Personal Income Tax Law and Corporation Tax Law: credits: local news outlets: business expense deduction: excessive employee remuneration.

Source-provided summary

(1) The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a credit for specified new hiring and employment. Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account. Existing law also establishes the continuously appropriated Corporation Tax Fund in the State Treasury for the purpose of making refunds pursuant to existing law. This bill would, for taxable years beginning on or after January 1, 2027, and before January 1, 2032, allow a credit against those taxes to a qualified taxpayer, as defined, equal to $20,000 for each qualifying journalist, as defined, continuously employed on a full-time basis by the taxpayer, not to exceed 5 qualifying journalists. The bill would also allow a credit of $15,000 for each qualifying journalist continuously employed on a full-time basis by the taxpayer in excess of 5 qualifying journalists, and a credit of $7,500 for each qualifying journalist employed on a part-time basis by the taxpayer. The bill would allow an additional credit of $15,000 for each qualifying journalist employed on a full-time basis in a new journalism position, as defined. The bill would require the amount of the credit exceeding the taxpayer's liability to be credited against other amounts due, if any, and would require the balance to be paid from the Tax Relief and Refund Account or the Corporation Tax Fund, as specified, and refunded to the taxpayer. By increasing the payments from the Tax Relief and Refund Account and the Corporation Tax Fund, which are continuously appropriated funds, the bill would make an appropriation. The bill would allow the credit to organizations that are exempt from income taxation, as specified, and would allow the refund provisions to apply for those organizations. Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals that the tax credit will achieve, detailed performance indicators, and data collection requirements. This bill also would include additional information required for any bill authorizing a new tax expenditure. The bill would also require the Franchise Tax Board to publish a report on its internet website detailing the total number of taxpayers allowed the credit, the total dollar value of credits allowed, and the average dollar amount per qualified taxpayer allowed a credit. The bill would require the Franchise Tax Board to submit a report to the Legislature providing guidance on potential administration and enforcement of a refundable tax credit for organizations exempt from federal income tax, as provided. (2) 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, 2025, the specified date of those referenced Internal Revenue Code sections is January 1, 2025, unless otherwise specifically provided. The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions from gross income in calculating adjusted gross income, including a deduction for the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Existing law does not allow a deduction as an ordinary and necessary business expense for the wages or other remuneration of a covered employee, as defined, to the extent that remuneration exceeds $1,000,000. Existing federal income tax law, enacted after January 1, 2025, amends the application of the limitations relating to covered employees in the case of taxpayers that are members of a controlled group. This bill would specifically conform to the federal application of the limitations relating to covered employees in the case of taxpayers that are members of a controlled group for state tax purposes. The bill would also further conform to the federal definition of a covered employee. This bill would incorporate additional changes to Sections 17039 and 23036 of the Revenue and Taxation Code proposed by AB 2319 to be operative only if this bill and AB 2319 are enacted and this bill is enacted last.