20250SB__057397AMD INTRODUCED 2025-02-20 AMENDED_SENATE 2025-03-26 AMENDED_SENATE 2025-04-02 2025 SB AMD Introduced by Senator Smallwood-Cuevas LEAD_AUTHOR SENATE Smallwood-Cuevas

An act to amend

Section 17131.12 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. taxation, to take effect immediately, tax levy Personal Income Tax Law: exclusions: guaranteed income pilot programs. The Personal Income Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, and provides various exclusions from gross income, including, until July 1, 2026, an exclusion for payments received from a guaranteed income pilot program or related grants, as specified.

Existing law repeals this exclusion as of January 1, 2027. This bill would extend the above-referenced exclusion from gross income until July 1, 2031, and would repeal it as of January 1, 2032. 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.

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.</xhtml:p><xhtml:p>This bill, for taxable years beginning on and after January 1, 2026, would 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.</xhtml:p><xhtml:p>This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of

Section of

Article XIII<xhtml:span class="ThinSpace"/>A of the California Constitution, and thus would require for passage the approval of <caml:Fraction><caml:Numerator>2</caml:Numerator><caml:Denominator>3</caml:Denominator></caml:Fraction> of the membership of each house of the Legislature.</xhtml:p><xhtml:p>This bill would take effect immediately as a tax levy.</xhtml:p>"?> MAJORITY NO YES NO YES NO YES NO NO NO NO The people of the State of California do enact as follows:

SECTION

Section 17131.12 of the Revenue and Taxation Code is amended to read: 17131.12. (

a) Gross income does not include any payments received by an individual from a guaranteed income pilot program or project that receives a grant pursuant to

Section of the Welfare and Institutions Code. (

b) This

section shall become inoperative on July 1, 2031, and, as of January 1, 2032, is repealed.

SEC. 2. For the purpose of complying with

Section of the Revenue and Taxation Code, as it relates to

Section 17131.12 of that code, the Legislature finds and declares as follows: (

a) The specific goal of the extension of the exclusion provided pursuant to

Section 17131.12 of the Revenue and Taxation Code is to continue to provide financial relief to vulnerable Californians. (

b) There is no available data to collect or report with respect to the exclusion.

SEC. 3. This act provides for a tax levy within the meaning of

Article IV of the California Constitution and shall go into immediate effect. <caml:Num>SECTION 1.</caml:Num><caml:ActionLine action="IS_AMENDED" xlink:href="urn:caml:codes:RTC:caml#xpointer(%2Fcaml%3ALawDoc%2Fcaml%3ACode%2Fcaml%3ALawHeading%5B%40type%3D'DIVISION'%20and%20caml%3ANum%3D'2.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'PART'%20and%20caml%3ANum%3D'11.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'CHAPTER'%20and%20caml%3ANum%3D'2.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'ARTICLE'%20and%20caml%3ANum%3D'2.'%5D%2Fcaml%3ALawSection%5Bcaml%3ANum%3D'23151.'%5D)" xlink:label="fractionType: LAW_SECTION" xlink:type="locator">Section of the <caml:DocName>Revenue and Taxation Code</caml:DocName> is amended to read:</caml:ActionLine><caml:Fragment><caml:LawSection id="id_7FDB6C9A-8A6A-42D0-A3BA-D3140574CA51"><caml:Num>23151.</caml:Num><caml:LawSectionVersion id="id_08228838-7135-454D-8163-B4C095C1805B"><caml:Content><xhtml:p>(a)<xhtml:span class="EnSpace"/>With the exception of banks and financial corporations, every corporation doing business within the limits of this state and not expressly exempted from taxation by the provisions of the Constitution of this state or by this part, shall annually pay to the state, for the privilege of exercising its corporate franchises within this state, a tax according to or measured by its net income, to be computed at the rate of 7.6 percent upon the basis of its net income for the next preceding income year, or if greater, the minimum tax specified in

Section 23153.</xhtml:p><xhtml:p>(b)<xhtml:span class="EnSpace"/>For calendar or fiscal years ending after June 30, 1973, the rate of tax shall be percent instead of 7.6 percent as provided by subdivision (a).</xhtml:p><xhtml:p>(c)<xhtml:span class="EnSpace"/>For calendar or fiscal years ending in to 1986, inclusive, the rate of tax shall be 9.6 percent.</xhtml:p><xhtml:p>(d)<xhtml:span class="EnSpace"/>For calendar or fiscal years ending in to 1996, inclusive, and for any income year beginning before January 1, 1997, the tax rate shall be 9.3 percent.</xhtml:p><xhtml:p>(e)<xhtml:span class="EnSpace"/>For any income year beginning on or after January 1, 1997, the tax rate shall be 8.84 percent.

