BILL NUMBER: AB 2303	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Leno

                        FEBRUARY 19, 2004

   An act to add Section 451.5 to the Public Utilities Code, and to
add Section 24428 to the Revenue and Taxation Code, relating to
public utilities.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2303, as introduced, Leno.  Public utilities: corporate
taxation:  insolvency.
   (1) Under existing law, the Public Utilities Commission has
regulatory authority over public utilities, and authorizes the
commission to fix just and reasonable rates and charges.
   This bill would require that any expense resulting from a bonus
paid to an officer or employee of an insolvent utility be borne by
the shareholders of the utility and would prohibit any expense
resulting from the payment of a bonus by an insolvent utility from
being recovered in rates.
   (2) The Bank and Corporation Tax Law allows various deductions in
computing income subject to taxation. Among other things, that law
allows a deduction for the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business, including compensation paid to officers and employees.
   This bill would provide that no deduction shall be allowed for the
costs paid or incurred during the taxable year by a public utility
for any bonus paid to an officer or employee during the period that
the utility is insolvent, as defined.
   This bill would result in a change in state taxes for the purpose
of increasing state revenues within the meaning of Section 3 of
Article XIII A of the California Constitution, and thus would require
for passage the approval of 2/3 of the membership of each house of
the Legislature.
   (3) Under existing law, a violation of the Public Utilities Act or
an order of the commission is a crime.
   Because certain provisions of this bill would be a part of the act
and a violation of those provisions would be a crime, this bill
would impose a state-mandated local program by creating a new crime.

  (4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote:  2/3.  Appropriation:  no.  Fiscal committee:  yes.
State-mandated local program:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 451.5 is added to the Public Utilities Code, to
read:
   451.5.  Any expense resulting from a bonus paid to an officer or
employee of an insolvent utility shall be borne by the shareholders
of the utility. No expense resulting from the payment of a bonus by
an insolvent utility may be recovered in rates.  For purposes of this
section, "insolvent" means the utility has ceased to pay its debts
in the ordinary course of business, the utility cannot pay its debts
as they become due, or the utility's liabilities exceed the utility's
assets.
  SEC. 2.  Section 24428 is added to the Revenue and Taxation Code,
to read:
   24428.  (a) Notwithstanding any other provision in this part to
the contrary, no deduction shall be allowed for the costs paid or
incurred during the taxable year by a public utility for any bonus
paid to an officer or employee during the period that the utility is
insolvent.
   (b) For purposes of this section, "insolvent" means the public
utility has ceased to pay its debts in the ordinary course of
business, the public cannot pay its debts as they become due, or the
public utility's liabilities exceed its assets.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.