AB 132: Taxation.

(1) Existing state sales and use tax laws impose 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. The Sales and Use Tax Law generally provides that the taxes are due and payable to the California Department of Tax and Fee Administration (CDTFA) quarterly on or before the last day of the month next succeeding each quarterly period and requires, for purposes of sales tax, a return to be filed by a seller that contains, among other information, the gross receipts of the seller during the preceding reporting period.

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 laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law, with respect to specified vehicles sold at retail on and after January 1, 2021, by a licensed dealer, except a new motor vehicle dealer, requires the dealer to pay the applicable sales tax, or use tax pursuant to the Transactions and Use Tax Law, to the Department of Motor Vehicles (DMV) acting for and on behalf of CDTFA within 30 days from the date of the sale. That law does not relieve the dealer of the obligation to file a return with CDTFA.

This bill, for reporting periods beginning on or after January 1, 2021, would instead require an application filed with DMV to be deemed a filed return with CDTFA, as provided. The bill would also authorize CDTFA to exempt a licensed dealer from the requirement to pay the applicable taxes to DMV if the dealer sold 1,000 or more vehicles at retail in the current or preceding calendar year and the dealer’s account is in good standing, as defined, with CDTFA.

(2) Existing law, the Marketplace Facilitator Act, administered by the CDTFA, provides that a marketplace facilitator, as defined, is considered the seller, retailer, and dealer for each sale facilitated through its marketplace, as defined, for purposes of determining whether that marketplace facilitator is required to register with the department under the Sales and Use Tax Law. That act provides, among other things, that any marketplace facilitator that is registered or required to register with the department under the Sales and Use Tax Law and who facilitates a retail sale of tangible personal property by a marketplace seller, as defined, is the retailer selling or making the sale of the tangible personal property sold through its marketplace for purposes of paying or collecting specified taxes and fees, including a fee administered pursuant to the Fee Collection Procedures Law, defined to include a covered electronic waste recycling fee pursuant to the Electronic Waste Recycling Act of 2003, as specified.

This bill would expand the application the Marketplace Facilitator Act to instead include any fee imposed pursuant to the Electronic Waste Recycling Act of 2003, as specified.

(3) Existing law authorizes cities and counties, subject to certain limitations and approval requirements, to levy a transactions and use tax for general or specific purposes, in accordance with the procedures and requirements set forth in the Transactions and Use Tax Law, including a requirement that the combined rate of all taxes that may be imposed in accordance with that law in the county not exceed 2%. Existing law authorizes the County of Sonoma or any city within the County of Sonoma to impose a transactions and use tax for general or specific purposes, and authorizes the Sonoma County Transportation Authority to impose a transactions and use tax for specific purposes, at a rate of no more than 1% that, in combination with other transactions and use taxes, would exceed the above-described combined rate limit of 2%, if certain requirements are met. Existing law conditionally repeals the additional authorization for the County of Sonoma, any city within that county, and the Sonoma County Transportation Authority, on January 1, 2026, if an ordinance proposing the tax has not been approved by that date.

This bill would recast and restate the authority granted to the County of Sonoma, any city within that county, or the Sonoma County Transportation Authority to clarify that the authority for each of those public entities is determined separately. The bill would state that this change is not a change in, but is declaratory of, existing law.

This bill would repeal the provision that conditionally repeals the authority granted to the County of Sonoma, any city within that county, or the Sonoma County Transportation Authority. The bill would instead require that any ordinance exercising this authority be approved by the voters voting on the ordinance before January 1, 2026.

(4) The Personal Income Tax Law, in conformity with federal income tax laws, defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income.

This bill, for taxable years beginning on or after January 1, 2025, and before January 1, 2030, would exclude from gross income retirement pay received by a qualified taxpayer, as defined, during the taxable year, not to exceed $20,000, from the federal government for service performed in the uniformed services, as defined. The bill, for taxable years beginning on or after January 1, 2025, and before January 1, 2030, would also exclude from gross income annuity payments received by a qualified taxpayer, as defined, during the taxable year, not to exceed $20,000, pursuant to a United States Department of Defense Survivor Benefit Plan.

