(a) (1) Section 3406 of the Internal Revenue Code, relating to the backup withholding, shall apply, except as otherwise provided.
(2) For purposes of this section, the term “reportable payment,” as defined in Section 3406(b) of the Internal Revenue Code, shall include payments of items of income as defined in Section 18662, and any regulations thereunder, with respect to rents, prizes and winnings, compensation for services, including bonuses, and other fixed or determinable annual or periodic gains, profits, and income.
(3) This section shall not apply to either of the following:
(A) Payment of interest and dividends.
(B) Any release of loan funds made by a financial institution in the normal course of business.
(4) For the purposes of subparagraph (B) of paragraph (3), “financial institution” means any of the following:
(A) A depository institution, as defined in Section 1813(c) of Title 12 of the United States Code.
(B) An institution-affiliated party, as defined in Section 1813(u) of Title 12 of the United States Code.
(C) Any federal credit union or state credit union, as defined in Section 1752 of Title 12 of the United States Code, including an institution-affiliated party of a credit union, as defined in Section 1786(r) of Title 12 of the United States Code.
(b) The amount of tax to be withheld shall be computed by applying a rate of 7 percent to the reportable payment.
(c) Where withholding under both this section and other provisions of this article would otherwise be required, withholding shall only be required under this section.
(d) Any payer required to withhold tax pursuant to this section shall notify the payee of such withholding at a time and in a manner as may be prescribed in forms and instructions by the Franchise Tax Board.
(e) This section shall apply to payments made on or after January 1, 2010.
(Added by Stats. 2009, 4th Ex. Sess., Ch. 16, Sec. 3. (AB 18 4x) Effective January 23, 2009.)
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