SB 500: Personal income taxes: nonresident de minimis income.

Existing law, the Personal Income Tax Law, imposes a tax on the entire taxable income of a resident taxpayer subject to that law, and provides for a specified treatment of the income of nonresidents. For purposes of computing the taxable income, the gross income of a nonresident includes only the gross income from sources within this state. Existing law requires every taxpayer subject to tax under the law to file a return with the Franchise Tax Board, stating specifically the items of the gross income from all sources and the deductions and credits allowable, as provided.

This bill would provide, for purposes of computing the taxable income of a nonresident, that the gross income of a nonresident from sources within this state does not include de minimis income, defined as compensation subject to specified withholding if the nonresident has no other income from sources within this state, is present in this state to perform employment duties on behalf of an employer and any other related person for not more than 20 9 calendar days during the taxable year in which the compensation is received, if the compensation is received on or after January 1, 2016, 2017, for any part of the taxable year during which the taxpayer was not a resident of this state, and the nonresidents state of residence provides a substantially similar exclusion or does not impose an individual income tax. Except as specified, the bill would provide that a nonresident whose only income from sources in this state is compensation excluded pursuant to these provisions has no personal income tax liability and is not required to file a return. The bill would repeal these provisions on January 1, 2021.

Existing law requires every employer who pays wages to a nonresident employee for services performed in this state to deduct and withhold from those wages, except as provided, the amount of specified income taxes. taxes reasonably estimated to be due from the inclusion of those wages in the employees gross income.

This bill bill, until January 1, 2021, would provide that no amount is required to be deducted or withheld from compensation paid to a nonresident for employment duties performed in this state if that compensation is excluded from provide, for those tax withholding purposes, that gross income excludes de minimis income excluded from a nonresidents income subject to tax pursuant to the aforementioned provisions. The bill would repeal these provisions on January 1, 2021.