CA AB 122

Quick answers

Description

(1) Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state of, or on the storage, use, or other consumption in this state of, tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law (SUT) defines "tangible personal property" to mean personal property that may be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses. Existing law punishes various violations of the SUT as crimes. The Bradley-Burns Uniform Local Sales and Use Tax Law (Bradley-Burns) authorizes counties and cities to impose local sales and use taxes in conformity with the SUT, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the SUT. Amendments to the SUT are automatically incorporated into the local tax laws. This bill would define "tangible personal property" to additionally mean a digital product and any copyright or patent interests associated therewith for the purposes of the application of the SUT, as prescribed. The bill would define "digital product" to mean, except as provided, prewritten computer software transferred on tangible storage media, transferred electronically, or accessed remotely. The bill would also make various conforming changes. By expanding the scope of violating the SUT, this bill would impose a state-mandated local program. This bill would prohibit a purchaser or retailer of a digital product that is transferred electronically or accessed remotely from entering into any form of agreement that would result, directly or indirectly, in the payment, transfer, diversion, or rebate of any tax revenue resulting from the imposition of a sales and use tax under Bradley-Burns imposed on the sale or purchase of a digital product that is transferred electronically or accessed remotely. This bill would make an appropriation of $750,000 from the General Fund to the California Department of Tax and Fee Administration for the purpose of administering these sales and use tax provisions. (2) The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws. Existing law, for taxable years beginning on or after January 1, 2024, and before January 1, 2027, limits the total tax reduction by all business credits, as defined, to $5,000,000 per taxable year, except as specified. This bill would extend this limitation through taxable years beginning before January 1, 2030. The bill would also create additional exceptions to this limitation for certain refundable credits or refundable amounts. The bill would, for taxable years beginning on or after January 1, 2030, similarly apply a business credit limit of 70% of the total taxes imposed or $5,000,000, whichever is greater, except as specified. Existing law, for taxable years beginning on or after January 1, 2024, and before January 1, 2027, allows a taxpayer to make an irrevocable election to receive an annual refundable credit amount, beginning the 3rd taxable year after the election is made, equal to 20% of the qualified credits that would have otherwise been available to the taxpayer but for the $5,000,000 limitation. Existing law requires the annual refundable credit amount to be allowed as a credit for the taxable year, as specified, and requires the balance, if any, to be paid from the Tax Relief and Refund Account, a continuously appropriated fund, to the taxpayer. This bill would extend the provisions relating to elections to receive an annual refundable credit amount through taxable years beginning before January 1, 2030. By extending the operation of a continuous appropriation, this bill would make an appropriation. (3) 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, except as provided, 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, 2027, and before January 1, 2030, would reduce the amount of the annual tax imposed on a limited partnership, limited liability partnership, and limited liability company doing business in this state from $800 to $400 for the corporation's first taxable year. The bill would require the Franchise Tax Board to submit an annual report to the Legislature regarding the reduction of the annual tax for these corporations, as provided. (4) The Personal Income Tax Law and Corporation Tax Law impose taxes according to or measured by net income of a taxpayer subject to those laws, including residents of the state, at specified rates. Existing law requires the Franchise Tax Board to administer the Personal Income Tax Law and the Corporation Tax Law pursuant to existing law, the violation of which is a crime. The United States Department of Justice announced on May 18, 2026, the establishment of the federal Anti-Weaponization Fund for the purpose of providing a systematic process to hear and redress claims of persons who suffered weaponization and lawfare. This bill would, for taxable years beginning on or after January 1, 2026, and before January 1, 2030, impose a tax on any settlement fund payment from the federal Anti-Weaponization Fund, or any subsequent fund, settlement, or agreement, as provided, at a rate of 100%. The bill would provide that the taxes imposed by these provisions would not be subject to reduction due to deductions or credits, as provided. The bill would require the Franchise Tax Board to administer this tax consistent with existing law relating to the administration of the Personal Income Tax Law and the Corporation Tax Law. By expanding the scope of crimes relating to those provisions, this bill would impose a state-mandated local program. (5) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature. (6) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. (7) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.