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2008 Legislative Update

Below is a list of legislative bills that contain tax pieces related to the recently enacted budget, commonly referred to as budget trailer bills. Complete analysis of these bills is available on our legislation information page.

AB 1279 Enacted (Chapter 08-735)

  1. Transfers Franchise Tax Board's authority to develop and implement the California Child Support Automated System to the Department of Child Support Services.

AB 1389 Enacted (Chapter 08-751)

  1. Nonresident electing partners included on the group return are subject to the millionaire tax.
  2. Nonresident Corporate Directors electing to be included on a group return are subject to the millionaire tax.
  3. Requires taxpayers that meet certain thresholds for estimate payments or tax liabilities to make all future payments electronically.
  4. Adds bail as a type of debt that could be referred to FTB for collection by the Courts.
  5. Authorizes Department of Industrial Relations to refer assessments and penalties under the Cal/OSHA Targeted Inspection Program to FTB for collection.

AB 1452 Enacted (Chapter 08-763)

  1. Limits business tax credits to 50% of net tax (before credits) for tax years 2008 and 2009.
  2. Suspends NOL deductions for 2008 and 2009, then conforms to federal NOL carryback rules with modifications.
  3. Requires the LLC fee to be estimated and paid 10 months before the current due date of the return; imposes a 10% underpayment penalty.
  4. Amnesty 2009 - repealed by SB X1 28.
  5. Allows existing corporate tax law credit carryovers, under corporation tax law, to be assigned to unitary affiliates for taxable years beginning on or after July 1, 2008.
  6. Requires the Franchise Tax Board to issue a report on the use of tax credits in the 2010 and 2011 taxable years.

SB X1 28 Enacted (Chapter number unavailable)

  1. Changes estimate payment percentages to 30% of the annual tax liability for the 1st and 2nd estimate payment installments and 20% of the annual tax liability for the 3rd and 4th installments under PIT and CORP law for tax years on or after January 1, 2009.
  2. Requires corporate taxpayers not required to make a 1st installment to pay 40%, 30%, and 30% for installments due.
  3. Eliminates option of using a percentage of prior year's tax to compute the required annual payment for taxpayers with AGI of $1 million or more ($500,000 in the case of a married individual filing a separate return).
  4. Repeals Tax amnesty provisions and penalty in AB 1452.
  5. Enacts new corporation tax penalty for understatements of tax greater than $1 million equal to 20% of understatement for taxable years beginning on or after January 1, 2003.
  6. Clarifies operative date for the requirement to estimate and pay the LLC fee for taxable years beginning on or after January 1, 2009.
  7. Clarifies the business tax credit assignment language in AB 1452 with regard to application of limitations on credits when initially earned.

AB X3 36 (Vetoed)

  1. Increases withholding to 110% of the amount of tax estimated to be due, withholding on supplemental wages from 6% to 6.6%, and withholding on stock options and bonus payments from 9.3% to 10.23%.
  2. Eliminates option of using a percentage of prior year's tax to compute the required annual payment for taxpayers with AGI of $1 million or more ($500,000 in the case of a married individual filing a separate return) - picked up in SB X1 28.
  3. For tax years on or after 1/1/09 changes estimate payment percentages to 30% of the annual tax liability for the 1st and 2nd estimate payment installments, and 20% of the annual tax liability for the 3rd and 4th installments under PIT and CORP law - picked up in SB X1 28.
  4. Corporate taxpayers that are not required to make a 1st installment will pay 40%, 30% and 30% for their installments due - picked up in SB X1 28.