This bill, for taxable years beginning on or after January 1, 2021, and before January 1, 2030, would provide an exclusion from gross income for any qualified taxpayer, as defined, for amounts received in settlement in connection with a wildfire in the state, as provided.

This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2029, would provide an exclusion from gross income for amounts received, on or after March 1, 2024, as compensation for specified costs and losses related to the Chiquita Canyon elevated temperature landfill event in the County of Los Angeles, as provided.

(5) Existing law establishes various means-tested public social services programs administered by counties to provide eligible recipients with certain benefits, including, but not limited to, cash assistance under the California Work Opportunity and Responsibility to Kids (CalWORKs) program, nutrition assistance under the CalFresh program, and health care services under the Medi-Cal program.

Existing law requires the State Department of Social Services, subject to an appropriation in the annual Budget Act, to administer the California Guaranteed Income Pilot Program to provide grants to eligible entities for the purpose of administering pilot programs and projects that provide a guaranteed income to participants. Existing law defines an eligible entity, for purposes of the program, as a nonprofit organization, as specified, or a city, county, or city and county.

This bill, to the extent permitted by federal law, would prohibit any Chiquita Canyon elevated temperature landfill event payment, as defined, received by a taxpayer from being considered income or resources when determining eligibility or benefit amounts for any means-tested program or guaranteed income payments, as defined. To the extent that the bill would expand eligibility for programs administered by counties, the bill would impose a state-mandated local program.

(6) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax law, allow a credit against the taxes imposed by those laws, for taxable years beginning on or after January 1, 2021, and before January 1, 2027, a credit for rehabilitation of certified historic structures, as defined, and, under the Personal Income Tax Law, for a qualified residence, as defined. Existing law limits the amount of rehabilitation tax credits that may be allocated to $50,000,000 per calendar year in the aggregate, plus any amount of unallocated tax credits from the prior calendar year. Existing law requires that $2,000,000 of that amount be set aside in each calendar year for taxpayers with qualified rehabilitation expenditures, as defined, for a certified historic structure that is a qualified residence. Existing law further requires that $8,000,000 of the total amount of credits be set aside for taxpayers with qualified rehabilitation expenditures of less than $1,000,000 for any other certified historic building that is not a qualified residence. Existing law requires that any amount of the $2,000,000 or $8,000,000 set aside, as described, that is not allocated during that calendar year becomes available for allocation in the next calendar year, as provided.

This bill would, beginning July 1, 2025, instead require that any amount of the $2,000,000 or $8,000,000 set aside, as described above, not allocated during the calendar year be made available within 90 days to taxpayers with qualified rehabilitation expenditures of $1,000,000 or more for affordable housing projects that were eligible for, but did not receive, an allocation, as provided. The bill would also provide that awards shall be made until the tax credits are depleted.

(7) The Personal Income Tax Law and the Corporation Tax Law allow numerous motion picture credits. Existing law, for taxable years beginning on or after January 1, 2025, allows a motion picture credit (motion picture credit 4.0) to be allocated by the California Film Commission on or after July 1, 2025, and before July 1, 2030, in an amount equal to 20% or 25% of qualified expenditures for the production of a qualified motion picture in this state, and limits the aggregate amount of the credit that may be allocated for a fiscal year to $330,000,000, as specified. Existing law allows a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit under the motion picture credit 4.0 exceeds the qualified taxpayer’s tax liability for the taxable year, and allows the excess to be carried over, as specified.

This bill, for the above-described motion picture credit, would increase the aggregate amount of the credit that may be allocated for a fiscal year to $750,000,000, as specified, and would correct erroneous cross-references in those provisions. By requiring additional moneys to be paid from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.

(8) The Personal Income Tax Law also imposes an annual tax on every limited partnership, limited liability partnership, and limited liability company doing business in this state, as specified, in an amount equal to the minimum franchise tax. The Corporation Tax Law imposes an annual tax on “S” corporations at a rate of 1.5% of its net income, or if greater, the minimum franchise tax, as specified.

