CA AB1778

Amends Revenue and Taxation Code Section 17941 to exempt limited liability companies (LLCs) formed exclusively to acquire and hold equity or debt interests in a single other corporation, LLC, or partnership from paying the annual franchise tax.

Exempts LLCs that collect income from such interests and distribute the entire amount (less expenses) to members, thereby excluding them from the annual tax requirement.

Provides exemption for small businesses solely owned by deployed U.S. Armed Forces members from annual tax during taxable years when the owner is deployed and the LLC operates at a loss or ceases operation; exemption sunsets January 1, 2018.

Requires the Franchise Tax Board to notify taxpayers filing final returns that annual taxes continue until a certificate of dissolution or cancellation is filed with the Secretary of State.

Takes effect immediately as a tax levy.