Annual tax: partnerships and LLCs.
SB 347
California Bills
20250SB__034795AMD INTRODUCED 2025-02-12 AMENDED_SENATE 2025-03-26 AMENDED_SENATE 2025-05-07 AMENDED_SENATE 2026-01-05 AMENDED_SENATE 2026-01-15 2025 SB AMD Introduced by Senator Choi LEAD_AUTHOR SENATE Choi
An act to amend Sections 17935, 17941, and of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. taxation, to take effect immediately, tax levy Annual tax: partnerships and LLCs.
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, and 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.
This bill, for taxable years beginning on or after January 1, 2026, and before January 1, 2031, would reduce the annual tax on every limited partnership, limited liability partnership, and limited liability company to $600. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill also would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy. MAJORITY NO YES NO YES NO YES NO NO NO NO The people of the State of California do enact as follows:
SECTION 1.
Section of the Revenue and Taxation Code is amended to read: 17935. (
a) Except as provided in subdivision (f), for each taxable year beginning on or after January 1, 1997, every limited partnership doing business in this state (as defined by
Section 23101) and required to file a return under
Section shall pay annually to this state a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in subdivision (
d) of
Section 23153. (b)
(1) In addition to any limited partnership that is doing business in this state and therefore is subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, every limited partnership that has executed, acknowledged, and filed a certificate of limited partnership with the Secretary of State pursuant to
Section or 15902.01 of the Corporations Code, and every foreign limited partnership that has registered with the Secretary of State pursuant to
Section or 15909.01 of the Corporations Code, shall pay annually the tax prescribed in subdivision (a). The tax shall be paid for each taxable year, or part thereof, until a certificate of cancellation is filed on behalf of the limited partnership with the office of the Secretary of State pursuant to
Section 15623, 15696, 15902.03, or 15909.07 of the Corporations Code.
(2) If a taxpayer files a return with the Franchise Tax Board that is designated its final return, that board shall notify the taxpayer that the tax imposed by this
chapter is due annually until a certificate of cancellation is filed with the Secretary of State pursuant to
Section 15623, 15696, 15902.03, or 15909.07 of the Corporations Code. (
c) The tax imposed by this
chapter shall be due and payable on the date the return is required to be filed under former
Section or 18633. (
d) For purposes of this section, “limited partnership” means any partnership formed by two or more persons under the laws of this state or any other jurisdiction and having one or more general partners and one or more limited partners. (
e) Notwithstanding subdivision (b), any limited partnership that ceased doing business prior to January 1, 1997, filed a final return with the Franchise Tax Board for a taxable year ending before January 1, 1997, and filed a certificate of dissolution with the Secretary of State pursuant to
Section of the Corporations Code prior to January 1, 1997, shall not be subject to the tax imposed by this
chapter for any period following the date the certificate of dissolution was filed with the Secretary of State, but only if the limited partnership files a certificate of cancellation with the Secretary of State pursuant to
Section of the Corporations Code. In the case where a notice of proposed deficiency assessment of tax or a notice of tax due (whichever is applicable) is mailed after January 1, 2001, the first sentence of this subdivision shall not apply unless the certificate of cancellation is filed with the Secretary of State not later than days after the date of the mailing of the notice. (
f) For each taxable year beginning on or after January 1, 2026, and before January 1, 2031, every limited partnership doing business in this state and required to file a return under
Section shall, instead of the amount specified in subdivision (a), pay an annual tax to this state in the amount of six hundred dollars ($600).
SEC. 2.
Section of the Revenue and Taxation Code is amended to read: 17941. (
a) Except as provided in subdivision (g), for each taxable year beginning on or after January 1, 1997, a limited liability company doing business in this state (as defined in
Section 23101) shall pay annually to this state a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in subdivision (
d) of
Section 23153. (b)
(1) In addition to any limited liability company that is doing business in this state and is therefore subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, a limited liability company shall pay annually the tax prescribed in subdivision (
a) if articles of organization have been accepted, or a certificate of registration has been issued, by the office of the Secretary of State. The tax shall be paid for each taxable year, or part thereof, until a certificate of cancellation of registration or of articles of organization is filed on behalf of the limited liability company with the office of the Secretary of State.