The change in rate provided in this subdivision shall be made without proration otherwise required by

Section 24251.</xhtml:p><xhtml:p>(f)<xhtml:span class="EnSpace"/>(1)<xhtml:span class="EnSpace"/>For the first taxable year beginning on or after January 1, 2000, the tax imposed under this

section shall be the sum of both of the following:</xhtml:p><xhtml:p>(A)<xhtml:span class="EnSpace"/>A tax according to or measured by net income, to be computed at the rate of 8.84 percent upon the basis of the net income for the next preceding income year, but not less than the minimum tax specified in

Section 23153.</xhtml:p><xhtml:p>(B)<xhtml:span class="EnSpace"/>A tax according to or measured by net income, to be computed at the rate of 8.84 percent upon the basis of the net income for the first taxable year beginning on or after January 1, 2000, but not less than the minimum tax specified in

Section 23153.</xhtml:p><xhtml:p>(2)<xhtml:span class="EnSpace"/>Except as provided in paragraph (1) and subdivision (g), for taxable years beginning on or after January 1, 2000, the tax imposed under this

section shall be a tax according to or measured by net income, to be computed at the rate of 8.84 percent upon the basis of the net income for that taxable year, but not less than the minimum tax specified in

Section 23153.</xhtml:p><xhtml:p>(g)<xhtml:span class="EnSpace"/>(1)<xhtml:span class="EnSpace"/>For taxable years beginning on or after January 1, 2026, the tax imposed under this

section upon a publicly held corporation, as defined in

Section 162(m)(2), relating to publicly held corporation, of the Internal Revenue Code, shall be a tax according to or measured by net income, to be computed at the applicable tax rate upon the basis of the net income for that taxable year, as determined by paragraph (2), but not less than the minimum tax specified in

Section 23153.</xhtml:p><xhtml:p>(2)<xhtml:span class="EnSpace"/>The applicable tax rate shall be determined as follows:</xhtml:p><xhtml:p><xhtml:table border="0" frame="void" id="id_EDFDB90F-7783-4965-A2D9-8AD95D42255F" rules="none" width="416"><xhtml:tbody><xhtml:tr><xhtml:td width="208">If the compensation ratio is:</xhtml:td><xhtml:td width="208">The applicable tax rate is:</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over zero but not over 25</xhtml:td><xhtml:td width="208">7% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 50</xhtml:td><xhtml:td width="208">7.5% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 100</xhtml:td><xhtml:td width="208">8% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 150</xhtml:td><xhtml:td width="208">9% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 200</xhtml:td><xhtml:td width="208">9.5% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 250</xhtml:td><xhtml:td width="208">10% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 300</xhtml:td><xhtml:td width="208">11% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over but not over 400</xhtml:td><xhtml:td width="208">12% upon the basis of net income</xhtml:td></xhtml:tr><xhtml:tr><xhtml:td width="208">Over 400</xhtml:td><xhtml:td width="208">13% upon the basis of net income</xhtml:td></xhtml:tr></xhtml:tbody></xhtml:table></xhtml:p><xhtml:p>(3)<xhtml:span class="EnSpace"/>For purposes of this subdivision:</xhtml:p><xhtml:p>(A)<xhtml:span class="EnSpace"/>(i)<xhtml:span class="EnSpace"/>“Compensation,” in the case of employees of the taxpayer other than the chief operating officer or the highest paid employee, means wages as defined in

Section 3121(

a) of the Internal Revenue Code, relating to wages, paid by the taxpayer during a calendar year to employees of the taxpayer.</xhtml:p><xhtml:p>(ii)<xhtml:span class="EnSpace"/>“Compensation,” in the case of the chief operating officer and the highest paid employee of the taxpayer, means total compensation as reported in the

