Revenue and Taxation Code — Part 13 | RTC — United States — California law | Esheria

Revenue and Taxation Code

Part 13 of 36 · provisions 2,401–2,600

This section says the act is known as the Revenue and Taxation Code.

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Starting in the 1995–96 fiscal year, county-assessed property rights or interests must be placed in a separate countywide tax rate area, and the tax rate is calculated using the rates from Section 100. This section suspends a specified California constitutional subparagraph for the 2009–10 fiscal year. This section requires the county auditor to reduce certain 2009–10 property tax apportionments, transfer the reduction amounts to a county fund, and report the calculations. It also lets the Director of Finance grant limited hardship relief, requires later state reimbursement, and allows mandamus if reimbursement is not made on time. This section sets how certain railroad property tax value and revenues must be allocated among tax rate areas, counties, school entities, and related jurisdictions. Supplemental property tax revenues for 1985–86 and later years must be apportioned using the current year’s property tax apportionment factors.

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Provisions of Revenue and Taxation Code

Showing 200 of 7,200

  1. 23364a

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2. The Corporation Franchise Tax [23101 - 23364a] ( Heading of Chapter 2 amended by Stats. 2001, Ch. 543, Sec. 26. ) ## ARTICLE 9. Affiliated Railroads [23361 - 23364a] ( Article 9 added by Stats. 1949, Ch. 557. )

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    A qualifying corporation’s tax for its first taxable year in California is set under Section 23151.1, subdivisions (a) and (b).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2. The Corporation Franchise Tax [23101 - 23364a] ( Heading of Chapter 2 amended by Stats. 2001, Ch. 543, Sec. 26. ) ## ARTICLE 9. Affiliated Railroads [23361 - 23364a] ( Article 9 added by Stats. 1949, Ch. 557. ) ## 23364a. Where a member of an affiliated group filing a consolidated return is a corporation commencing to do business in this state for the first time after August 27, 1937, its tax for the taxable year of commencement shall be the tax for such year as provided for in subdivisions (a) and (b) of Section 23151.1. (Amended by Stats. 1977, Ch. 552.)
  2. 234.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    Seed potatoes of a grower are exempt from taxation if they are held on the lien date for later field planting and are planted during the assessment year.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 234. Seed potatoes of a grower, which are personal property, held on the lien date for subsequent planting in field form and planted during the assessment year by the grower shall be exempt from taxation. This section does not apply to plant nurseries. (Added by renumbering Section 232 (as added by Stats. 1974, Ch. 14) by Stats. 1981, Ch. 714, Sec. 398.)
  3. 23400.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    This section makes the federal alternative minimum tax rules apply for this chapter as of January 1, 2015, unless otherwise provided, and exempts certain S corporations from the tax imposed by the chapter.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23400. (a) For the purpose of this chapter, Part VI of Subchapter A of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to alternative minimum tax, shall apply as it read on January 1, 2015, except as otherwise provided. (b) A corporation electing under Chapter 4.5 (commencing with Section 23800) to be treated as an “S corporation” shall not be subject to the tax imposed by this chapter. (Amended by Stats. 2025, Ch. 231, Sec. 76. (SB 711) Effective October 1, 2025.)
  4. 23453.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    For each taxable year, a minimum tax credit is allowed against the regular tax, and the credit is determined under Internal Revenue Code Section 53 unless this part says otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23453. (a) There shall be allowed as a credit against the regular tax (as defined by subdivision (c) of Section 23455), for any taxable year, an amount equal to the minimum tax credit for that taxable year. (b) For purposes of subdivision (a), the minimum tax credit shall be determined in accordance with Section 53 of the Internal Revenue Code, except as otherwise provided in this part. (c) For purposes of this chapter, the amount determined under Section 53(c)(1) of the Internal Revenue Code shall be the regular tax as defined by subdivision (c) of Section 23455, reduced by the sum of the credits allowable under this part other than any credit which reduces the tax below the tentative minimum tax, as defined by Section 23455. (d) Section 53(e) of the Internal Revenue Code, relating to the application to applicable corporations, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 77. (SB 711) Effective October 1, 2025.)
  5. 23455.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    This section sets alternative minimum tax rules and rates for several categories of taxpayers, including corporations, banks, financial corporations, and certain organizations or trusts.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23455. For purposes of this part, Section 55 of the Internal Revenue Code is modified as follows: (a) Section 55(b)(1) of the Internal Revenue Code, relating to the amount of tentative minimum tax, is modified by requiring the tentative minimum tax for the taxable year to be imposed as follows: (1) With respect to corporations subject to tax under Chapter 2 (commencing with Section 23101), other than banks or financial corporations, according to or measured by net income, for the privilege of doing business within this state, at a rate of 7 percent upon the basis of so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount. (2) With respect to corporations subject to tax under Chapter 3 (commencing with Section 23501), on net income from sources within this state, at a rate of 7 percent upon the basis of so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount. (3) With respect to organizations or trusts subject to tax under Article 2 (commencing with Section 23731) of Chapter 4, on the unrelated business income from sources within this state, at a rate of 7 percent upon the basis of so much of the alternative taxable income for the taxable year as exceeds the exemption amount. (4) With respect to banks subject to tax under Section 23181, according to or measured by net income, for the privilege of doing business within this state, in an amount equal to the sum of the following: (A) At a rate of 7 percent upon the basis of so much of the alternative minimum taxable income as exceeds the exemption amount. (B) At the rate determined under Section 23186, less the rate prescribed by Section 23151, upon the basis of net income for the taxable year. (5) With respect to financial corporations subject to tax under Section 23183, according to or measured by net income, for the privilege of doing business within this state, in an amount equal to the sum of the following: (A) At a rate of 7 percent upon the basis of so much of the alternative minimum taxable income as exceeds the exemption amount. (B) At the rate determined under Section 23186, less the rate prescribed by Section 23151, upon the basis of net income for the taxable year. (b) Section 55(b)(2) of the Internal Revenue Code, relating to the definition of alternative minimum taxable income, is modified as follows: (1) For corporations whose net income is determined under Chapter 17 (commencing with Section 25101), alternative minimum taxable income shall be allocated and apportioned in the same manner as net income is allocated and apportioned for purposes of the regular tax. (2) With respect to taxpayers subject to Article 4 (commencing with Section 23221) of Chapter 2, Article 4 (commencing with Section 23221) to Article 9 (commencing with Section 23361), inclusive, shall apply to the tax imposed by this section except that Section 23221 shall not apply. (3) For purposes of computing the alternative minimum tax for taxable years in which a taxpayer commenced doing business, dissolves, withdraws, or ceases doing business, Sections 18601, 23151, 23151.1, 23151.2, 23181, 23183, 23183.1, 23183.2, 23201 to 23204, inclusive, 23222 to 23224.5, inclusive, 23282, 23332.5, and 23504 shall be applied with due regard for the rate and alternative minimum taxable income prescribed by this chapter. (c) Section 55(c) of the Internal Revenue Code, relating to the definition of regular tax, is modified to read: (1) For purposes of this chapter, “regular tax” means the amount of tax imposed under Chapter 2 (commencing with Section 23101) or Chapter 3 (commencing with Section 23501) or Article 2 (commencing with Section 23731) of Chapter 4, but does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667. (2) The tax specified in paragraph (1) shall be the amount determined prior to reduction by any credits against the tax. (3) The amendments made to Section 55(c)(1) of the Internal Revenue Code by Section 12001(b)(4) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), shall apply. (d) The rate of 7 percent prescribed in subdivision (a) shall be 6.65 percent for any taxable year beginning on or after January 1, 1997. The change in rate provided in this subdivision shall be made without proration otherwise required by Section 24251. (Amended by Stats. 2025, Ch. 231, Sec. 78. (SB 711) Effective October 1, 2025.)
  6. 23455.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    The exemption for small corporations in Section 55(e) of the Internal Revenue Code does not apply here.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23455.5. Section 55(e) of the Internal Revenue Code, relating to exemption for small corporations, shall not apply. (Added by Stats. 1998, Ch. 322, Sec. 64. Effective August 20, 1998.)
  7. 23456.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    This section changes how Section 56 of the Internal Revenue Code applies for California alternative minimum tax purposes.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23456. For purposes of this part, Section 56 of the Internal Revenue Code is modified as follows: (a) (1) Section 56(a)(2) of the Internal Revenue Code, relating to mining exploration and development costs, shall apply only to expenses incurred during taxable years beginning on or after January 1, 1988. (2) Section 56(a)(5) of the Internal Revenue Code, relating to pollution control facilities, shall apply only to amounts allowable as a deduction under Section 24372.3. (b) For purposes of applying Section 56(d) of the Internal Revenue Code, all references to “December 31, 1986,” are modified to read “December 31, 1987,” and all references to “January 1, 1987,” are modified to read “January 1, 1988.” (c) Section 56(d)(1) of the Internal Revenue Code is modified to include the provisions of Section 25108. (d) Section 56(g) of the Internal Revenue Code, relating to adjustments based on adjusted current earnings, is modified to provide that for corporations whose income is determined under Chapter 17 (commencing with Section 25101), adjusted current earnings shall be allocated and apportioned in the same manner as net income is allocated and apportioned for purposes of the regular tax. In addition, each of the following shall apply: (1) Sections 56(g)(1)(A) and 56(g)(3) of the Internal Revenue Code are modified to provide that the term “adjusted current earnings” means the sum of the adjusted current earnings of that corporation apportionable to this state and the adjusted current earnings allocable to this state. (2) Section 56(g)(1)(B) of the Internal Revenue Code is modified to provide that the term “alternative minimum taxable income” means the sum of the alternative minimum taxable income of that corporation apportionable to this state and the alternative minimum taxable income allocable to this state. (e) Section 56(g)(4)(A) of the Internal Revenue Code is modified to provide the following: (1) In the case of any property placed in service on or after January 1, 1981, and prior to January 1, 1987, other than residential rental property for which an election was made under former Section 24349.5, the amount allowable as depreciation or amortization with respect to that property shall be the same amount that would have been allowable for the taxable year had the taxpayer depreciated the property under the straight line method for each taxable year of the useful life (determined without regard to Section 24354.2) for which the taxpayer has held the property. (2) In the case of any property placed in service on or after January 1, 1987, and prior to January 1, 1990, other than residential rental property for which an election was made under former Section 24349.5, the amount allowable as depreciation or amortization with respect to that property shall be determined by each of the following: (A) Taking into account the adjusted basis of that property (as determined for purposes of computing alternative minimum taxable income) as of the close of the last taxable year beginning before January 1, 1990. (B) Using the straight line method over the remainder of the recovery period applicable to that property under the alternative system of Section 168(g) of the Internal Revenue Code. (3) The amendments made to paragraph (2) by the act adding this paragraph shall apply to taxable years beginning on or after January 1, 1990. (4) The last sentence of Section 56(g)(4)(A)(i) of the Internal Revenue Code, shall not apply to taxable years beginning before January 1, 1998. (f) (1) Section 56(g)(4)(C) of the Internal Revenue Code, relating to disallowance of items not deductible in computing earnings and profits, shall be modified as follows: (A) (i) A deduction shall be allowed for amounts allowable as a deduction for purposes of the regular tax under Sections 24402, 24410, 24411, and 25106. (ii) For each taxable year beginning on or after January 1, 1990, a deduction shall be allowed for amounts allowable as a deduction to a credit union for purposes of the regular tax under Section 24405. (B) Section 56(g)(4)(C)(ii) of the Internal Revenue Code, relating to special rule for certain dividends, shall not be applicable. (C) Section 56(g)(4)(C)(iii) of the Internal Revenue Code, relating to treatment of taxes on dividends from 936 corporations, shall not be applicable. (D) Section 56(g)(4)(C)(iv) of the Internal Revenue Code, relating to special rule for certain dividends received by certain cooperatives, shall not be applicable. (2) Section 56(g)(4)(D)(ii) of the Internal Revenue Code is modified to specify that Sections 24364 and 24407 shall not apply to expenditures paid or incurred in taxable years beginning on or after January 1, 1990. (3) With respect to corporations that are not subject to the tax imposed under Chapter 2 (commencing with Section 23101), the amount of interest income included in the adjusted current earnings shall not exceed the amount of interest income included for purposes of the regular tax. (4) Appropriate adjustments shall be made to limit deductions from adjusted current earnings for interest expense in accordance with the provisions of Sections 24344 and 24425. (Amended by Stats. 2025, Ch. 231, Sec. 79. (SB 711) Effective October 1, 2025.)
