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

Changed the term 'local news organizations' to 'local news outlets' in the credit description (paragraph AJ of Section 17039(c)(1)) and in the legislative counsel's digest, aligning the credit name with the defined term used elsewhere in the statute.

Added new Section 1.5 that amends Section 17039 to renumber credit ordering paragraphs, inserting a new paragraph (9) for the credit allowed by Section 17053.98.5 (for taxable years beginning on or after January 1, 2027 and before January 1, 2032). This shifts all subsequent paragraph numbers up by one. The change is operative only if both this bill and AB 2319 are enacted and this bill is enacted last.

Added language to the legislative counsel's digest stating that the bill would incorporate additional changes to Sections 17039 and 23036 proposed by AB 2319, operative only if both bills are enacted and this bill is enacted last.

Updated the legislative counsel's digest to include a new paragraph (2) describing federal conformity changes for covered employee remuneration limits in controlled groups, which was previously embedded in the body of the digest but is now presented as a separate numbered item.

The document format changed from the full legislative text (with section numbers, line numbers, and amendment history) to a web page display showing bill metadata, version dropdown, and navigation links. The substantive content of AB 2222 - including the $20,000/$15,000/$7,500 journalist credits, eligibility definitions, and 2027-2032 operative period - appears unchanged.

The credit is now explicitly available to organizations exempt from income taxation (such as 501(c)(3) nonprofits), and refund provisions apply to those organizations. This was not in the prior version.

Public reporting requirements were significantly reduced. The prior version required the FTB to publish a report listing each qualified taxpayer by name, the amount of credits awarded to each, the total number of qualifying journalists supported, and the geographic distribution of credits by county. The new version only requires reporting the total number of taxpayers allowed the credit, the total dollar value of credits allowed, and the average dollar amount per qualified taxpayer.

The definition of 'qualifying journalist' was simplified from requiring all three criteria (full-time employment, job duties, and residency) to only two (job duties and residency). The full-time employment threshold is now handled through the credit structure itself rather than the journalist definition. A new definition for 'annualized wages, salary, or passthrough income' was added to clarify how part-time compensation is calculated.

The 'qualified taxpayer' definition changed from requiring ownership of a 'local news organization' to a 'local news outlet,' and reorganized the state registration requirement into a separate subparagraph. This is a minor rewording that could affect interpretation.

The bill now amends Section 17039 to add the local news credit (Section 17053.76) to the statutory credit ordering hierarchy, specifying its position relative to other credits and confirming it can reduce net tax below the tentative minimum tax. This is a technical integration step necessary for proper administration.

Assembly Member Quirk-Silva was added as a coauthor, indicating broader legislative support for the bill.

A new 'continuously employed' requirement means a journalist must have been employed by the qualified taxpayer (or same combined reporting group) in BOTH the preceding taxable year and the current taxable year to count toward the credit. This narrows eligibility compared to the prior version which only required employment during the current year.

The definition of 'qualified taxpayer' was expanded from 'a local news organization that is organized in this state' to 'a person or entity engaged in a trade or business within California that owns or operates a local news organization.' This allows parent companies, holding entities, or other business structures to claim the credit on behalf of their local news operations.

Section 17271 was changed so that Section 162(m)(3)(C) of the Internal Revenue Code (the federal 'covered employee' definition) now SHALL APPLY rather than shall not apply. This means the limitation on deducting excessive executive compensation will use the federal covered-employee definition, potentially reducing deductions for high-paid executives at qualifying taxpayers.

A new defined term 'local news outlet' was added, meaning a qualifying digital news outlet, broadcast station, or print publication that produces original news coverage concerning local communities in the state. This consolidates what was previously described inline.

The 'qualifying journalist' definition was restructured: it now requires only two elements (job duties in the state and residency) instead of three. The full-time employment threshold (30+ hours/week, 26+ weeks, $35,000+ annualized) is now handled through the separate 'on a full-time basis' definition applied at the credit level rather than embedded in the journalist definition.

The Franchise Tax Board is now required 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 under Section 501(c)(3). This signals legislative interest in extending the credit to nonprofit news organizations.

Performance indicators for evaluating the credit were expanded to include 'the average dollar amount per qualified taxpayer allowed a credit' in addition to the existing metrics of number of taxpayers and total dollar value.

