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Summary:
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Under the Personal Income Tax Law and the Corporation
Tax Law, various provisions of the federal Internal Revenue Code, as
enacted as of a specified date, are referenced in various sections of the
Revenue and Taxation Code. Those laws provide that for taxable years
beginning on or after January 1, 2005, the specified date of those
referenced Internal Revenue Code sections is January 1, 2005, unless
otherwise specifically provided. Existing law requires, for any introduced
bill that proposes changes in any of those dates, that the Franchise Tax
Board prepare a complete analysis of the bill that describes all changes to
state law that will automatically occur by reference to federal law as of
the changed date. It further requires the Franchise Tax Board to immediately
update and supplement that analysis upon any amendment to the bill, and
requires that analysis be made available to the public and be submitted to
the Legislature for publication in the daily journal of each house of the
Legislature. This bill would change the specified date of those referenced
Internal Revenue Code sections to January 1, 2007, for taxable years
beginning on or after January 1, 2007, and thereby would make numerous
substantive changes to both the Personal Income Tax Law and the Corporation
Tax Law with respect to those areas of preexisting conformity that are
subject to changes under federal laws enacted after January 1, 2005, and
that have not been, or are not being, excepted or modified. This bill would
make certain other changes in federal income tax laws applicable, with
specified exceptions and modifications, and make specified supplemental,
technical, or clarifying changes for purposes of the Personal Income Tax
Law or the Corporation Tax Law, or both, with respect to, among other
things, the tax treatment of certain disaster mitigation payments,
depreciation of electric transmission property and natural gas gathering
lines, amortization of certain atmospheric pollution control facilities and
geological and geophysical expenditures, nuclear decommissioning cost
provisions, a small refiner exception to oil depletion deduction, recapture
rules for amortizable Section 197 intangibles, amortization of expenses
incurred in creating or acquiring music or music copyrights, treatment of certain
self-created musical works and qualified retirement income, funding for
self-employed defined benefit pension plans and for multiemployer defined
benefit pension plans, withdrawals from retirement plans for individuals
called to active duty, waiver of an early withdrawal penalty tax on certain
distributions of pension plans for public safety employees, allowance of
additional IRA payments in certain bankruptcy cases, inflation indexing of
gross income limitations on certain retirement savings incentives,
treatment of death benefits from corporate-owned life insurance, exemption
of income from leveraged real estate held by church plans, gratuitous
transfer for benefits of employees, deductions for charitable contributions
and tax treatment of certain payments to controlling tax-exempt
organizations, contributions of specified real property made for
conservation purposes, frivolous tax submissions, exclusion of gain from
sale of principal residence by certain employees of the intelligence
community, sale of property by judicial officers, excise tax on UBTI of
charitable remainder trusts, certain listed and reportable transactions
provisions, the taxation of certain settlement funds, the active business
requirement, loans to qualified continuing care facilities, exception from
suspension rules, and specified federal acts. This bill would also increase
the age of minor children whose unearned income is taxed as if a parent's
income and would revise, in modified conformity with the federal income tax
laws, various provisions applicable to tax-exempt organizations. This bill
contains other related provisions.
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