  8. 23456.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    Section 56A of the Internal Revenue Code, relating to adjusted financial statement income, does not apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23456.5. Section 56A of the Internal Revenue Code, relating to adjusted financial statement income, shall not apply. (Repealed and added by Stats. 2025, Ch. 231, Sec. 82. (SB 711) Effective October 1, 2025.)
  9. 23457.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    This section changes how Section 57 of the Internal Revenue Code applies for this part, by making the tax-exempt interest rule inapplicable and revising the accelerated depreciation/amortization rule.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23457. For purposes of this part, Section 57 of the Internal Revenue Code is modified as follows: (a) Section 57(a)(5) of the Internal Revenue Code, relating to tax-exempt interest, shall not be applicable. (b) Section 57(a)(6) of the Internal Revenue Code, relating to accelerated depreciation or amortization on certain property placed in service before January 1, 1987, is modified to read: With respect to each property as described in Section 1250(c) of the Internal Revenue Code as that provision read on April 1, 1970, the amount by which the deduction allowable for the taxable year for exhaustion, wear, tear, obsolescence, or amortization exceeds the depreciation deduction that would have been allowable for the taxable year, had the taxpayer depreciated the property under the straight line method for each taxable year of its useful life (determined without regard to Section 24354.2 or 24381) for which the taxpayer has held the property. (Amended by Stats. 2002, Ch. 488, Sec. 8.5. Effective September 12, 2002.)
  10. 23459.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. )

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    This section modifies how Internal Revenue Code section 59 applies for this part.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 2.5. Alternative Minimum Tax [23400 - 23459] ( Chapter 2.5 repealed and added by Stats. 1987, Ch. 1139, Sec. 24. ) ## 23459. For purposes of this part, the provisions of Section 59 of the Internal Revenue Code are modified as follows: (a) Section 59(a) of the Internal Revenue Code, relating to the alternative minimum tax foreign tax credit, shall not be applicable. (b) Section 59(b) of the Internal Revenue Code, relating to income eligible for the credit under Section 936 of the Internal Revenue Code, shall not be applicable. (c) Subparagraphs (A), (B), and (C) of Section 59(e)(2) of the Internal Revenue Code, relating to qualified expenditures, are modified to refer to: (1) Section 24364, in lieu of the deduction under Section 173 of the Internal Revenue Code. (2) Section 24423, in lieu of the deduction under Section 263(c) of the Internal Revenue Code. (Amended by Stats. 1991, Ch. 117, Sec. 50. Effective July 16, 1991.)
  11. 235.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    A lessee of tangible personal property owned by a bank or financial corporation is conclusively presumed to be the owner for purposes of this division.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 235. For the purposes of this division, the lessee of tangible personal property owned by a bank or financial corporation shall be conclusively presumed the owner of that property. (Added by Stats. 1986, Ch. 1457, Sec. 8.)
  12. 23501.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Imposition of Tax [23501 - 23504] ( Article 1 added by Stats. 1949, Ch. 557. )

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    Most corporations, except banks, must pay a tax on net income from sources within California at 7.6%, subject to later rate changes in the section.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Imposition of Tax [23501 - 23504] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23501. (a) There shall be imposed upon every corporation, other than a bank, for each taxable year, a tax at the rate of 7.6 percent upon its net income derived from sources within this state on or after January 1, 1937, other than income for any period for which the corporation is subject to taxation under Chapter 2 (commencing with Section 23101), according to or measured by its net income. (b) For calendar or fiscal years ending after June 30, 1973, the rate of tax shall be 9 percent instead of 7.6 percent as provided by subdivision (a). (c) For calendar or fiscal years ending after December 31, 1979, the rate of tax shall be the rate specified for those years by Section 23151. (Amended by Stats. 1997, Ch. 605, Sec. 73. Effective January 1, 1998.)
  13. 23503.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Imposition of Tax [23501 - 23504] ( Article 1 added by Stats. 1949, Ch. 557. )

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    A corporation income tax amount for a period is reduced by any Chapter 2 tax for the same period.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Imposition of Tax [23501 - 23504] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23503. There shall be offset against the tax hereby imposed for any period the amount of any tax imposed on the taxpayer under Chapter 2 for the same period. In the event that taxes, interest and penalties have been or shall be assessed against, paid by or collected from a taxpayer under this chapter, which assessment, payment or collection should have been made under Chapter 2, such taxes, interest and penalties shall be considered as having been assessed, paid or collected under Chapter 2 as of the date or dates they were made. (Added by Stats. 1949, Ch. 557.)
  14. 23504.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Imposition of Tax [23501 - 23504] ( Article 1 added by Stats. 1949, Ch. 557. )

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    If a corporation moves from Chapter 2 to Chapter 3 tax status, the tax for that change year is assessed under Chapter 2, not Chapter 3; later years are assessed under Chapter 3.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Imposition of Tax [23501 - 23504] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23504. Where a corporation formerly subject to tax under Chapter 2 (commencing with Section 23101) becomes subject to tax under Chapter 3 (commencing with Section 23501), the tax for the year in which the change occurs will be assessed under Chapter 2 (commencing with Section 23101) and not under Chapter 3 (commencing with Section 23501). For years subsequent to the year in which the change occurs, the tax will be assessed under Chapter 3 (commencing with Section 23501). (Amended by Stats. 1971, Ch. 1304.)
  15. 23561.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Cessation of Activities [23561- 23561.] ( Article 2 added by Stats. 1949, Ch. 557. )

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    Certain courts and filing officials must not process dissolution-related filings for corporations whose powers, rights, and privileges have been suspended or forfeited for nonpayment of covered taxes, penalties, or interest.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3. The Corporation Income Tax [23501 - 23561] ( Chapter 3 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Cessation of Activities [23561- 23561.] ( Article 2 added by Stats. 1949, Ch. 557. ) ## 23561. No decree of dissolution shall be made and entered by any court, nor shall the county clerk of any county or the Secretary of State file any such decree, or file any other document by which the term of existence of any taxpayer shall be reduced or terminated, nor shall the Secretary of State file any certificate of the surrender by a foreign corporation of its right to do intrastate business in this State if the corporate powers, rights, and privileges of the corporation have been suspended or forfeited by the Franchise Tax Board for failure to pay the tax, penalties, or interest due under this part or Part 10.2 (commencing with Section 18401). (Amended by Stats. 2006, Ch. 773, Sec. 58. Effective September 29, 2006.)
  16. 236.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    Certain long-term leased property used for qualifying low-income rental housing is exempt from taxation on both the possessory interest and the fee interest.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 236. Property leased for a term of 35 years or more or any transfer of property leased with a remaining term of 35 years or more where the lessor is not otherwise qualified for a tax exemption pursuant to Section 214, which is used exclusively and solely for rental housing and related facilities for tenants who are persons of low income (as defined in Section 50093 of the Health and Safety Code), and is leased and operated by religious, hospital, scientific, or charitable funds, foundations or corporations, public housing authorities, public agencies, or limited partnerships in which the managing general partner has received a determination that it is a charitable organization under Section 501(c)(3) of the Internal Revenue Code and is operating the property in accordance with its exempt purpose is exempt from taxation on the possessory interest and the fee interest in the property throughout the term of the lease. Low- and moderate-income has the same meaning as the term “persons and families of low- and moderate-income” as defined by Section 50093 of the Health and Safety Code. (Added by Stats. 1988, Ch. 1296, Sec. 1. Applicable July 1, 1989, by Sec. 3 of Ch. 1296.)
  17. 236.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    A qualifying leasehold interest in real property may be exempt from property tax if it is leased for at least 35 years and used exclusively for a public park with a uniquely governmental character, and the listed conditions are met.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 236.5. Any otherwise taxable interest in real property, leased for an original term of 35 years or more and used exclusively by the lessee for the operation of a public park that is uniquely of a governmental character, as described in paragraph (4) of subdivision (b) of Section 231, is, during the term of the lease, within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution, if all of the following conditions are met: (a) The lessee is a charitable foundation that has received a determination that it is a charitable organization as described in Section 501(c)(3) of the Internal Revenue Code. (b) The operation of the public park by the lessee is within the tax exempt purposes of the lessee. (c) The lessee acquired the leasehold in the property by means of a charitable donation. (d) Under the terms of the lease, the lessee will acquire the entire ownership interest in the property on or before the end of the lease term. (Added by Stats. 2001, Ch. 609, Sec. 1. Effective October 9, 2001.)
  18. 23608.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    Taxpayers who transport donated agricultural products may claim a credit equal to 50% of transportation costs.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23608. (a) In the case of a taxpayer who transports any agricultural product donated in accordance with Chapter 5 (commencing with Section 58501) of Part 1 of Division 21 of the Food and Agricultural Code, for taxable years beginning on or after January 1, 1996, there shall be allowed as a credit against the “tax” (as defined by Section 23036), an amount equal to 50 percent of the transportation costs paid or incurred by the taxpayer in connection with the transportation of that donated agricultural product. (b) If two or more taxpayers share in the expenses eligible for the credit provided by this section, each taxpayer shall be eligible to receive the tax credit in proportion to its respective share of the expenses paid or incurred. (c) If any credit allowed by this section is claimed by the taxpayer, any deduction otherwise allowed under this part for that amount of the cost paid or incurred by the taxpayer which is eligible for the credit that is claimed shall be reduced by the amount of the credit allowed. (d) Upon delivery of the donated agricultural product by a taxpayer authorized to claim a credit pursuant to subdivision (a), the nonprofit charitable organization shall provide a certificate to the taxpayer who transported the agricultural product. The certificate shall contain a statement signed and dated by a person authorized by that organization that the product is donated under Chapter 5 (commencing with Section 58501) of Part 1 of Division 21 of the Food and Agricultural Code. The certificate shall also contain the following information: the type and quantity of product donated, the distance transported, the name of the transporter, the name of the taxpayer donor, and the name and address of the donee. Upon the request of the Franchise Tax Board, the taxpayer shall provide a copy of the certification to the Franchise Tax Board. (e) In the case where any credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit is exhausted. (Amended by Stats. 2000, Ch. 862, Sec. 68. Effective January 1, 2001.)
  19. 23609.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    Taxpayers may claim a research credit against the tax, subject to this section’s timing rules, California research limits, and other modifications.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “tax” (as defined by Section 23036) an amount determined in accordance with Section 41 of the Internal Revenue Code, relating to credit for increasing research activities, except as follows: (a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply: (1) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “8 percent.” (2) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “12 percent.” (b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply: (A) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.” (B) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.” (2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply: (A) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “12 percent.” (B) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.” (3) For each taxable year beginning on or after January 1, 2000, both of the following shall apply: (A) The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “15 percent.” (B) The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.” (c) (1) With respect to any expense paid or incurred after the operative date of Section 6378, Section 41(b)(1) of the Internal Revenue Code, relating to qualified research expenses, is modified to exclude from the definition of “qualified research expense” any amount paid or incurred for tangible personal property that is eligible for the exemption from sales or use tax provided by Section 6378. (2) “Qualified research” and “basic research” shall include only research conducted in California. (d) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that “basic research,” for purposes of this section, includes any basic or applied research including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following: (1) Basic research conducted outside California. (2) Basic research in the social sciences, arts, or humanities. (3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors. (4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas). (e) (1) In the case of a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following: (A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code. (B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a “specialized laboratory cancer center,” and has received Clinical Cancer Research Center status from the National Cancer Institute. (2) For purposes of this subdivision: (A) “Biopharmaceutical research activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products. (B) “Other biotechnology research and development activities” means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (f) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit has been exhausted. (g) For each taxable year beginning on or after January 1, 1998, the reference to “Section 501(a)” in Section 41(b)(3)(C)(ii)(I) of the Internal Revenue Code, relating to qualified research consortium, is modified to read “this part or Part 10 (commencing with Section 17001).” (h) (1) (A) For each taxable year beginning on or after January 1, 2000, and before January 1, 2025, the election of alternative incremental credit under Section 41(c)(4) of the Internal Revenue Code, as applicable for state purposes, shall apply as that section was in effect on January 1, 2015, and as modified as follows: (i) The reference to “3 percent” in Section 41(c)(4)(A)(i) of the Internal Revenue Code is modified to read “one and forty-nine hundredths of one percent.” (ii) The reference to “4 percent” in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified to read “one and ninety-eight hundredths of one percent.” (iii) The reference to “5 percent” in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is modified to read “two and forty-eight hundredths of one percent.” (B) Section 41(c)(4)(B) of the Internal Revenue Code shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 1998, and before January 1, 2025. That election shall apply to the taxable year for which made and all succeeding taxable years beginning before January 1, 2025, unless revoked with the consent of the Franchise Tax Board. (2) (A) For taxable years beginning on or after January 1, 2025, Section 41(c)(4) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall apply, and is modified as follows: (i) The reference to “14 percent” in Section 41(c)(4)(A) of the Internal Revenue Code is modified to read “3 percent.” (ii) The reference to “6 percent” in Section 41(c)(4)(B)(ii) of the Internal Revenue Code is modified to read “1.3 percent.” (B) Section 41(c)(4)(C) of the Internal Revenue Code shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 2024. That election shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Franchise Tax Board. (i) Section 41(c)(6) of the Internal Revenue Code, relating to gross receipts, is modified to take into account only those gross receipts from the sale of property held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser within this state, regardless of f.o.b. point or any other condition of the sale. (j) Section 41(h) of the Internal Revenue Code, relating to treatment of credit for qualified small businesses, shall not apply. (k) Section 41(g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following: (1) The last sentence shall not apply. (2) If the amount determined under Section 41(a) of the Internal Revenue Code for any taxable year exceeds the limitation of Section 41(g) of the Internal Revenue Code, that amount may be carried over to other taxable years under the rules of subdivision (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply. (m) Section 41(b)(3)(D) of the Internal Revenue Code, relating to amounts paid to eligible small businesses, universities, and federal laboratories, shall not apply. (n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 83. (SB 711) Effective October 1, 2025.)