Section 23036 was expanded with new subdivisions addressing S corporation credit computation, disregarded entity credit limitations, pass-thru entity credits for fiscal-year filers when a credit expires, and operative dates for prior amendments from Chapter 56 of the Statutes of 2023.

The definition of 'qualifying broadcast station' was substantially rewritten. The old version required the station to have at least 33 percent of its broadcasting area within California, demonstrated using FCC service contour maps. The new version removes that geographic threshold and instead requires either (A) a community of license located within California, or (B) nonprofit 501(c)(3) status combined with either a prior CPB community service grant or employment of journalists on behalf of a university-licensed public broadcaster. This broadens which broadcast stations can qualify.

The definition of 'qualifying digital news outlet' was changed from a 'publication with a primary mission to publish' to simply 'an entity that publishes.' This removes the requirement for a stated primary mission and broadens the type of organizations that can qualify, while retaining the 33 percent in-state audience threshold.

A new category was added to the definition of 'qualifying print publication': a newspaper of general circulation adjudicated by a California court. Previously only local newspapers and news magazine publishers with USPS periodicals mailing privileges qualified.

The privacy requirement for the Franchise Tax Board's public report was narrowed. The old version required that 'all taxpayer information is anonymized.' The new version only requires that 'any proprietary financial information regarding the operation of qualified taxpayers remains confidential,' meaning non-financial taxpayer details (such as names) may now appear in the published report.

The legislative finding stating the goal of the credits was narrowed from providing 'financial relief to struggling local news media outlets' to providing 'financial relief to local news media outlets that are struggling to maintain or grow local journalist employment,' tying the purpose more specifically to journalist employment outcomes.

Various drafting cleanups were made: removed redundant language in the control/disqualification requirement for qualified taxpayers, fixed a garbled phrase in the 'new journalism position' definition (removed 'on any day of'), corrected a typo ('of of' to 'of'), and cleaned up the report submission language.

Section 23633(c) now directs excess corporate tax credits to be refunded from the Corporation Tax Fund instead of the Tax Relief and Refund Account, aligning the refund source with the appropriate fund for each tax type. The digest confirms both funds are continuously appropriated.

The appropriation and vote line was updated from 'Appropriation: no' to 'Appropriation: yes' and 'Vote: majority 2/3' to 'Vote: 2/3,' reflecting that the bill now makes an appropriation from two continuously appropriated funds.

The residency requirement for qualifying journalists was changed in both sections from residing within 50 miles of the coverage area of the qualified taxpayer to residing within the state (California). This significantly broadens eligibility by removing the geographic proximity requirement to a specific news organization.

Section 17053.76(b)(5)(B) now requires that a qualifying journalist's primary job duties 'occur in the state,' adding a work-location requirement not present in the prior version. Notably, this language was not added to the parallel provision in Section 23633 (corporation tax).

In both sections, the definition of qualifying journalist was changed from being employed by 'an eligible local news organization' to 'a qualified taxpayer,' making the terminology internally consistent with the rest of the bill.

The standalone legislative intent section (formerly Section 1) stating the Legislature's intent to incentivize retention and hiring of journalists through an employment tax credit was removed entirely, along with its corresponding language in the digest.

New Section 2 amends Revenue and Taxation Code Section 17271 to apply the Tax Cuts and Jobs Act amendments to IRC Section 162(m) (excessive employee remuneration limit) for individual income tax purposes, with the binding contract exception date modified from November 2, 2017 to March 31, 2019. It also provides that IRC Section 162(m)(3)(C) relating to 'covered employee' shall not apply.

New Section 5 amends Revenue and Taxation Code Section 24343 to conform corporate tax law to federal rules on excessive employee remuneration, including applying amendments from the One Big Beautiful Bill Act (Public Law 119-21) regarding controlled group members and allocation of deduction. This is a new federal conformity provision that did not exist in the Assembly version.

Senator McNerney added as a coauthor, reflecting Senate sponsorship of the amendment.

Section renumbering: the former Section 3 (adding Section 23633 for corporate news credits) becomes Section 4, making room for the new Section 2 on individual tax conformity.

