Vote Smart's Synopsis:

Vote to pass a bill that increases tax rates for certain businesses and establishes a scholarship fund for certain California residents.

Highlights:

• Establishes the Middle Class Scholarship Fund to receive expected revenue that will be generated from the increase in certain business tax rates (Sec. 1).

• Requires all business income, except income generated by “qualified business activity”, to be apportioned by multiplying the income by the sum of the property, payroll, and twice the sales factor, divided by 4 (Sec. 3).

• Requires any business, beginning January 1, 2012 , that derives more than 50 percent of its gross business receipts from 1 or more qualified business activities to apportion income to the state of California by multiplying the income by the sum of the property, payroll, and sales factor, divided by 3 (Sec. 3).

• Defines “qualified business activity” as any of the following activities (Sec. 3): 
• An agricultural business activity;
• A mining or resource extraction activity;
• A savings and loan activity; or
• A banking or financial business activity.

• Defines “in-state sales” as any of the following for businesses that are eligible for an election for intangible property, effective for taxable years beginning January 1, 2011 (Sec. 6):
• An income-producing activity that is performed in California; or
• An income-producing activity that is performed both in and outside California, but for which the greater proportion of income is generated within California.

• Defines “in-state sales” for businesses subject to the 50 percent gross business receipts test as any of the following, effective for taxable years beginning January 1, 2011 (Sec. 7):
• Sales from services where the purchaser of the service received the benefit of the services in California;
• Sales from intangible property that are used in California;
• Sales from the sale, lease, rental, or licensing of real estate that is located in California; or
• Sales from the rental, lease, or licensing of tangible personal property that is located in California.

• Defines “in-state sales” of intangible property beginning on or after January 1, 2012 as any of the following (Sec. 7):
• Sales from services a customer received within California;
• Sales from intangible property used within California, such as marketable securities; or
• Sales from the sale, lease, rental, or licensing of real estate property or tangible property located in California.

• Specifies that only 50 percent of “qualified business activity” conducted by cable providers or networks is considered to have been earned in the state for tax purposes (Sec. 8).

Full Bill Text