  20. 23610.4.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    The Legislature says the state low-income housing tax credit for a project should not be more than the extra amount needed, beyond the federal tax credit, to make the project financially feasible and viable through the extended use period.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23610.4. It is the intent of the Legislature that the amount of the state low-income housing tax credit allocated to a project pursuant to Section 23610.5 shall not exceed an amount in addition to the federal tax credit that is necessary for the financial feasibility of the project and its viability throughout the extended use period. (Amended (as added by Stats. 1990, Ch. 166) by Stats. 1990, Ch. 1349, Sec. 19.3. Effective September 26, 1990.)
  21. 23610.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a state low-income housing tax credit and sets rules for claiming, allocating, certifying, and reporting it.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23610.5. (a) (1) There shall be allowed as a credit against the “tax,” defined in Section 23036, a state low-income housing tax credit in an amount equal to the amount determined in subdivision (c), computed in accordance with Section 42 of the Internal Revenue Code, relating to low-income housing credit, except as otherwise provided in this section. (2) “Taxpayer,” for purposes of this section, means the sole owner in the case of a “C” corporation, the partners in the case of a partnership, and the shareholders in the case of an “S” corporation. (3) “Housing sponsor,” for purposes of this section, means the sole owner in the case of a “C” corporation, the partnership in the case of a partnership, and the “S” corporation in the case of an “S” corporation. (b) (1) The amount of the credit allocated to any housing sponsor shall be authorized by the California Tax Credit Allocation Committee, or any successor thereof, based on a project’s need for the credit for economic feasibility in accordance with the requirements of this section. (A) The low-income housing project shall be located in California and shall meet either of the following requirements: (i) Except for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code, that are allocated credits solely under the set-aside described in subdivision (c) of Section 50199.20 of the Health and Safety Code, the project’s housing sponsor has been allocated by the California Tax Credit Allocation Committee a credit for federal income tax purposes under Section 42 of the Internal Revenue Code, relating to low-income housing credit. (ii) It qualifies for a credit under Section 42(h)(4)(B) of the Internal Revenue Code, relating to special rule where 50 percent or more of building is financed with tax-exempt bonds subject to volume cap. (B) The California Tax Credit Allocation Committee shall not require fees for the credit under this section in addition to those fees required for applications for the tax credit pursuant to Section 42 of the Internal Revenue Code, relating to low-income housing credit. The committee may require a fee if the application for the credit under this section is submitted in a calendar year after the year the application is submitted for the federal tax credit. (C) (i) For a project that receives a preliminary reservation of the state low-income housing tax credit, allowed pursuant to subdivision (a), on or after January 1, 2009, the credit shall be allocated to the partners of a partnership owning the project in accordance with the partnership agreement, regardless of how the federal low-income housing tax credit with respect to the project is allocated to the partners, or whether the allocation of the credit under the terms of the agreement has substantial economic effect, within the meaning of Section 704(b) of the Internal Revenue Code, relating to determination of distributive share. (ii) To the extent the allocation of the credit to a partner under this section lacks substantial economic effect, any loss or deduction otherwise allowable under this part that is attributable to the sale or other disposition of that partner’s partnership interest made prior to the expiration of the federal credit shall not be allowed in the taxable year in which the sale or other disposition occurs, but shall instead be deferred until and treated as if it occurred in the first taxable year immediately following the taxable year in which the federal credit period expires for the project described in clause (i). (iii) This subparagraph shall not apply to a project that receives a preliminary reservation of state low-income housing tax credits under the set-aside described in subdivision (c) of Section 50199.20 of the Health and Safety Code unless the project also receives a preliminary reservation of federal low-income housing tax credits. (2) (A) The California Tax Credit Allocation Committee shall certify to the housing sponsor the amount of tax credit under this section allocated to the housing sponsor for each credit period. (B) In the case of a partnership or an “S” corporation, the housing sponsor shall provide a copy of the California Tax Credit Allocation Committee certification to the taxpayer. (C) (i) A taxpayer shall be eligible to claim the credit commencing in the taxable year the building is placed in service and the federal credit period commences, notwithstanding that the certification pursuant to subparagraph (A) has not been issued by the California Tax Credit Allocation Committee, provided that the housing sponsor has filed a taxpayer certification with the California Tax Credit Allocation Committee and delivered a copy to the taxpayer. The amount of credit claimed by the taxpayer shall not exceed the pro rata share with respect to the amount of credit that the taxpayer purchased or is allocated per the partnership agreement, as applicable, of the lesser of either of the following: (I) The applicable percentages for each of the four credit years, as specified in subdivision (c), multiplied by the qualified basis of the building set forth in the preliminary reservation. (II) The amount of credit the project is eligible for as stated in the taxpayer certification. (ii) The California Tax Credit Allocation Committee may, but is not required to, review the taxpayer certification and other information provided by the housing sponsor to confirm both of the following: (I) The calculations set forth in the taxpayer certification. (II) The amount of credits allocated to the project is consistent with applicable California Tax Credit Allocation Committee rules and regulations for the purposes of making the certification required pursuant to subparagraph (A). (iii) If the California Tax Credit Allocation Committee issues a certification pursuant to subparagraph (A) that is inconsistent with the taxpayer certification upon which a credit has been claimed, the taxpayer shall amend any previously filed tax returns to reflect the credit amount certified by the California Tax Credit Allocation Committee pursuant to subparagraph (A). (iv) For purposes of this subparagraph, “taxpayer certification” means a certified statement from the certified public accountant of the housing sponsor. The taxpayer certification shall contain the amount of the credit the project is eligible for, the taxable year the building is placed in service, and the taxable year in which the federal credit period for the building has commenced. (v) The taxpayer shall, upon request, provide a copy of the taxpayer certification pursuant to clause (iv) or the California Tax Credit Allocation Committee’s certification pursuant to subparagraph (A), as applicable, to the Franchise Tax Board. (vi) In the case of a failure to provide a copy of the taxpayer certification pursuant to clause (iv) or the California Tax Credit Allocation Committee’s certification pursuant to subparagraph (A), if the Franchise Tax Board so requires, no credit under this section shall be allowed for that taxable year until a copy of that certification is provided. (vii) The changes made to this subparagraph by the act adding this clause shall apply for taxable years beginning on or after January 1, 2023. (D) All elections made by the taxpayer pursuant to Section 42 of the Internal Revenue Code, relating to low-income housing credit, shall apply to this section. (E) (i) Except as described in clause (ii) or (iii), for buildings located in designated difficult development areas (DDAs) or qualified census tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas, credits may be allocated under this section in the amounts prescribed in subdivision (c), provided that the amount of credit allocated under Section 42 of the Internal Revenue Code, relating to low-income housing credit, is computed on 100 percent of the qualified basis of the building. (ii) Notwithstanding clause (i), the California Tax Credit Allocation Committee may allocate the credit for buildings located in DDAs or QCTs that are restricted to having 50 percent of the building’s occupants be special needs households, as defined in the California Code of Regulations by the California Tax Credit Allocation Committee, or receiving an allocation pursuant to subparagraph (B) of paragraph (1) of subdivision (g), even if the taxpayer receives federal credits pursuant to Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas, provided that the credit allowed under this section shall not exceed 30 percent of the eligible basis of the building. (iii) On and after January 1, 2018, notwithstanding clause (i), the California Tax Credit Allocation Committee may allocate the credit pursuant to paragraph (7) of subdivision (c) even if the taxpayer receives federal credits, pursuant to Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas. (F) (i) The California Tax Credit Allocation Committee may allocate a credit under this section in exchange for a credit allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas, in amounts up to 30 percent of the eligible basis of a building if the credits allowed under Section 42 of the Internal Revenue Code, relating to low-income housing credit, are reduced by an equivalent amount. (ii) An equivalent amount shall be determined by the California Tax Credit Allocation Committee based upon the relative amount required to produce an equivalent state tax credit to the taxpayer. (c) Section 42(b) of the Internal Revenue Code, relating to applicable percentage: 70 percent present value credit for certain new buildings; 30 percent present value credit for certain other buildings, shall be modified as follows: (1) In the case of any qualified low-income building placed in service by the housing sponsor during 1987, the term “applicable percentage” means 9 percent for each of the first three years and 3 percent for the fourth year for new buildings (whether or not the building is federally subsidized) and for existing buildings. (2) In the case of any qualified low-income building that receives an allocation after 1989 and is a new building not federally subsidized, the term “applicable percentage” means the following: (A) For each of the first three years, the percentage prescribed by the Secretary of the Treasury for new buildings that are not federally subsidized for the taxable year, determined in accordance with the requirements of Section 42(b)(2) of the Internal Revenue Code, relating to temporary minimum credit rate for nonfederally subsidized new buildings, in lieu of the percentage prescribed in Section 42(b)(1)(A) of the Internal Revenue Code. (B) For the fourth year, the difference between 30 percent and the sum of the applicable percentages for the first three years. (3) In the case of any qualified low-income building that is a new building and is federally subsidized and receiving an allocation pursuant to subparagraph (B) of paragraph (1) of subdivision (g), the term “applicable percentage” means for the first three years, 9 percent of the qualified basis of the building, and for the fourth year, 3 percent of the qualified basis of the building. (4) In the case of any qualified low-income building that receives an allocation after 1989 pursuant to subparagraph (A) of paragraph (1) of subdivision (g) and that is a new building that is federally subsidized or that is an existing building that is “at risk of conversion,” the term “applicable percentage” means the following: (A) For each of the first three years, the percentage prescribed by the Secretary of the Treasury for new buildings that are federally subsidized for the taxable year. (B) For the fourth year, the difference between 13 percent and the sum of the applicable percentages for the first three years. (5) In the case of any qualified low-income building that meets all of the requirements of subparagraphs (A) through (D), inclusive, the term “applicable percentage” means 30 percent for each of the first three years and 5 percent for the fourth year. A qualified low-income building receiving an allocation under this paragraph is ineligible to also receive an allocation under paragraph (3). (A) The qualified low-income building is at least 15 years old. (B) The qualified low-income building is either: (i) Serving households of very low income or extremely low income such that the average maximum household income as restricted, pursuant to an existing regulatory agreement with a federal, state, county, local, or other governmental agency, is not more than 45 percent of the area median gross income, as determined under Section 42 of the Internal Revenue Code, relating to low-income housing credit, adjusted by household size, and a tax credit regulatory agreement is entered into for a period of not less than 55 years restricting the average targeted household income to no more than 45 percent of the area median income. (ii) Financed under Section 514, or 521 of the National Housing Act of 1949 (42 U.S.C. Sec. 1485). (C) The qualified low-income building would have insufficient credits under paragraphs (2) and (3) to complete substantial rehabilitation due to a low appraised value. (D) The qualified low-income building will complete the substantial rehabilitation in connection with the credit allocation herein. (6) For purposes of this section, the term “at risk of conversion,” with respect to an existing property, means a property that satisfies all of the following criteria: (A) The property is a multifamily rental housing development in which at least 50 percent of the units receive governmental assistance pursuant to any of the following: (i) New construction, substantial rehabilitation, moderate rehabilitation, property disposition, and loan management set-aside programs, or any other program providing project-based assistance pursuant to Section 8 of the United States Housing Act of 1937, Section 1437f of Title 42 of the United States Code, as amended. (ii) The Below-Market-Interest-Rate Program pursuant to Section 221(d)(3) of the National Housing Act, Sections 1715l(d)(3) and (5) of Title 12 of the United States Code. (iii) Section 236 of the National Housing Act, Section 1715z-1 of Title 12 of the United States Code. (iv) Programs for rent supplement assistance pursuant to Section 101 of the Housing and Urban Development Act of 1965, Section 1701s of Title 12 of the United States Code, as amended. (v) Programs under Sections 514, 515, 516, 533, and 538 of the Housing Act of 1949 (Public Law 81-171), as amended. (vi) The low-income housing credit program set forth in Section 42 of the Internal Revenue Code, relating to low-income housing credit, this section, and Sections 12206 and 17058. (vii) Programs for loans or grants administered by the Department of Housing and Community Development. (viii) Section 202 of the Housing Act of 1959 (12 U.S.C. Sec. 1701q), as amended. (ix) Section 142(d) of the Internal Revenue Code or its predecessors. (x) Section 147 of the Internal Revenue Code, as enacted by the Tax Reform Act of 1986 (Public Law 99-514), or as subsequently amended, including as amended by the Tax Cuts and Jobs Act of 2017 (Public Law 115-97) and all amendments enacted prior to the Tax