Summary Compensation Table reported to the Securities and Exchange Commission pursuant to Item of Regulation S-K of the Securities and Exchange Commission.</xhtml:p><xhtml:p>(B)<xhtml:span class="EnSpace"/>(i)<xhtml:span class="EnSpace"/>“Compensation ratio” for a taxable year means a ratio where the numerator is the amount equal to the greater of the compensation of the chief operating officer or the highest paid employee of the taxpayer for the calendar year preceding the beginning of the taxable year and the denominator is the amount equal to the median compensation of all employees employed by the taxpayer in the United States for the calendar year preceding the beginning of the taxable year.</xhtml:p><xhtml:p>(ii)<xhtml:span class="EnSpace"/>For taxpayers that are required to be included in a combined report under

Section or authorized to be included in a combined report under

Section 25101.15, the calculation of the ratio in clause (

i) shall be made by treating all taxpayers that are required to be or authorized to be included in a combined report as a single taxpayer.</xhtml:p><xhtml:p>(4)<xhtml:span class="EnSpace"/>A taxpayer subject to this subdivision shall furnish a detailed compensation report to the Franchise Tax Board with its timely filed original return.</xhtml:p><xhtml:p>(5)<xhtml:span class="EnSpace"/>(A)<xhtml:span class="EnSpace"/>If the total number of full-time employees, determined on an annual full-time equivalent basis, employed by the taxpayer in the United States for a taxable year is reduced by more than percent, as compared to the total number of full-time employees, determined on an annual full-time equivalent basis, employed by the taxpayer in the United States for the preceding taxable year and the total number of contracted employees or foreign full-time employees, determined on an annual full-time equivalent basis, of the taxpayer for that taxable year has increased, as compared with the total number of contracted employees or foreign full-time employees, determined on an annual full-time equivalent basis, of the taxpayer for the preceding taxable year, then the applicable tax rate determined under paragraph (2) shall be increased by percent.

For taxpayers who first commence doing business in this state during the taxable year, the number of full-time employees, contracted employees, and foreign full-time employees for the immediately preceding prior taxable year shall be zero.</xhtml:p><xhtml:p>(B)<xhtml:span class="EnSpace"/>For purposes of this paragraph:</xhtml:p><xhtml:p>(i)<xhtml:span class="EnSpace"/>“Annual full-time equivalent” means either of the following:</xhtml:p><xhtml:p>(I)<xhtml:span class="EnSpace"/>In the case of a full-time employee paid hourly qualified wages, “annual full-time equivalent” means the total number of hours worked for the qualified taxpayer by the employee, not to exceed 2,000 hours per employee, divided by 2,000.</xhtml:p><xhtml:p>(II)<xhtml:span class="EnSpace"/>In the case of a salaried full-time employee, “annual full-time equivalent” means the total number of weeks worked for the qualified taxpayer by the employee divided by 52.</xhtml:p><xhtml:p>(ii)<xhtml:span class="EnSpace"/>“Contracted full-time employee” means an individual engaged by the taxpayer to provide a specific set of services established pursuant to the terms and conditions of a written employment contract that delineates the length of employment, the salary and bonuses (if any) to be paid, and the benefits that accrue to that individual.</xhtml:p><xhtml:p>(iii)<xhtml:span class="EnSpace"/>“Foreign full-time employee” means a full-time employee of the taxpayer that is employed at a location other than the United States.</xhtml:p><xhtml:p>(iv)<xhtml:span class="EnSpace"/>“Full-time employee” means an employee of the taxpayer that satisfies either of the following requirements:</xhtml:p><xhtml:p>(I)<xhtml:span class="EnSpace"/>Is paid compensation by the taxpayer for services of not less than an average of hours per week.</xhtml:p><xhtml:p>(II)<xhtml:span class="EnSpace"/>Is a salaried employee of the taxpayer and is paid compensation during the taxable year for full-time employment, within the meaning of

Section of the Labor Code.</xhtml:p><xhtml:p>(6)<xhtml:span class="EnSpace"/>The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this subdivision, including any guidelines regarding the determination of wages, average compensation, and compensation ratio.

Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this subdivision.</xhtml:p></caml:Content></caml:LawSectionVersion></caml:LawSection></caml:Fragment></caml:BillSection><caml:BillSection id="id_7DDD5FD7-7A2B-4288-A597-B790C1FDA395"><caml:Num>SEC. 2.</caml:Num><caml:Content><xhtml:p>This act provides for a tax levy within the meaning of

Article IV of the California Constitution and shall go into immediate effect.</xhtml:p></caml:Content></caml:BillSection>"?>