(2) 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 dissolution is filed with the Secretary of State pursuant to
Section 17707.08 of the Corporations Code or a certificate of cancellation is filed with the Secretary of State pursuant to
Section 17708.06 of the Corporations Code. (
c) The tax assessed under this
section shall be due and payable on or before the 15th day of the fourth month of the taxable year. (
d) For purposes of this section, “limited liability company” means an organization, other than a limited liability company that is exempt from the tax and fees imposed under this
chapter pursuant to
Section 23701h or
Section 23701x, that is formed by one or more persons under the law of this state, any other country, or any other state, as a “limited liability company” and that is not taxable as a corporation for California tax purposes. (
e) Notwithstanding anything in this
section to the contrary, if the office of the Secretary of State files a certificate of cancellation pursuant to
Section 17707.02 of the Corporations Code for any limited liability company, then paragraph (1) of subdivision (
f) of
Section shall apply to that limited liability company as if the limited liability company were properly treated as a corporation for that limited purpose only, and paragraph (2) of subdivision (
f) of
Section shall not apply. Nothing in this subdivision entitles a limited liability company to receive a reimbursement for any annual taxes or fees already paid. (f)
(1) Notwithstanding any provision of this
section to the contrary, a limited liability company that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the tax imposed under this
section for any taxable year the owner is deployed and the limited liability company operates at a loss or ceases operation.
(2) The Franchise Tax Board may promulgate regulations as necessary or appropriate to carry out the purposes of this subdivision, including a definition for “ceases operation.”
(3) For the purposes of this subdivision, all of the following
definitions apply: (A) “Deployed” means being called to active duty or active service during a period when a Presidential Executive order specifies that the United States is engaged in combat or homeland defense. “Deployed” does not include either of the following: (
i) Temporary duty for the sole purpose of training or processing. (ii) A permanent change of station. (B) “Operates at a loss” means a limited liability company’s expenses exceed its receipts. (C) “Small business” means a limited liability company with total income from all sources derived from, or attributable to, the state of two hundred fifty thousand dollars ($250,000) or less.
(4) This subdivision shall become inoperative for taxable years beginning on or after January 1, 2025. (
g) For each taxable year beginning on or after January 1, 2026, and before January 1, 2031, every limited liability company doing business in this state shall, instead of the amount specified in subdivision (a), pay an annual tax to this state in the amount of six hundred dollars ($600).
SEC. 3.
Section of the Revenue and Taxation Code is amended to read: 17948. (
a) Except as provided in subdivision (e), for each taxable year beginning on or after January 1, 1997, every limited liability partnership doing business in this state (as defined in
Section 23101) and required to file a return under
Section shall pay annually to the Franchise Tax Board a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in subdivision (
d) of
Section 23153. (
b) In addition to any limited liability partnership that is doing business in this state and therefore is subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, every registered limited liability partnership that has registered with the Secretary of State pursuant to
Section of the Corporations Code and every foreign limited liability partnership that has registered with the Secretary of State pursuant to
Section of the Corporations Code shall pay annually the tax prescribed in subdivision (a). The tax shall be paid for each taxable year, or part thereof, until any of the following occurs:
(1) A notice of cessation is filed with the Secretary of State pursuant to subdivision (
b) of
Section or of the Corporations Code.
(2) A foreign limited liability partnership withdraws its registration pursuant to subdivision (
a) of
Section 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 or of the Corporations Code. (
e) For each taxable year beginning on or after January 1, 2026, and before January 1, 2031, every limited liability partnership doing business in this state and required to file a return under
Section shall, instead of the amount specified in subdivision (a), pay an annual tax to this state in the amount of six hundred dollars ($600).
SEC. 4. (
a) It is the intent of the Legislature to apply the requirements of
Section of the Revenue and Taxation Code to this act. (
b) With respect to Sections 17935, 17941, and of the Revenue and Taxation Code, as amended by this act, the Legislature finds and declares as follows:
(1) The goal of this act is to make California’s business environment more competitive for California partnerships and limited liability companies.
(2) The performance indicator for the Legislature to use in determining whether the act achieves its goal shall be the number of partnerships and limited liability companies that are affected by the act. (c)
(1) On or before April 1, 2028, and annually thereafter, the Franchise Tax Board shall submit a report to the Legislature, in compliance with
Section of the Government Code, on the performance of partnerships and limited liability companies in the state using the data in paragraph (2) of subdivision (b).
(2) The disclosure requirements of this subdivision shall be treated as an exception to
Section of the Revenue and Taxation Code.
SEC. 5. This act provides for a tax levy within the meaning of