Cuts and Jobs Act of 2017 (Public Law 115-97). (xi) Title I of the Housing and Community Development Act of 1974, as amended. (xii) Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990, as amended. (xiii) Titles IV and V of the McKinney-Vento Homeless Assistance Act of 1987, as amended, including the Department of Housing and Urban Development’s Supportive Housing Program, Shelter Plus Care Program, and surplus federal property disposition program. (xiv) The following assistance provided by counties and cities in exchange for restrictions on the maximum rents that may be charged for units within a multifamily rental housing development and on the maximum tenant income as a condition of eligibility for occupancy of the unit subject to the rent restriction, as reflected by a recorded agreement with a county or city: (I) Loans or grants provided using tax increment financing pursuant to the Community Redevelopment Law (Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code). (II) Local housing trust funds, as referred to in Section 50843 of the Health and Safety Code. (III) The sale or lease of public property at or below market rates. (IV) The granting of density bonuses, or concessions or incentives, including fee waivers, parking variances, or amendments to general plans, zoning, or redevelopment project area plans, pursuant to Chapter 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code. (B) As used in subparagraph (A), “government assistance” shall not include the use of tenant-based housing choice vouchers under subsection (o) of Section 1437f of Title 42 of the United States Code, excluding paragraph (13) relating to project-based assistance. Restrictions shall not include any rent control or rent stabilization ordinance imposed by a county or city. (C) If the development is subject to restrictions on rent and income levels, 50 percent of the units are also restricted to initial occupancy by lower income households, as defined in Section 50079.5 of the Health and Safety Code. (D) The restrictions on rent and income levels, excluding any restrictions recorded pursuant to paragraph (2) of subdivision (e) of Section 65863.11 or Section 65863.13 of the Government Code or in connection with interim or acquisition financing, will terminate or the federally insured mortgage or rent subsidy contract on the property is eligible for prepayment or termination any time within five years before or after the date of application to the California Tax Credit Allocation Committee. (E) The entity acquiring the property enters into a regulatory agreement that requires the property to be operated in accordance with the requirements of Section 42 of the Internal Revenue Code and any further requirements added by the California Tax Credit Allocation Committee to implement the low-income housing tax credit established by Section 42 of the Internal Revenue Code (26 U.S.C. Sec. 42), this section, and Sections 12206 and 17058 pursuant to Chapter 3.6 (commencing with Section 50199.4) of Part 1 of Division 31 of the Health and Safety Code. (F) The property satisfies the requirements of Section 42(e) of the Internal Revenue Code, relating to rehabilitation expenditures treated as separate new building, except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not apply. (7) On and after January 1, 2018, in the case of any qualified low-income building that is (A) farmworker housing, as defined by paragraph (2) of subdivision (h) of Section 50199.7 of the Health and Safety Code, and (B) is federally subsidized, the term “applicable percentage” means for each of the first three years, 20 percent of the qualified basis of the building, and for the fourth year, 15 percent of the qualified basis of the building. (d) The term “qualified low-income housing project” as defined in Section 42(c)(2) of the Internal Revenue Code, relating to qualified low-income building, is modified by adding the following requirements: (1) The taxpayer shall be entitled to receive a cash distribution from the operations of the project, after funding required reserves, that, at the election of the taxpayer, is equal to: (A) An amount not to exceed 8 percent of the lesser of: (i) The owner equity, which shall include the amount of the capital contributions actually paid to the housing sponsor and shall not include any amounts until they are paid on an investor note. (ii) Twenty percent of the adjusted basis of the building as of the close of the first taxable year of the credit period. (B) The amount of the cashflow from those units in the building that are not low-income units. For purposes of computing cashflow under this subparagraph, operating costs shall be allocated to the low-income units using the “floor space fraction,” as defined in Section 42 of the Internal Revenue Code, relating to low-income housing credit. (C) Any amount allowed to be distributed under subparagraph (A) that is not available for distribution during the first 5 years of the compliance period may be accumulated and distributed any time during the first 15 years of the compliance period but not thereafter. (2) The limitation on return shall apply in the aggregate to the partners if the housing sponsor is a partnership and in the aggregate to the shareholders if the housing sponsor is an “S” corporation. (3) The housing sponsor shall apply any cash available for distribution in excess of the amount eligible to be distributed under paragraph (1) to reduce the rent on rent-restricted units or to increase the number of rent-restricted units subject to the tests of Section 42(g)(1) of the Internal Revenue Code, relating to in general. (e) The provisions of Section 42(f) of the Internal Revenue Code, relating to definition and special rules relating to credit period, shall be modified as follows: (1) The term “credit period” as defined in Section 42(f)(1) of the Internal Revenue Code, relating to credit period defined, is modified by substituting “four taxable years” for “10 taxable years.” (2) The special rule for the first taxable year of the credit period under Section 42(f)(2) of the Internal Revenue Code, relating to special rule for 1st year of credit period, shall not apply to the tax credit under this section. (3) Section 42(f)(3) of the Internal Revenue Code, relating to determination of applicable percentage with respect to increases in qualified basis after 1st year of credit period, is modified to read: If, as of the close of any taxable year in the compliance period, after the first year of the credit period, the qualified basis of any building exceeds the qualified basis of that building as of the close of the first year of the credit period, the housing sponsor, to the extent of its tax credit allocation, shall be eligible for a credit on the excess in an amount equal to the applicable percentage determined pursuant to subdivision (c) for the four-year period beginning with the later of the taxable years in which the increase in qualified basis occurs. (f) The provisions of Section 42(h) of the Internal Revenue Code, relating to limitation on aggregate credit allowable with respect to projects located in a state, shall be modified as follows: (1) Section 42(h)(2) of the Internal Revenue Code, relating to allocated credit amount to apply to all taxable years ending during or after credit allocation year, does not apply and instead the following provisions apply: The total amount for the four-year credit period of the housing credit dollars allocated in a calendar year to any building shall reduce the aggregate housing credit dollar amount of the California Tax Credit Allocation Committee for the calendar year in which the allocation is made. (2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I), (7), and (8) of Section 42(h) of the Internal Revenue Code, relating to limitation on aggregate credit allowable with respect to projects located in a state, do not apply to this section. (g) The aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to this section, Section 12206, and Section 17058 shall be an amount equal to the sum of all the following: (1) (A) Seventy million dollars ($70,000,000) for the 2001 calendar year, and, for the 2002 calendar year and each calendar year thereafter, seventy million dollars ($70,000,000) increased by the percentage, if any, by which the Consumer Price Index for the preceding calendar year exceeds the Consumer Price Index for the 2001 calendar year. For the purposes of this paragraph, the term “Consumer Price Index” means the last Consumer Price Index for All Urban Consumers published by the federal Department of Labor. (B) Five hundred million dollars ($500,000,000) for the 2020 calendar year, and up to five hundred million dollars ($500,000,000) for the 2021 calendar year and every year thereafter. Allocations shall only be available pursuant to this subparagraph in the 2021 calendar year and thereafter if the annual Budget Act, or if any bill providing for appropriations related to the Budget Act, specifies an amount to be available for allocation in that calendar year by the California Tax Credit Allocation Committee, and after the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee have adopted increasing production and containing regulations, rules, or guidelines to align the programs of both committees with the objective of increasing production and containing costs as described in clause (iii). The California Tax Credit Allocation Committee shall accept applications for the 2021 calendar year not sooner than 30 days after these regulations, rules, or guidelines have been adopted. The California Debt Limit Allocation Committee shall not accept applications for the 2021 calendar year for bond allocations for an eligible project under this section prior to issuing, reviewing, and publishing a new tax-exempt private activity bond demand survey. Except as provided in clause (vi), a housing sponsor receiving a nonfederally subsidized allocation under subdivision (c) shall not be eligible for receipt of the housing credit allocated from the increased amount under this subparagraph. A housing sponsor receiving a nonfederally subsidized allocation under subdivision (c) shall remain eligible for receipt of the housing credit allocated from the credit ceiling amount under subparagraph (A). (i) Eligible projects for allocations under this subparagraph include any new building, as defined in Section 42(i)(4) of the Internal Revenue Code, relating to newly constructed buildings, and the regulations promulgated thereunder, excluding rehabilitation expenditures under Section 42(e) of the Internal Revenue Code, relating to rehabilitation expenditures treated as separate new building, and is federally subsidized. Eligible projects for allocations under this subparagraph also include any retrofitting and repurposing of existing nonresidential structures, including, but not limited to, hotels and motels, that were converted to residential use within the previous five years from the date of the application. (ii) Notwithstanding any other provision of this section, for allocations pursuant to this subparagraph for the 2020 calendar year, the California Tax Credit Allocation Committee shall consider projects located throughout the state and shall allocate housing credits, subject to the minimum federal requirements as set forth in Sections 42 and 142 of the Internal Revenue Code, the minimum requirements set forth in Sections 5033 and 5190 of the California Debt Limit Allocation Committee regulations, and the minimum set forth in Section 10326 of the Tax Credit Allocation Committee regulations, for projects that can begin construction within 180 days from award, subject to availability of funds. (iii) (I) Notwithstanding any other provision of this section, for allocations pursuant to this subparagraph for the 2021 calendar year and thereafter, the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee shall develop and prescribe regulations, rules, or guidelines, necessary to implement a new allocation methodology that is aimed at increasing production and containing costs, which would include a scoring system that maximizes the efficient use of public subsidy and benefit created through the private activity bond and low-income housing tax credit programs. The factors for determining the efficient use of public subsidy and benefit shall include, but not be limited to, all of the following: (ia) The number and size of units developed including local incentives provided to increase density. (ib) The proximity to amenities, jobs, and public transportation. (ic) The location of the development. (id) The delivery of housing affordable to very low and extremely low income households by the development. (II) The efficient use of public subsidy and benefit criteria specified in this clause shall take into account the total state subsidy provided and prioritize cost containment and increased unit production. These regulations, rules, or guidelines developed pursuant to this subparagraph shall also consider updated definitions for at-risk preservation and new construction. (III) For bond allocations for the 2021 calendar year to projects eligible for an allocation under this subparagraph, the California Debt Limit Allocation Committee may adopt emergency regulations. (IV) The California Tax Credit Allocation Committee shall consider amending the regulations establishing a scoring system, as required by this clause, to also grant, for farmworker housing as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code, maximum points to farmworker housing projects under the housing needs category, and an initial five points in the category for site amenities beyond those required as additional thresholds. (iv) Of the amount available pursuant to this subparagraph, and notwithstanding any other requirement of this section, the California Tax Credit Allocation Committee may allocate up to two hundred million dollars ($200,000,000) for housing financed by the California Housing Finance Agency under its Mixed-Income Program. (v) (I) For the calendar years of 2024 to 2034, inclusive, of the amount available pursuant to this subparagraph, the lesser of 5 percent of that amount or twenty-five million dollars ($25,000,000) per calendar year shall be set aside for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code, and administered consistent with the credits available pursuant to paragraph (4). (II) Any credits pursuant to this clause that remain unallocated following the conclusion of a funding round shall roll over to consecutive subsequent funding rounds in that calendar year with the exception that any credits that remain unallocated after the final funding round in that calendar year shall be added back to the aggregate amount of credits that may be allocated pursuant to this subparagraph. (III) For the 2035 calendar year, and every year thereafter, of the amount available pursuant to this subparagraph, a portion of the amount allocated shall be set aside for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code. The amount set aside shall be determined by the Legislature upon consideration of the comprehensive strategy, or most recent update thereof, provided by the Department of Housing and Community Development pursuant to subdivision (c) of Section 50408.5 of the Health and Safety Code. (vi) (I) For any calendar year in which the California Debt Limit Allocation Committee has declared a competition for the award of tax-exempt bond authority for qualified residential rental projects, the California Tax Credit Allocation Committee may allocate some or all of the credits allocated under this subparagraph, except for any credits allocated for housing financed by the California Housing Finance Agency under its Mixed-Income Program, for nonfederally subsidized buildings eligible for credits under Section 42 of the Internal Revenue Code, relating to low-income housing credit, and shall allocate the remainder of these credits for new buildings, as defined in Section 42(i)(4) of the Internal Revenue Code, relating to new buildings, that are federally subsidized and that can begin construction within