Minor grammatical correction in Section 23633: 'a disqualified organization means is either of the following' changed to 'a disqualified organization is either of the following.'

A new $7,500 credit is added for each qualifying part-time journalist, defined as someone working at least 20 but less than 30 hours per week for more than 26 weeks with annualized wages of at least $25,000.

The residency requirement for qualifying journalists is broadened from residing within 50 miles of the coverage area to simply residing within the state, significantly expanding who qualifies.

The full-time journalist definition adds a 'for more than 26 weeks' duration requirement in addition to the existing 30 hours per week threshold.

The definition of 'new journalism position' is expanded to include journalists employed by any trade or business acquired by the qualified taxpayer during the taxable year, so acquisitions can generate new-position credits.

The qualifying broadcast station definition is restructured from a single 33% in-state broadcasting area test to two alternative prongs: (A) licensed to a California community of license, or (B) a 501(c)(3) nonprofit that received a CPB community service grant before FY 2025-26 or employs journalists for a university-licensed public broadcaster.

The qualifying print publication definition adds a new alternative: a newspaper of general circulation adjudicated by a California court, in addition to the existing USPS periodicals mailing privileges test.

The disqualified organization control test is broadened from 'controlled directly or indirectly by' to 'controlled directly or indirectly through one or more intermediaries by,' closing a potential avoidance loophole.

A new tentative minimum tax floor is added: the credit cannot reduce net tax below the tentative minimum tax (personal income tax) or below the tentative minimum tax and minimum franchise tax (corporation tax).

The Franchise Tax Board reporting requirement is expanded from just the number of taxpayers and total dollar value to include a list of qualified taxpayers, amounts awarded to each, total number of qualifying journalists supported, geographic distribution by county, and total dollar amount. The published version must protect proprietary financial information.

An entirely new section amending Section 23036 of the Revenue and Taxation Code is added, establishing a comprehensive ordering system for how all corporate tax credits are applied against tax liability, including carryover rules, S corporation treatment, disregarded entity limitations, and pass-through entity provisions. The new Section 23633 credit is placed seventh in the ordering.

Two new coauthors (Assembly Members Lowenthal and McKinnor) are added to the bill.

The bill now contains fully operative tax credit provisions (Sections 17053.76 and 23633 of the Revenue and Taxation Code) rather than being a non-binding statement of legislative intent.

Vote requirement changed from simple majority to two-thirds majority. Appropriation status changed from 'no' to 'yes' (via the continuously appropriated Tax Relief and Refund Account). Fiscal committee review changed from 'no' to 'yes.'

Establishes specific credit amounts: $20,000 for each of the first 5 qualifying journalists, $15,000 for each additional qualifying journalist beyond 5, and an extra $15,000 for each qualifying journalist in a net-new journalism position. Excess credits are refunded from the continuously appropriated Tax Relief and Refund Account.

Defines 'qualified taxpayer' as a local news organization organized or registered in California for at least 12 months that operates a qualifying digital news outlet, broadcast station, or print publication, publicly discloses beneficial owners or board of directors, carries media liability insurance, maintains an error correction policy, and is not controlled by PACs or 501(c)(4) organizations.

Defines 'qualifying journalist' as a full-time employee (30+ hours/week) earning at least $35,000 annualized wages whose primary duties involve gathering, producing, or publishing state or local news, and who resides within 50 miles of the coverage area.

Credits apply to taxable years beginning on or after January 1, 2027 and before January 1, 2032. The sections sunset and are repealed as of December 1, 2032.

Requires the Franchise Tax Board to submit an annual report to the Legislature starting April 1, 2029, detailing the number of taxpayers allowed a credit and total dollar value, with an anonymized version published on the FTB website.

Limits revenue received from disqualified organizations (PACs and 501(c)(4) entities) to no more than 15 percent of gross revenues in the previous two taxable years, with an exception for political advertising purchased during lowest unit windows at FCC campaign advertising rates.

Defines 'new journalism position' as the net increase (not below zero) in average daily qualifying journalists compared to the prior taxable year. Defines qualifying broadcast station (at least 33% of broadcasting area in-state), qualifying digital news outlet (at least 33% of audience in-state, publishing at least monthly), and qualifying print publication (USPS periodicals mailing privileges, at least 33% in-state distribution).