Existing law, for taxable years beginning on or after January 1, 2021, and before January 1, 2026, authorizes a partnership or “S” corporation that meets certain other requirements, including a requirement that the entity make a payment of a specified amount on or before June 15 of the year of the election, to elect to pay an elective tax at a rate based on its net income, as specified, for the taxable year. That law, for taxable years beginning on or after January 1, 2021, and before January 1, 2026, allows a credit against the personal income tax to a taxpayer, other than a partnership, that is a partner, shareholder, or member of an entity that elects to pay the elective tax, in an amount equal to a specified percentage of the partner’s, shareholder’s, or member’s pro rata share or distributive share, as applicable, of income subject to the elective tax paid by the entity.

This bill would allow the above-referenced credit in the qualified taxpayer’s taxable year beginning on or after January 1, 2026, and before January 1, 2027, if the qualified taxpayer is a partner, shareholder, or member of an entity that elects to pay the elective tax for their taxable year beginning on or after January 1, 2025, and before January 1, 2026, and files its return on a fiscal year basis, as provided.

This bill would also extend the operation of both the elective tax and the credit described above for taxable years beginning on or after January 1, 2026, and before January 1, 2031. The bill would remove the requirement that the electing entity make the specified payment by June 15. The bill would also reduce the credit allowed to a taxpayer against personal income tax if the electing entity does not make a payment by June 15, or makes a payment that is less than the required amount, as specified.

This bill would make additional conforming changes.

(9) The Corporation Tax Law imposes taxes measured by income and, in the case of a business with business income derived from or attributable to sources both within and without this state, apportions the business income between this state and other states and foreign countries in accordance with a sales factor, as specified, 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, business income is apportioned in accordance with a specified 3-factor formula. Existing law defines qualified business activities for this purpose to include, among other things, banking and financial business activities, as defined.

This bill, for taxable years beginning on or after January 1, 2025, would remove banking and financial business activities from the definition of qualified business activities for purposes of apportionment.

(10) Existing law authorizes a juvenile or superior court, county, the state, or the State Bar to refer any fine, monetary sanction, state or local penalty, bail, forfeiture, restitution fine, restitution order, or any other amount to the Franchise Tax Board for collection under guidelines prescribed by the Franchise Tax Board, as specified. Existing law requires amounts collected pursuant to the above-described provisions, except as specified, to be transmitted to the Treasurer and deposited in the State Treasury to the credit of the Court Collection Account in the General Fund. Existing law states the intent of the Legislature that costs to the Franchise Tax Board to administer the above-described provisions for the 1997–98 fiscal year and each fiscal year thereafter not exceed 15% of the amount it collects, as provided.

This bill would instead state the intent of the Legislature that costs to the Franchise Tax Board to administer the above-described provisions for the 2025–26 fiscal year and each fiscal year thereafter not exceed 20% of the amount it collects, as provided.

(11) The California Department of Tax and Fee Administration administers various taxes, fees, and surcharges, including, among others, an excise tax on the retail sale in this state of any firearm, firearm precursor part, or ammunition. Existing law requires collection of the excise tax pursuant to the Fee Collections Procedures Law, the violation of which is a crime.

This bill would name the provisions governing the above-described excise tax the “California Firearm Excise Tax Law.” The bill would deem, for purposes of the California Firearm Excise Tax Law, a licensed firearms dealer, firearms manufacturer, or ammunition vendor in this state who transfers physical possession of any firearm, firearm precursor part, or ammunition to a purchaser in this state on behalf of an out-of-state retailer engaging in business in this state the retailer, as specified. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.

(12) Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would provide that additional information for the above-described exclusions from the Personal Income Tax Law and would provide that the provisions requiring additional information for any bill authorizing a new tax expenditure do not apply to the other provisions of this measure, except as specified.

(13) 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.

(14) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that with regard to certain mandates no reimbursement is required by this act for a specified reason.

With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

(15) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.