a reasonable time, as determined by the California Tax Credit Allocation Committee. (II) For any calendar year in which the California Debt Limit Allocation Committee has not declared a competition for the award of tax-exempt bond authority for qualified residential rental projects, projects receiving an award of credits pursuant to this subparagraph shall begin construction within a reasonable time, as determined by the California Tax Credit Allocation Committee. (III) Notwithstanding subclauses (I) and (II), if credits available under this subparagraph remain unallocated after the final California Debt Limit Allocation Committee round for qualified residential rental projects in a given calendar year, the California Tax Credit Allocation Committee may allocate some or all of the remaining credits for nonfederally subsidized buildings eligible for credits under Section 42 of the Internal Revenue Code, relating to low-income housing credit. (2) The unused housing credit ceiling, if any, for the preceding calendar years. (3) The amount of housing credit ceiling returned in the calendar year. For purposes of this paragraph, the amount of housing credit dollar amount returned in the calendar year equals the housing credit dollar amount previously allocated to any project that does not become a qualified low-income housing project within the period required by this section or to any project with respect to which an allocation is canceled by mutual consent of the California Tax Credit Allocation Committee and the allocation recipient. (4) Five hundred thousand dollars ($500,000) per calendar year for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code. (5) The amount of any unallocated or returned credits under former Sections 17053.14, 23608.2, and 23608.3, as those sections read prior to January 1, 2009, until fully exhausted for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code. (h) The term “compliance period” as defined in Section 42(i)(1) of the Internal Revenue Code, relating to compliance period, is modified to mean, with respect to any building, the period of 30 consecutive taxable years beginning with the first taxable year of the credit period with respect thereto. (i) Section 42(j) of the Internal Revenue Code, relating to recapture of credit, shall not be applicable and the following shall be substituted in its place: The requirements of this section shall be set forth in a regulatory agreement between the California Tax Credit Allocation Committee and the housing sponsor, and the regulatory agreement shall be subordinated, when required, to any lien or encumbrance of any banks or other institutional lenders to the project. The regulatory agreement entered into pursuant to subdivision (f) of Section 50199.14 of the Health and Safety Code shall apply, provided that the agreement includes all of the following provisions: (1) A term not less than the compliance period. (2) A requirement that the agreement be recorded in the official records of the county in which the qualified low-income housing project is located. (3) A provision stating which state and local agencies can enforce the regulatory agreement in the event the housing sponsor fails to satisfy any of the requirements of this section. (4) A provision that the regulatory agreement shall be deemed a contract enforceable by tenants as third-party beneficiaries thereto and that allows individuals, whether prospective, present, or former occupants of the building, who meet the income limitation applicable to the building, the right to enforce the regulatory agreement in any state court. (5) A provision incorporating the requirements of Section 42 of the Internal Revenue Code, relating to low-income housing credit, as modified by this section. (6) A requirement that the housing sponsor notify the California Tax Credit Allocation Committee or its designee if there is a determination by the Internal Revenue Service that the project is not in compliance with Section 42(g) of the Internal Revenue Code, relating to qualified low-income housing project. (7) A requirement that the housing sponsor, as security for the performance of the housing sponsor’s obligations under the regulatory agreement, assign the housing sponsor’s interest in rents that it receives from the project, provided that until there is a default under the regulatory agreement, the housing sponsor is entitled to collect and retain the rents. (8) A provision that the remedies available in the event of a default under the regulatory agreement that is not cured within a reasonable cure period include, but are not limited to, allowing any of the parties designated to enforce the regulatory agreement to collect all rents with respect to the project; taking possession of the project and operating the project in accordance with the regulatory agreement until the enforcer determines the housing sponsor is in a position to operate the project in accordance with the regulatory agreement; applying to any court for specific performance; securing the appointment of a receiver to operate the project; or any other relief as may be appropriate. (j) (1) The committee shall allocate the housing credit on a regular basis consisting of two or more periods in each calendar year during which applications may be filed and considered. The committee shall establish application filing deadlines, the maximum percentage of federal and state low-income housing tax credit ceiling that may be allocated by the committee in that period, and the approximate date on which allocations shall be made. If the enactment of federal or state law, the adoption of rules or regulations, or other similar events prevent the use of two allocation periods, the committee may reduce the number of periods and adjust the filing deadlines, maximum percentage of credit allocated, and allocation dates. (2) The committee shall adopt a qualified allocation plan, as provided in Section 42(m)(1) of the Internal Revenue Code, relating to plans for allocation of credit among projects. In adopting this plan, the committee shall comply with the provisions of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code, relating to qualified allocation plan and relating to certain selection criteria must be used, respectively. (3) Notwithstanding Section 42(m) of the Internal Revenue Code, relating to responsibilities of housing credit agencies, the California Tax Credit Allocation Committee shall allocate housing credits in accordance with the qualified allocation plan and regulations, which shall include the following provisions: (A) All housing sponsors, as defined by paragraph (3) of subdivision (a), shall demonstrate at the time the application is filed with the committee that the project meets the following threshold requirements: (i) The housing sponsor shall demonstrate there is a need and demand for low-income housing in the community or region for which it is proposed. (ii) The project’s proposed financing, including tax credit proceeds, shall be sufficient to complete the project and that the proposed operating income shall be adequate to operate the project for the extended use period. (iii) The project shall have enforceable financing commitments, either construction or permanent financing, for at least 50 percent of the total estimated financing of the project. (iv) The housing sponsor shall have and maintain control of the site for the project. (v) The housing sponsor shall demonstrate that the project complies with all applicable local land use and zoning ordinances. (vi) The housing sponsor shall demonstrate that the project development team has the experience and the financial capacity to ensure project completion and operation for the extended use period. (vii) The housing sponsor shall demonstrate the amount of tax credit that is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the extended use period, taking into account operating expenses, a supportable debt service, reserves, funds set aside for rental subsidies and required equity, and a development fee that does not exceed a specified percentage of the eligible basis of the project prior to inclusion of the development fee in the eligible basis, as determined by the committee. (B) The committee shall give a preference to those projects satisfying all of the threshold requirements of subparagraph (A) if both of the following apply: (i) The project serves the lowest income tenants at rents affordable to those tenants. (ii) The project is obligated to serve qualified tenants for the longest period. (C) In addition to the provisions of subparagraphs (A) and (B), the committee shall use the following criteria in allocating housing credits: (i) Projects serving large families in which a substantial number, as defined by the committee, of all residential units are low-income units with three or more bedrooms. (ii) Projects providing single-room occupancy units serving very low income tenants. (iii) Existing projects that are “at risk of conversion,” as defined by paragraph (6) of subdivision (c). (iv) Projects for which a public agency provides direct or indirect long-term financial support for at least 15 percent of the total project development costs or projects for which the owner’s equity constitutes at least 30 percent of the total project development costs. (v) Projects that provide tenant amenities not generally available to residents of low-income housing projects. (D) Subparagraph (B) and (C) shall not apply to projects receiving an allocation pursuant to subparagraph (B) of paragraph (1) of subdivision (g). (4) For purposes of allocating credits pursuant to this section, the committee shall not give preference to any project by virtue of the date of submission of its application except to break a tie when two or more of the projects have an equal rating. (5) Not less than 20 percent of the low-income housing tax credits available annually under this section, Section 12206, and Section 17058 shall be set aside for allocation to rural areas as defined in Section 50199.21 of the Health and Safety Code. Any amount of credit set aside for rural areas remaining on or after October 31 of any calendar year shall be available for allocation to any eligible project. No amount of credit set aside for rural areas shall be considered available for any eligible project so long as there are eligible rural applications pending on October 31. (k) Section 42(l) of the Internal Revenue Code, relating to certifications and other reports to secretary, shall be modified as follows: The term “secretary” shall be replaced by the term “Franchise Tax Board.” (l) In the case in which the credit allowed under this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years, if necessary, until the credit has been exhausted. (m) A project that received an allocation of a 1989 federal housing credit dollar amount shall be eligible to receive an allocation of a 1990 state housing credit dollar amount, subject to all of the following conditions: (1) The project was not placed in service prior to 1990. (2) To the extent the amendments made to this section by the Statutes of 1990 conflict with any provisions existing in this section prior to those amendments, the prior provisions of law shall prevail. (3) Notwithstanding paragraph (2), a project applying for an allocation under this subdivision shall be subject to the requirements of paragraph (3) of subdivision (j). (n) The credit period with respect to an allocation of credit in 1989 by the California Tax Credit Allocation Committee of which any amount is attributable to unallocated credit from 1987 or 1988 shall not begin until after December 31, 1989. (o) The provisions of Section 11407(a) of Public Law 101-508, relating to the effective date of the extension of the low-income housing credit, apply to calendar years after 1989. (p) The provisions of Section 11407(c) of Public Law 101-508, relating to election to accelerate credit, shall not apply. (q) (1) A corporation may elect to assign any portion of any credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. For purposes of this subdivision, “affiliated corporation” has the meaning provided in subdivision (b) of Section 25110, as that section was amended by Chapter 881 of the Statutes of 1993, as of the last day of the taxable year in which the credit is allowed, except that “100 percent” is substituted for “more than 50 percent” wherever it appears in the section, as that section was amended by Chapter 881 of the Statutes of 1993, and “voting common stock” is substituted for “voting stock” wherever it appears in the section, as that section was amended by Chapter 881 of the Statutes of 1993. (2) The election provided in paragraph (1): (A) May be based on any method selected by the corporation that originally receives the credit. (B) Shall be irrevocable for the taxable year the credit is allowed, once made. (C) May be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the affiliated corporations that assign and receive the credits. (r) (1) (A) For a project that receives a preliminary reservation under this section beginning on or after January 1, 2016, a taxpayer may elect, in the manner prescribed by the California Tax Credit Allocation Committee, to sell all or any portion of any credit allowed, subject to subparagraph (B). The taxpayer may make the election to sell pursuant to this subdivision at any time before the California Tax Credit Allocation Committee allocates a final credit amount for the project pursuant to this section, at which point the election shall become irrevocable. (B) A credit that a taxpayer elects to sell all or a portion of pursuant to this subdivision shall be sold for consideration that is not less than 80 percent of the amount of the credit. (2) (A) The taxpayer that originally received the credit shall report to the California Tax Credit Allocation Committee within 10 days of the sale of the credit, in the form and manner specified by the California Tax Credit Allocation Committee, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party or parties to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the taxpayer for the sale of the credit. (B) The California Tax Credit Allocation Committee shall provide an annual listing to the Franchise Tax Board, in a form and manner agreed upon by the California Tax Credit Allocation Committee and the Franchise Tax Board, of the taxpayers that have sold or purchased a credit pursuant to this subdivision. (3) A credit may be sold pursuant to this subdivision to more than one unrelated party. (4) Notwithstanding any other law, the taxpayer that originally received the credit that is sold pursuant to paragraph (1) shall remain solely liable for all obligations and liabilities imposed on the taxpayer by this section with respect to the credit, none of which shall apply to a party to whom the credit has been sold or subsequently transferred. Parties that purchase credits pursuant to paragraph (1) shall be entitled to utilize the purchased credits in the same manner in which the taxpayer that originally received the credit could utilize them. (5) A taxpayer shall not sell a credit allowed by this section if the taxpayer was allowed the credit on any tax return of the taxpayer. (s) The California Tax Credit Allocation Committee may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the California Tax Credit Allocation Committee pursuant to this section. (t) Any unused credit may continue to be carried forward, as provided in subdivision (l), until the credit has been exhausted. (u) This section shall remain in effect on and after December 1, 1990, for as long as Section 42 of the Internal Revenue Code, relating to low-income housing credit, remains in effect. (v) The amendments to this section made by Chapter 1222 of the Statutes of 1993 shall apply only to taxable years beginning on or after January 1, 1994, except that paragraph (1) of subdivision (q), as amended, shall apply to taxable years beginning on or after January 1, 1993. (Amended by Stats. 2025, Ch. 492, Sec. 3. (AB 480) Effective January 1, 2026. Section conditionally inoperative pursuant to subd. (u).)
