section 1361(b)(3) of the Internal Revenue Code, to
5 the extent applicable.
6 (3) This subdivision shall not apply to any corporation that
7 reorganizes solely for the purpose of avoiding payment of its
8 minimum franchise tax.
9 (g) Notwithstanding subdivision (a), a domestic corporation, as
10 defined in Section 167 of the Corporations Code, that files a
11 certificate of dissolution in the office of the Secretary of State
12 pursuant to subdivision (b) of Section 1905 of the Corporations
13 Code, prior to its amendment by the act amending this subdivision,
14 and that does not thereafter do business shall not be subject to the
15 minimum franchise tax for taxable years beginning on or after the
16 date of that filing.
17 (h) The minimum franchise tax imposed by paragraph (1) of
18 subdivision (d) shall not be increased by the Legislature by more
19 than 10 percent during any calendar year.
20 (i) (1) Notwithstanding subdivision (a), for taxable years
21 beginning on or after January 1, 2020, a corporation that is a small
22 business solely owned by a deployed member of the United States
23 Armed Forces shall not be subject to the minimum franchise tax
24 for any taxable year the owner is deployed and the corporation
25 operates at a loss or ceases operation.
26 (2) The Franchise Tax Board may promulgate regulations as
27 necessary or appropriate to carry out the purposes of this
28 subdivision, including a definition for "ceases operation."
29 (3) For the purposes of this subdivision, all of the following
30 definitions apply:
31 (A) "Deployed" means being called to active duty or active
32 service during a period when a Presidential Executive order
33 specifies that the United States is engaged in combat or homeland
34 defense. "Deployed" does not include either of the following:
35 (i) Temporary duty for the sole purpose of training or processing.
36 (ii) A permanent change of station.
37 (B) "Operates at a loss" means negative net income as defined
38 in Section 24341.
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I (C) "Small business" means a corporation with total income
2 from all sources derived from, or attributable to, the state of two
3 hundred fifty thousand dollars ($250,000) or less.
4 (4) This subdivision shall become inoperative for taxable years
5 beginning on or after January 1, 2030.
6 SEC. 5. It is the intent of the Legislature to comply with Section
7 41 of the Revenue and Taxation Code.
8 SEC. 6. This act provides for a tax levy within the meaning of
9 Article IV of the California Constitution and shall go into
10 immediate effect.
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