CCH Tax News Headlines - November 11, 2010

Proposition 26, approved by California voters at the November 2, 2010 general election, has raised some questions regarding the continued validity of California's recent corporation franchise and income tax and personal income tax conformity bill (S.B. 401, Laws 2010). Proposition 26 amends the state constitution to expand the definition of a "tax" that must be approved by a two-thirds vote of the Legislature or a vote of the electorate in the case of local taxes. As amended, "tax" is defined to mean any levy, charge, or exaction of any kind that is imposed by the state or a local government, except as specifically noted. Proposition 26 also provides that any state tax adopted since January 1, 2010, that was not adopted in compliance with this requirement is void within 12 months, unless it is reenacted in such compliance. S.B. 401 was scored as a "revenue neutral" bill, but it may increase taxes for some taxpayers in certain circumstances and it did not garner a two-thirds vote, calling into question its continued validity under Proposition 26. Details of S.B. 401 were previously reported. (TAXDAY, 2010/04/14, S.6)

SB 401 looks like a law about mortgage forgiveness -- ie. FTB will allow you to not count forgiven debt as income in some circumstances (like foreclosure, short sale), conforming to federal law. I don't see what this has to do with proposition 26.

If it's revenue neutral, the to balance the decrease you cited above, something else was raised, and that's why it's subject to Prop 26.

OK I see what you mean. The tax provides relief to some, but is paid for by taxes on someone else. I tried to read

butcouldn't figure out what they were talking about. A link from therepublican caucus 4&id"3156is a bit easier to understand. They say * $10 - $15 million per year - Increases in Age of Minor Children Whose Unearned Income is Taxed as if Parent's Income (2007, Section

8241) * $3.2 - $4.5 million per year - Modify Interest Suspension Under 6404(g) from 18 - 36 months (2007, Section 8242) * Up to $6.4 million per year - Gain from Sale of Principal Residence Allocated to Nonqualified Use Not Excluded from Income (2008, Section 3092) * Up to $5.7 million per year - Uniform Definition of a Child (2008, Section 501) * Up to $1.5 million per year - Modification of Penalty for Failure to File S Corporation Returns (2008, Section 128)

From

0920100SB401&vdt 09-06-02+13%3A11%3A00&vds30senate: 22 yes votes, 15 no votes, 2 non votes, therefore passed by22/39 = 56%

0920100SB401&vdt 10-04-05+13%3A13%3A00&vds13assembly: 45 yes, 27 no, 7 non votes, therefore passed by 45/79 = 56% Since it didn't get 66 2/3% in each house, SB 401 is void. Do I understand their argument correctly?

Also, to get the number of yes votes, was my formula right? Is it (a) number of yes votes divided by number of total potential votes, or (b) number of yes votes divided by number of people who voted yes/no (ie. not counting the non-votes).

As an aside, since 2/3 is not required for specific government services (like the fee for entering a state park), you might expect fees to increase (like the fees to enter state parks), or new use fees (like maintaining street lights).

0920100SB401&vdt 09-06-02+13%3A11%3A00&vds30> senate: 22 yes votes, 15 no votes, 2 non votes, therefore passed by > 22/39 = 56%>

0920100SB401&vdt 10-04-05+13%3A13%3A00&vds13> assembly: 45 yes, 27 no, 7 non votes, therefore passed by 45/79 = 56% >> Since it didn't get 66 2/3% in each house, SB 401 is void. Do I> understand their argument correctly? No. It auto-expires on its one-year anniversary of passage (of SB 401). Therefore, if it's not fixed, it's a one year change only.

2/3rds is 27 votes in the state senate and 54 votes in the assembly.

Not street lights - as that's a general assessment on the population. The park entry fee is exempt.