  22. 23621.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a 10% tax credit for qualifying wages paid to certified employees, subject to certification timing and several wage and employee exclusions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23621. (a) There shall be allowed as a credit against the “tax” (as defined by Section 23036) an amount equal to 10 percent of the amount of wages paid to each employee who is certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code. The credit under this section shall not apply to an individual unless, on or before the day on which that individual begins work for the employer, the employer: (1) Has received a certification from the Employment Development Department, or (2) Has requested in writing that certification from the Employment Development Department. For purposes of this subdivision, if on or before the day on which the individual begins work for the employer, the individual has received from the Employment Development Department a written preliminary determination that he or she is a member of a targeted group, then the requirement of paragraph (1) or (2) shall be applicable on or before the fifth day on which the individual begins work for the employer. (b) The credit under this section shall not apply to wages paid in excess of three thousand dollars ($3,000) during an taxable year by a taxpayer to the same individual. With respect to each qualified employee, the aggregate credit under this section shall not exceed six hundred dollars ($600). (c) The credit under this section shall not apply to wages paid to an individual: (1) Who is a dependent, as described in paragraphs (1) to (8), inclusive, of Section 152(a) of the Internal Revenue Code, of an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the taxpayer (determined with the application of Section 267(c) of the Internal Revenue Code); or (2) Who is a dependent (as described in paragraph (9) of Section 152(a) of the Internal Revenue Code) of an individual described in paragraph (1). (d) The credit under this section shall not apply to wages paid to an individual if, prior to the hiring date of that individual, that individual had been employed by the employer at any time during which he or she was not certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code. (e) If the certification of an employee has been revoked pursuant to subdivision (c) of Section 328 of the Unemployment Insurance Code, the credit under this section shall not apply to wages paid by the employer after the date on which notice of revocation is received by the employer. (f) The credit under this section shall be in addition to any deduction under this part to which the taxpayer may be entitled, if any. (g) The credit provided by this section shall be applied to wages paid to each qualifying employee during the 24-month period beginning on the date the employee begins working for the taxpayer. (h) (1) A taxpayer may elect to have this section not apply for any taxable year. (2) An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the four-year period beginning on the last date prescribed by law for filing the return for that taxable year (determined without regard to extensions). (3) An election under paragraph (1) (or revocation thereof) shall be made in any manner which the Franchise Tax Board may prescribe. (i) (1) In the case of a successor employer referred to in Section 3306(b)(1) of the Internal Revenue Code, the determination of the amount of the credit under this section with respect to wages paid by that successor employer shall be made in the same manner as if those wages were paid by the predecessor employer referred to in that section. (2) No credit shall be determined under this section with respect to remuneration paid by an employer to an employee for services performed by that employee for another person unless the amount reasonably expected to be received by the employer for those services from that other person exceeds the remuneration paid by the employer to that employee for those services. (j) The term “wages” shall not include either of the following: (1) Payments defined in Section 51(c)(3) of the Internal Revenue Code, relating to payments for services during labor disputes. (2) Any amounts paid or incurred to an individual who begins work for an employer after December 31, 1993. (Amended by Stats. 2000, Ch. 862, Sec. 77. Effective January 1, 2001.)
  23. 23624.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    A tax credit is allowed for certain wages paid to prisoners in qualifying joint venture programs, and the Department of Corrections must send the Franchise Tax Board an annual list of certified participating employers.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23624. (a) There shall be allowed as a credit against the “tax” (as defined by Section 23036) an amount equal to 10 percent of the amount of wages paid or incurred during the taxable year to each prisoner who is employed in a joint venture program established pursuant to Article 1.5 of Chapter 5 of Title 1 of Part 3 of the Penal Code, through agreement with the Director of Corrections. (b) The Department of Corrections shall forward annually to the Franchise Tax Board a list of all employers certified by the Department of Corrections as active participants in a joint venture program pursuant to Article 1.5 (commencing with Section 2717.1) of Chapter 5 of Title 1 of Part 3 of the Penal Code. The list shall include the certified participant’s federal employer identification number. (Amended by Stats. 2000, Ch. 862, Sec. 80. Effective January 1, 2001. Note: This section was added on Nov. 6, 1990, by initiative Prop. 139 (the Prison Inmate Labor Initiative of 1990).)
  24. 23626.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a qualified taxpayer a corporation tax credit for hiring qualified full-time employees and paying qualified wages, if the taxpayer meets reservation, reporting, and documentation rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23626. (a) (1) For each taxable year beginning on or after January 1, 2014, and before January 1, 2026, there shall be allowed to a qualified taxpayer that hires a qualified full-time employee and pays or incurs qualified wages attributable to work performed by the qualified full-time employee in a designated census tract or economic development area, and that receives a tentative credit reservation for that qualified full-time employee, a credit against the “tax,” as defined by Section 23036, in an amount calculated under this section. (2) For each taxable year beginning on or after January 1, 2023, and before January 1, 2026, the designated census tract or economic development area requirements shall not apply to a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b). (3) The amount of the credit allowable under this section for a taxable year shall be equal to the product of the tentative credit amount for the taxable year and the applicable percentage for the taxable year. (4) (A) If a qualified taxpayer relocates to a designated census tract or economic development area, the qualified taxpayer shall be allowed a credit with respect to qualified wages for each qualified full-time employee who is employed within the new location only if the qualified taxpayer provides each employee at the previous location or locations a written offer of employment at the new location in the designated census tract or economic development area with comparable compensation. (B) For purposes of this paragraph, “relocates to a designated census tract or economic development area” means an increase in the number of qualified full-time employees, employed by a qualified taxpayer, within a designated census tract or tracts or economic development areas within a 12-month period in which there is a decrease in the number of full-time employees, employed by the qualified taxpayer in this state, but outside of designated census tracts or economic development areas. (C) This paragraph does not apply to a small business. (5) The credit allowed by this section may only be claimed on a timely filed original return of the qualified taxpayer and only with respect to a qualified full-time employee for whom the qualified taxpayer has received a tentative credit reservation. (b) For purposes of this section: (1) The “tentative credit amount” for a taxable year shall be equal to the product of the applicable credit percentage for each qualified full-time employee and the qualified wages paid by the qualified taxpayer during the taxable year to that qualified full-time employee. (2) The “applicable percentage” for a taxable year shall be equal to a fraction, the numerator of which is the net increase in the total number of full-time employees employed in this state during the taxable year, determined on an annual full-time equivalent basis, as compared with the total number of full-time employees employed in this state during the base year, determined on the same basis, and the denominator of which shall be the total number of qualified full-time employees employed in this state during the taxable year. The applicable percentage shall not exceed 100 percent. (3) The “applicable credit percentage” means the credit percentage for the calendar year during which a qualified full-time employee was first employed by the qualified taxpayer. The applicable credit percentage for all calendar years shall be 35 percent. (4) “Base year” means the 2013 taxable year, or in the case of a qualified taxpayer who first hires a qualified full-time employee in a taxable year beginning on or after January 2015, the taxable year immediately preceding the taxable year in which the qualified full-time employee was hired. (5) “Acquired” includes any gift, inheritance, transfer incident to divorce, or any other transfer, whether or not for consideration. (6) “Annual full-time equivalent” means either of the following: (A) In the case of a full-time employee paid hourly qualified wages, “annual full-time equivalent” means the total number of hours worked for the qualified taxpayer by the employee (not to exceed 2,000 hours per employee) divided by 2,000. (B) In the case of a salaried full-time employee, “annual full-time equivalent” means the total number of weeks worked for the qualified taxpayer by the employee divided by 52. (7) “Designated census tract” means a census tract within the state that is determined by the Department of Finance to have a civilian unemployment rate that is within the top 25 percent of all census tracts within the state and has a poverty rate within the top 25 percent of all census tracts within the state, as prescribed in Section 13073.5 of the Government Code. (8) “Economic development area” means either of the following: (A) A former enterprise zone. For purposes of this section, “former enterprise zone” means an enterprise zone designated and in effect as of December 31, 2011, any enterprise zone designated during 2012, and any revision of an enterprise zone prior to June 30, 2013, under former Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code, as in effect on December 31, 2012, excluding any census tract within an enterprise zone that is identified by the Department of Finance pursuant to Section 13073.5 of the Government Code as a census tract within the lowest quartile of census tracts with the lowest civilian unemployment and poverty. (B) A local agency military base recovery area designated as of the effective date of the act adding this subparagraph, in accordance with Section 7114 of the Government Code. (9) “Electric airplane manufacturing” means manufacturing of electric airplanes that would be classified under Code 3364 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition. (10) “Lithium production” means lithium mining and manufacturing described in Codes 212390 or 325180 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition. (11) “Manufacturing of lithium batteries” means the manufacturing described in Code 335910 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition. (12) “Minimum wage” means the wage established pursuant to Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code. (13) (A) “Qualified full-time employee” means an individual who meets all of the following requirements: (i) (I) Performs at least 50 percent of their services for the qualified taxpayer during the taxable year in a designated census tract or economic development area. (II) This clause does not apply to employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14). (ii) Receives starting wages that are at least 150 percent of the minimum wage or at least 100 percent of the minimum wage for employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14). (iii) Is hired by the qualified taxpayer on or after January 1, 2014. (iv) Is hired by the qualified taxpayer after the date the Department of Finance determines that the census tract referred to in clause (i) is a designated census tract or that the census tracts within a former enterprise zone are not census tracts with the lowest civilian unemployment and poverty. (v) Satisfies either of the following conditions: (I) Is paid qualified wages by the qualified taxpayer for services not less than an average of 35 hours per week. (II) Is a salaried employee and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code, by the qualified taxpayer. (vi) Upon commencement of employment with the qualified taxpayer, satisfies any of the following conditions: (I) Was unemployed for the six months immediately preceding employment with the qualified taxpayer. In the case of an individual who completed a program of study at a college, university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six months immediately preceding employment with the qualified taxpayer, that individual must have completed that program of study at least 12 months prior to the individual’s commencement of employment with the qualified taxpayer. (II) Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the qualified taxpayer. (III) Was a recipient of the credit allowed under Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal purposes, for the previous taxable year. (IV) Is an ex-offender previously convicted of a felony. (V) Is a recipient of either CalWORKs, in accordance with Article 2 (commencing with Section 11250) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or general assistance, in accordance with Section 17000.5 of the Welfare and Institutions Code. (B) An individual may only be considered a qualified full-time employee for the period of time commencing with the date the individual is first employed by the qualified taxpayer and ending 60 months thereafter. (14) (A) “Qualified taxpayer” means any of the following: (i) A corporation engaged in a trade or business within designated census tract or economic development area that, during the taxable year, pays or incurs qualified wages. (ii) A person or entity engaged in semiconductor manufacturing or semiconductor research and development that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they intend to apply or have applied for federal funding pursuant to Sections 101 to 106, inclusive, of, or intend to claim or have claimed the credit pursuant to Section 107 of, Division A of the federal Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 (Public Law 117-167), and that pays or incurs qualified wages during the taxable year. (iii) A person or entity engaged in electric airplane manufacturing that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they have received a sales and use tax exclusion pursuant to Section 6010.8 for an electric vertical takeoff and landing (eVTOL) manufacturer and that pays or incurs qualified wages during the taxable year. (iv) A person or entity engaged in lithium production that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they are a producer, as defined by Section 47002, who pays the tax imposed by Part 25 (commencing with Section 47000) for the taxable year and that pays or incurs qualified wages during the taxable year. (v) (I) A person or entity engaged in manufacturing of lithium batteries that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that their primary business is lithium battery manufacturing and that pays or incurs qualified wages during the taxable year. (II) For purposes of this clause, “primary business” means 50 percent or more of their gross income is derived from lithium battery manufacturing. (B) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 17053.73 shall be allowed to the pass-thru entity and passed through to the partners and shareholders in accordance with applicable provisions of this part or Part 10 (commencing with Section 17001). For purposes of this subdivision, the term “pass-thru entity” means any partnership or “S” corporation. (C) “Qualified taxpayer” shall not include any of the following: (i) Employers that provide temporary help services, as described in Code 561320 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition. (ii) Employers that provide retail trade services, as described in Sector 44-45 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition. (iii) Employers that are primarily engaged in providing food services, as described in Code 711110, 722511, 722513, 722514, or 722515 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition. (iv) Employers that are primarily engaged in services as described in Code 713210, 721120, or 722410 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition. (v) (I) An employer that is a sexually oriented business. (II) For purposes of this clause: (ia) “Sexually oriented business” means a nightclub, bar, restaurant, or similar commercial enterprise that provides for an audience of two or more individuals live nude entertainment or live nude performances where the nudity is a function of everyday business operations and where nudity is a planned and intentional part of the entertainment or performance. (ib) “Nude” means clothed in a manner that leaves uncovered or