Update on 2019 Tax Legislation: What Remains?

Chris Micheli
Chris Micheli is a Principal with the Sacramento governmental relations firm of Aprea & Micheli, Inc.

Now that the house of origin deadline has passed, and we are basically at the mid-point in the California Legislative Session, we can take a look at pending legislation with particular attention to the bills that will continue along the legislative process in the second house. The focus of this article is on tax legislation. The following are the major tax bills of particular interest to the California business community:

AB 18 (Levine) – Firearms tax

This bill would impose an excise tax on a retailer in the amount of $25 per firearm on the sale in this state of a handgun or semiautomatic rifle or shotgun sold as new.

Status: Held in the Assembly fiscal committee

AB 138 (Bloom) – Sweetened beverage tax

This bill, subject to specified exemptions, would impose a fee on every distributor for the privilege of distributing bottled sugary drinks and concentrate in the state at a rate of $0.02 per fluid ounce and for the privilege of distributing syrups and powders concentrate in this state, either as concentrate or as sweetened beverages derived from that concentrate, at the rate of $0.02 per fluid ounce of sweetened beverage to be produced from concentrate.

Status: Pending in the Assembly policy committee; the author made it a 2-year bill

AB 147 (Burke) – Wayfair decision implementation

This bill specifies that, on and after April 1, 2019, a retailer engaged in business in this state includes any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property for delivery in this state by the retailer and all persons related to the retailer that exceed $500,000. The bill allows the department to grant relief to certain retailers engaged in business in this state for specified interest or penalties imposed on use tax liabilities due and payable for tax reporting periods beginning April 1, 2019 and ending December 31, 2022.

Status: Signed by the Governor (Chapter 5)

AB 263 (Burke) – Tax expenditure information

This bill would extend the information requirement to any bill, introduced on or after January 1, 2020, that would authorize a personal income or corporation tax expenditure, as defined.

Status: Pending in the Senate policy committee

AB 755 (Holden) – Tax on tire purchases

The bill would increase the California tire fee by $1.50. The bill would require the California Department of Tax and Fee Administration to transfer the additional moneys to the Stormwater Permit Compliance Fund.

Status: Pending on the Assembly Floor; the author made it a 2-year bill

AB 1468 (McCarty) – Tax on opioids

The bill would, commencing with the 2021–22 fiscal year, require the CDTFA to calculate the ratable share of a manufacturer or wholesaler, which is the individual portion of the collective sum of $50,000,000 or a lesser amount, to be paid by the manufacturers and wholesalers, based on the information reported.

Status: Pending on the Assembly Floor

AB 1726 (Cervantes) – State WOTC

This bill, for each taxable year beginning on or after January 1, 2020, and before January 1, 2025, would allow a credit against the taxes imposed to a qualified employer in an amount equal to that allowed under the federal Work Opportunity Tax Credit, as modified.

Status: Held in the Assembly fiscal committee

SB 37 (Skinner) – Corporate tax rate increase

This bill would, for taxable years beginning on or after January 1, 2020, revise the rate for corporations with net income subject to taxes of $10,000,000 or more to instead impose a tax rate from 10.84% to 14.84%, or for financial institutions, from 12.84% to 16.84%, based on the compensation ratio, as defined, of the corporation. The 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,

Status: Pending in the Senate Rules Committee

SB 43 (Allen) – Carbon taxes study

This bill would require the state board, no later than January 1, 2022, to submit a report to the Legislature on the findings from a study, as specified, to determine the feasibility and practicality of assessing the carbon intensity of all retail products subject to the tax imposed pursuant to the Sales and Use Tax Law.

Status: Pending in the Assembly policy committee

SB 246 (Wieckowski) – Tax on oil and gas operators

This bill would impose an oil and gas severance tax upon any operator for the privilege of severing oil or gas from the earth or water in this state at specified rates.

Status: Pending in the Senate Rules Committee

SB 378 (Wiener) – Estate tax

This bill would propose to the voters a repeal of the initiative measure prohibiting the imposition of a tax on or by reason of any transfer occurring by reason of death and would propose the imposition of estate, gift, and generation-skipping transfer taxes, in modified conformity with federal law, on and after January 1, 2021.

Status: Pending in the Senate Rules Committee

SB 422 (Hueso) – Hiring tax credit

This bill would, under both laws for taxable years beginning on or after January 1, 2020, and before January 1, 2022, allow a credit in an amount equal to 50% of qualified wages paid by a qualified taxpayer, as defined, to qualified full-time employees, defined to mean, among other things, that the person is between 18 and 25 years of age who has completed a work readiness program, substance abuse treatment program, cognitive behavioral therapy treatment program, or anger management program, not to exceed $15,000 per qualified taxpayer per taxable year.

Status: Pending in the Assembly policy committee

SB 468 (Jackson) – Business tax incentives review

This bill would establish in state government the California Tax Expenditure Review Board as an independent advisory body to comprehensively assess major tax expenditures, as defined, and make recommendations to the Legislature.

Status: Pending in the Assembly policy committee

SB 522 (Hertzberg) – Services tax intent bill

This bill would make legislative findings regarding the need for further efforts to modernize and restructure the state’s tax system and would state the intent of the Legislature to enact legislation that would accomplish specified purposes, including realigning the state’s outdated tax code with the realities of California’s 21st century economy.

Status: Pending in the Senate Rules Committee

SCA 5 (Hill) – Lowered vote threshold

This measure would alternatively condition the imposition, extension, or increase of a parcel tax, as defined, by a school district or community college district upon the approval of 55% of its voters voting on the proposition, if the proposition meets specified requirements.

Status: Pending on the Senate Floor; the author made it a 2-year bill

The Legislature is scheduled to adjourn on September 13, and Governor Gavin Newsom will have 30 days to act on measures sent to him by that date. We’ll check back after final actions take place on these and other measures.

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