Certified Specialist In Taxation Law
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Certified Specialist In Taxation Law |
MINIMUM FRANCHISE TAX IS FREE FOR TWO YEARS A new bill would provide that a qualified new corporation, for income years beginning on or after January 1, 2000, and before January 1, 2003, shall not be subject to the prepayment of minimum franchise tax to the Secretary of State (SOS). For income years beginning on or after January 1, 2003, the prepayment to the SOS for qualified new corporations would return to $300. The March 23, 1999, amendments limited the income years to those before January 1, 2003, in which qualified new corporations would not be subject to the $300 prepayment of the minimum franchise tax to the SOS.The amendment also added the requirement that the SOS to report to the Legislature by January 31, 2002, regarding the number of new small businesses that incorporated in each calendar year since 1996 and the length of time those businesses continued doing business. This analysis will not discuss this report requirement as it does not impact this department. The department’s analysis of AB 10 as amended, March 1, 1999, still applies. Implementation Consideration Under existing law, a qualified new corporation is required to meet certain conditions to benefit from the reduced prepayment ($300) to the SOS. If these conditions are not met the qualified new corporation is required to pay an additional tax in an amount of $500 to equate the normal prepayment of $800.This bill would exempt every corporation that incorporates or qualifies to do business in California on or after January 1, 2000, from the minimum franchise tax for the first taxable year (prepaid to the Secretary of State (SOS)) or the minimum franchise tax for the second taxable year. The June 15, 1999, amendment revised and expanded the bill to provide that every corporation that incorporates or qualifies to do business on or after January 1, 2000, would not be subject to the minimum franchise tax (prepaid to the SOS) for its first taxable year or for its second taxable year. As a result of the amendment, the Specific Findings, Implementation Considerations and Tax Revenue Estimate identified in the department’s analysis of AB 10 as amended March 23, 1999, no longer apply. New Specific Findings (except for the state law discussion), Implementation Considerations, and Tax Revenue Estimate are provided below.
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