visible, through less than fully opaque clothing, any portion of the genitals or, in the case of a female, any portion of the breasts below the top of the areola of the breasts. (D) Subparagraph (C) shall not apply to a taxpayer that is a “small business.” (15) “Qualified wages” means those wages subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that meet all of the following requirements: (A) (i) Except as provided in clause (ii) or (iii), that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds 150 percent of minimum wage, but does not exceed 350 percent of the minimum wage. (ii) (I) In the case of a qualified full-time employee employed in a designated pilot area, that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds ten dollars ($10) per hour or an equivalent amount for salaried employees, but does not exceed 350 percent of the minimum wage. For qualified full-time employees described in the preceding sentence, clause (ii) of subparagraph (A) of paragraph (13) is modified by substituting “ten dollars ($10) per hour or an equivalent amount for salaried employees” for “150 percent of the minimum wage.” (II) For purposes of this clause: (ia) “Designated pilot area” means an area designated as a designated pilot area by the Governor’s Office of Business and Economic Development. (ib) Areas that may be designated as a designated pilot area are limited to areas within a designated census tract or an economic development area with average wages less than the statewide average wages, based on information from the Labor Market Division of the Employment Development Department, and areas within a designated census tract or an economic development area based on high poverty or high unemployment. (ic) The total number of designated pilot areas that may be designated is limited to five, one or more of which must be an area within five or fewer designated census tracts within a single county based on high poverty or high unemployment or an area within an economic development area based on high poverty or high unemployment. (id) The designation of a designated pilot area shall be applicable for a period of four calendar years, commencing with the first calendar year for which the designation of a designated pilot area is effective. The applicable period of a designated pilot area may be extended, in the sole discretion of the Governor’s Office of Business and Economic Development, for an additional period of up to three calendar years. The applicable period, and any extended period, shall not extend beyond December 31, 2020. (III) The designation of an area as a designated pilot area and the extension of the applicable period of a designated pilot area shall be at the sole discretion of the Governor’s Office of Business and Economic Development and shall not be subject to administrative appeal or judicial review. (iii) For qualified full-time employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14), that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds 100 percent of minimum wage, but does not exceed 350 percent of the minimum wage. (B) Wages paid or incurred during the 60-month period beginning with the first day the qualified full-time employee commences employment with the qualified taxpayer. In the case of any employee who is reemployed, including regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer, this reemployment shall not be treated as constituting commencement of employment for purposes of this section. (C) Except as provided in paragraph (3) of subdivision (m), qualified wages shall not include any wages paid or incurred by the qualified taxpayer on or after the date that the Department of Finance’s redesignation of designated census tracts is effective, as provided in paragraph (2) of subdivision (g), so that a census tract is no longer determined to be a designated census tract. (16) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations. (17) “Semiconductor manufacturing or semiconductor research and development” means manufacturing described in Code 3344 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition. (18) (A) “Small business” means a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than two million dollars ($2,000,000) during the previous taxable year. (B) (i) For purposes of this paragraph, “gross receipts, less returns and allowances reportable to this state,” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (d) of Section 25120. (ii) In the case of any trade or business activity conducted by a partnership or an “S” corporation, the limitations set forth in subparagraph (A) shall be applied to the partnership or “S” corporation and to each partner or shareholder. (iii) For taxpayers that are required to be included in a combined report under Section 25101 or authorized to be included in a combined report under Section 25101.15, the dollar amount specified in subparagraph (A) shall apply to the aggregate gross receipts of all taxpayers that are required to be or authorized to be included in a combined report. (C) (i) “Small business” shall not include a sexually oriented business. (ii) For purposes of this subparagraph: (I) “Sexually oriented business” means a nightclub, bar, restaurant, or similar commercial enterprise that provides for an audience of two or more individuals live nude entertainment or live nude performances where the nudity is a function of everyday business operations and where nudity is a planned and intentional part of the entertainment or performance. (II) “Nude” means clothed in a manner that leaves uncovered or visible, through less than fully opaque clothing, any portion of the genitals or, in the case of a female, any portion of the breasts below the top of the areola of the breasts. (19) An individual is “unemployed” for any period for which the individual is all of the following: (A) Not in receipt of wages subject to withholding under Section 13020 of the Unemployment Insurance Code for that period. (B) Not a self-employed individual (within the meaning of Section 401(c)(1)(B) of the Internal Revenue Code, relating to self-employed individual) for that period. (C) Not a registered full-time student at a high school, college, university, or other postsecondary educational institution for that period. (c) The net increase in full-time employees of a qualified taxpayer shall be determined as provided by this subdivision: (1) (A) The net increase in full-time employees shall be determined on an annual full-time equivalent basis by subtracting from the amount determined in subparagraph (C) the amount determined in subparagraph (B). (B) The total number of full-time employees employed in the base year by the taxpayer and by any trade or business acquired by the taxpayer during the current taxable year. (C) The total number of full-time employees employed in the current taxable year by the taxpayer and by any trade or business acquired during the current taxable year. (2) For taxpayers who first commence doing business in this state during the taxable year, the number of full-time employees for the base year shall be zero. (d) For purposes of this section: (1) All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single taxpayer. (2) In determining whether the taxpayer has first commenced doing business in this state during the taxable year, the provisions of subdivision (g) of Section 24416, without application of paragraph (7) of that subdivision, apply. (e) (1) (A) Except as provided in subparagraph (B), to be eligible for the credit allowed by this section, a qualified taxpayer shall, upon hiring a qualified full-time employee, request a tentative credit reservation from the Franchise Tax Board within 30 days of complying with the Employment Development Department’s new hire reporting requirement as provided in Section 1088.5 of the Unemployment Insurance Code, in the form and manner prescribed by the Franchise Tax Board. (B) For taxable years beginning on or after January 1, 2023, and before January 1, 2024, to be eligible for the credit allowed by this section, a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b) shall, upon hiring a qualified full-time employee, request a tentative credit reservation from the Franchise Tax Board on or before the last day of the month following the close of the taxable year for which the credit is claimed, in the form and manner prescribed by the Franchise Tax Board. (2) To obtain a tentative credit reservation with respect to a qualified full-time employee, the qualified taxpayer shall provide necessary information, as determined by the Franchise Tax Board, including the name, the social security number, the start date of employment, the rate of pay of the qualified full-time employee, the qualified taxpayer’s gross receipts, less returns and allowances, for the previous taxable year, and whether the qualified full-time employee is a resident of a targeted employment area, as defined in former Section 7072 of the Government Code, as in effect on December 31, 2013. (3) The qualified taxpayer shall provide the Franchise Tax Board an annual certification of employment with respect to each qualified full-time employee hire in a previous taxable year, on or before the 15th day of the third month of the taxable year. The certification shall include necessary information, as determined by the Franchise Tax Board, including the name, social security number, start date of employment, and rate of pay for each qualified full-time employee employed by the qualified taxpayer. (4) (A) A qualified taxpayer, as defined under clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b), shall, upon request, provide to the Franchise Tax Board the applicable verification specified in subparagraph (A) of paragraph (14) of subdivision (b). (B) The verification shall be provided in the form and manner prescribed by the Franchise Tax Board. (C) Any disallowance of a credit claimed due to a failure to provide verification under this paragraph shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from such disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. (5) A tentative credit reservation provided to a taxpayer with respect to an employee of that taxpayer shall not constitute a determination by the Franchise Tax Board with respect to any of the requirements of this section regarding a taxpayer’s eligibility for the credit authorized by this section. (f) The Franchise Tax Board shall do all of the following: (1) Approve a tentative credit reservation with respect to a qualified full-time employee hired during a calendar year. (2) Determine the aggregate tentative reservation amount and the aggregate small business tentative reservation amount for a calendar year. (3) A tentative credit reservation request from a qualified taxpayer with respect to a qualified full-time employee who is a resident of a targeted employment area, as defined in former Section 7072 of the Government Code, as in effect on December 31, 2013, shall be expeditiously processed by the Franchise Tax Board. The residence of a qualified full-time employee in a targeted employment area shall have no other effect on the eligibility of an individual as a qualified full-time employee or the eligibility of a qualified taxpayer for the credit authorized by this section. (4) Notwithstanding Section 19542, provide as a searchable database on its internet website, for each taxable year beginning on or after January 1, 2014, and before January 1, 2026, the employer names, amounts of tax credit claimed, and number of new jobs created for each taxable year pursuant to this section and Section 17053.73. (g) (1) The Department of Finance shall, by January 1, 2014, and by January 1 of every fifth year thereafter, provide the Franchise Tax Board with a list of the designated census tracts and a list of census tracts with the lowest civilian unemployment rate. (2) The redesignation of designated census tracts and lowest civilian unemployment census tracts by the Department of Finance as provided in Section 13073.5 of the Government Code shall be effective, for purposes of this credit, one year after the date that the Department of Finance redesignates the designated census tracts. (h) (1) For purposes of this section: (A) All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single qualified taxpayer. (B) All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed by a single qualified taxpayer. (C) The credit, if any, allowable by this section to each member shall be determined by reference to its proportionate share of the expense of the qualified wages giving rise to the credit, and shall be allocated in that manner. (D) If a qualified taxpayer acquires the major portion of a trade or business of another taxpayer, hereinafter in this paragraph referred to as the predecessor, or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section for any taxable year ending after that acquisition, the employment relationship between a qualified full-time employee and a qualified taxpayer shall not be treated as terminated if the employee continues to be employed in that trade or business. (2) For purposes of this subdivision, “controlled group of corporations” means a controlled group of corporations as defined in Section 1563(a) of the Internal Revenue Code, except that: (A) “More than 50 percent” shall be substituted for “at least 80 percent” each place it appears in Section 1563(a)(1) of the Internal Revenue Code. (B) The determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code. (3) Rules similar to the rules provided in Sections 46(e) and 46(h) of the Internal Revenue Code, as in effect on November 4, 1990, shall apply to both of the following: (A) An organization to which Section 593 of the Internal Revenue Code applies. (B) A regulated investment company or a real estate investment trust subject to taxation under this part. (i) (1) If the employment of any qualified full-time employee, with respect to whom qualified wages are taken into account under subdivision (a), is terminated by the qualified taxpayer at any time during the first 36 months after commencing employment with the qualified taxpayer, whether or not consecutive, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee. (2) Paragraph (1) does not apply to any of the following: (A) A termination of employment of a qualified full-time employee who voluntarily leaves the employment of the qualified taxpayer. (B) A termination of employment of a qualified full-time employee who, before the close of the period referred to in paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer reemployment to that employee. (C) A termination of employment of a qualified full-time employee, if it is determined that the termination was due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that employee. (D) A termination of employment of a qualified full-time employee due to a substantial reduction in the trade or business operations of the qualified taxpayer, including reductions due to seasonal employment. (E) A termination of employment of a qualified full-time employee, if that employee is replaced by other qualified full-time employees so as to create a net increase in both the number of employees and the hours of employment. (F) A termination of employment of a qualified full-time employee, when that employment is considered seasonal employment and the qualified employee is rehired on a seasonal basis. (3) For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified full-time employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified full-time employee continues to be employed in that trade or business and the qualified taxpayer retains a substantial interest in that trade or business. (4) An increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part. (j) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the succeeding four years if necessary, until exhausted. (k) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section. (l) (1) Upon the effective date of this section, the Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the 2020–21 fiscal year, inclusive. (2) (A) The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts. (B) Beginning March 1, 2025, the report required by this paragraph shall include information relating to the total dollar amount of the credits claimed under this section by taxpayers described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b). (m) (1) This section shall remain in effect only until December 1, 2029, and as of that date is repealed. (2) Notwithstanding paragraph (1) of subdivision (a), this section shall continue to be operative for taxable years beginning on or after January 1, 2026, but only with respect to qualified full-time employees who commenced employment with a qualified taxpayer in a designated census tract or economic development area in a taxable year beginning before January 1, 2026. (3) This section shall remain operative for any qualified taxpayer with respect to any qualified full-time employee after the designated census tract is no longer designated or an economic development area ceases to be an economic development area, as defined in this section, for the remaining period, if any, of the 60-month period after the original date of hiring of an otherwise qualified full-time employee and any wages paid or incurred with respect to those qualified full-time employees after the designated census tract is no longer designated or an economic development area ceases to be an economic development area, as defined in this section, shall be treated as qualified wages under this section, provided the employee satisfies any other requirements of paragraphs (13) and (15) of subdivision (b), as if the designated census tract was still designated and binding or the economic development area was still in existence. (n) The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2023. (Amended by Stats. 2023, Ch. 55, Sec. 12. (SB 131) Effective July 10, 2023. Repealed as of December 1, 2029, with remaining operation, as prescribed in subdivision (m).)
  25. 23628.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a small business hiring tax credit for eligible qualified small business employers for the 2021 taxable year window, with limits, calculations, carryover rules, and Franchise Tax Board administration powers.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23628. (a) (1) For each taxable year beginning on or after January 1, 2021, and before January 1, 2022, there shall be allowed a small business hiring credit against the “tax,” as defined in Section 23036, to a qualified small business employer that receives a tentative credit reservation under Section 6902.10, in an amount calculated pursuant to paragraph (2). (2) The amount of credit determined by this subdivision shall be equal to the amount calculated pursuant to subparagraph (A) minus the amount calculated pursuant to subparagraph (B). (A) One thousand dollars ($1,000) for each net increase in qualified employees, as specified in subdivision (c), not to exceed one hundred fifty thousand dollars ($150,000). (B) If the qualified small business employer received a tentative credit reservation amount pursuant to Section 6902.8, either of the following applies: (i) For a qualified small business employer that made an irrevocable election pursuant to Section 6902.8 to apply the credit against qualified sales and use taxes pursuant to Section 6902.7, the credit amounts allocated to the qualified small business employer pursuant to Sections 6902.7 and 6902.8. (ii) For a qualified small business employer that elected to apply the credit under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001), or both, the tentative credit reservation amount received by the qualified small business employer pursuant to Section 6902.8. (b) For purposes of this section: (1) “Monthly full-time equivalent” means either of the following: (A) In the case of a qualified employee paid hourly qualified wages, “monthly full-time equivalent” means the total number of hours employed per month for the qualified small business employer by the qualified employee, not to exceed 167 hours per month per qualified employee, divided by 167. (B) In the case of a salaried qualified employee, “monthly full-time equivalent” means the total number of weeks employed per month for the qualified small business employer by the qualified employee divided by 4.33 multiplied by the time base the qualified employee was employed. (2) (A) “Qualified employee” means an employee who is paid qualified wages by a qualified small business employer. (B) “Qualified employee” shall not include an employee whose qualified wages are included in calculating any other credit allowed under this part, except for the credit allowed under Section 23627. (3) (A) “Qualified small business employer” means a taxpayer that as of December 31, 2020, employed a total of 500 or fewer qualified employees and meets either of the following requirements: (i) Has a decrease of 20 percent or more in gross receipts determined by comparing gross receipts beginning on January 1, 2020, and ending on December 31, 2020, to the gross receipts beginning on January 1, 2019, and ending on December 31, 2019. (ii) Is a fiscal year filer that has a decrease of 20 percent or more in gross receipts determined by comparing either of the following: (I) The gross receipts for fiscal year 2019–20 to the gross receipts from fiscal year 2018–19. (II) The average of gross receipts for fiscal year 2019–20 and fiscal year 2020–21 to the gross receipts from fiscal year 2018–19. (iii) For a taxpayer that first commences business after January 1, 2019, but on or before January 1, 2020, has a decrease of 20 percent or more in gross receipts in the second quarter of 2020 determined by comparing gross receipts from January 1, 2020, through February 28, 2020, multiplied by 1.5 to the gross receipts for the period beginning on April 1, 2020, and ending on June 30, 2020. (B) “Qualified small business employer” does not include a taxpayer required to be included in a combined report under Section 25101 or 25110 or authorized to be included in a combined report under Section 25101.15. (4) “Qualified wages” means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code. (5) “Time base” means the fraction of full-time employment that the qualified employee is employed. (6) “Weeks employed” means the total number of calendar days that a qualified employee was employed by the qualified small business employer during the month, divided by seven, not to exceed 4.33. (c) The net increase in qualified employees of a qualified small business employer shall be equal to the amount calculated pursuant to paragraph (2) minus the amount calculated pursuant to paragraph (1). (1) The average monthly full-time equivalent qualified employees employed during the three-month period beginning on April 1, 2020, and ending on June 30, 2020, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all three months and dividing the total by three. (2) The lesser of either of the following: (A) The average monthly full-time equivalent qualified employees employed during the 12-month period beginning on July 1, 2020, and ending on June 30, 2021, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all 12 months and dividing the total by 12. (B) The average monthly full-time equivalent qualified employees employed during the three-month period beginning on April 1, 2021, and ending on June 30, 2021, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all three months and dividing the total by three. (d) If the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding four years if necessary, until the credit is exhausted. (e) A deduction otherwise allowed under this part for qualified wages shall be reduced by the amount of the credit allowed under this section. (f) For purposes of this section: (1) All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single qualified small business employer. (2) If a qualified small business employer changes its business form to a different entity type after receiving a tentative credit reservation under Section 6902.10 and continues operation, the new entity shall be allowed the credit, and the determination of the amount of the credit under this section with respect to qualified wages paid or incurred by the qualified small business employer shall apply to the new entity as if those qualified wages were paid or incurred by the new entity. (g) Notwithstanding Section 23803, an “S” corporation that makes the election under Section 6902.10 shall be allowed to apply the full credit amount against qualified sales and use tax, and no amount of credit shall be allowed to reduce the shareholder’s liability under Part 10 (commencing with Section 17001). (h) A disallowance of a credit claimed due to the application of the limitation specified in Section 6902.10 shall be treated as a mathematical error appearing on the return. An amount of tax resulting from that disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. (i) (1) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section. (2) The Franchise Tax Board may adopt rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any regulation, rule, guideline, procedure, or other guidance adopted by the Franchise Tax Board pursuant to this section. (j) Notwithstanding Section 19542, the Franchise Tax Board may provide to the California Department of Tax and Fee Administration, only to the extent allowed under federal law, information related to the credit allowed by Section 6902.9, this section, and Section 17053.71, including, but not limited to, the qualified small business employer names, amounts of tax credits allowed under each section, amount of gross receipts, and the net increase in qualified employees. (k) The amendments made to this section by Chapter 55 of the Statutes of 2022 shall apply for taxable years beginning on or after January 1, 2021, and before January 1, 2022. (l) This section shall remain in effect only until December 1, 2026, and as of that date is repealed. (Amended by Stats. 2023, Ch. 131, Sec. 211. (AB 1754) Effective January 1, 2024. Repealed as of December 1, 2026, by its own provisions.)
  26. 23629.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section gives a tax credit to qualified taxpayers that hire eligible individuals, with different credit amounts based on the employee’s hours worked and a per-taxpayer cap.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23629. (a) (1) For each taxable year beginning on or after January 1, 2022, and before January 1, 2027, there shall be allowed to a qualified taxpayer that employs an eligible individual a credit against the “tax,” as defined in Section 23036, an amount as determined pursuant to paragraph (2), not to exceed thirty thousand dollars ($30,000) per taxpayer per taxable year. (2) A qualified taxpayer shall be allowed the credit pursuant to this section in the following amounts per taxable year: (A) Two thousand five hundred dollars ($2,500) for each eligible individual that works at least 500 hours, but fewer than 1,000 hours, for the eligible employer during the taxable year in which the credit is claimed. (B) Five thousand dollars ($5,000) for each eligible individual that works at least 1,000 hours, but fewer than 1,500 hours, for the eligible employer during the taxable year in which the credit is claimed. (C) Seven thousand five hundred dollars ($7,500) for each eligible individual that works at least 1,500 hours, but fewer than 2,000 hours, for the eligible employer during the taxable year in which the credit is claimed. (D) Ten thousand dollars ($10,000) for each eligible individual that works at least 2,000 hours for the eligible employer during the taxable year in which the credit is claimed. (b) For purposes of this section: (1) “Continuum of care” has the same meaning as in Section 578.3 of Title 24 of the Code of Federal Regulations. (2) “Coordinated entry system” means a centralized or coordinated assessment system developed pursuant to Section 578.7 of Title 24 of the Code of Federal Regulations, designed to coordinate homelessness program participant intake, assessment, and provision of referrals. (3) “Eligible employer” means a taxpayer that meets all of the following requirements: (A) Pays wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code. (B) Pays at least 120 percent of minimum wage. (C) Provides to the Franchise Tax Board, upon request, a copy of the certification received for each eligible individual for each tax year that the credit is claimed for that eligible individual by that eligible employer. (4) “Eligible individual” means a person who meets both of the following criteria: (A) The person is homeless or has received supportive services from a homeless services provider, as designated by a local continuum of care or a community-based service provider that is connected to the local coordinated entry system or to a local Homeless Management Information System, on the date of the hire or anytime during the 180-day period immediately before the hire. (B) The person has been issued a certification pursuant to paragraph (2) of subdivision (c), and that certification has not expired. (5) “Homeless Management Information System” has the same meaning as in Section 578.3 of Title 24 of the Code of Federal Regulations. “Homeless Management Information System” includes the use of a comparable database by a victim services provider or legal services provider that is permitted by the federal government under Part 576 of Title 24 of the Code of Federal Regulations. (6) “Person is homeless” means the same as “homeless” as defined in Section 578.3 of Title 24 of the Code of Federal Regulations. (7) “Minimum wage” means the wage established pursuant to Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code. (8) “Qualified taxpayer” means an eligible employer that pays wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code to an eligible individual. (c) (1) A credit shall not be allowed under this section unless the eligible employer submits to the Franchise Tax Board, upon request, a certification issued by a continuum of care, or a community-based service provider that is connected to the local coordinated entry system or to a local Homeless Management Information System, or other program as specified by the Franchise Tax Board. (2) A continuum of care or a community-based service provider that is connected to the local coordinated entry system or to a local Homeless Management Information System, shall issue certifications for eligible individuals. (3) The certification pursuant to paragraph (2) shall be issued in a form and manner prescribed by Franchise Tax Board. (4) A certification issued pursuant to this subdivision shall expire one year after issuance. (5) An eligible individual may receive a new certification pursuant to this subdivision if they are homeless or have received supportive services from a homeless services provider, as designated by a local continuum of care or a community-based service provider that is connected to the local coordinated entry system or to a local Homeless Management Information System, on the date that the eligible individual receives a new certification or anytime during the 180-day period immediately before that date. (d) (1) The total aggregate amount of the credit that may be allocated by credit reservations per calendar year to all qualified taxpayers pursuant to this section and Section 17053.80 shall not exceed thirty million dollars ($30,000,000), plus the unallocated credit amount, if any, from the preceding calendar year. (2) (A) To be eligible for the credit allowed by this section with respect to an eligible individual, a qualified taxpayer shall request a credit reservation from the Franchise Tax Board, in the form and manner prescribed by the Franchise Tax Board, consistent with either of the following, as applicable: (i) Within 30 days of hiring an eligible individual. (ii) Within 60 days of receiving a new certification pursuant to paragraph (5) of subdivision (c). (B) To obtain a credit reservation with respect to an eligible individual, the qualified taxpayer shall provide necessary information, as determined by the Franchise Tax Board, including the name, social security number, how many hours the eligible individual is expected to work for the next 12 months, and the start date of employment. (3) The Franchise Tax Board shall do both of the following: (A) Approve a tentative credit reservation with respect to an eligible individual. (B) Subject to the annual cap established as provided in paragraph (1), allocate an aggregate amount of credits under this section and Section 17053.80, and allocate any carryover of unallocated credits from prior years. (e) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding two years if necessary, until the credit is exhausted. (f) If the credit allowed by this section is claimed by the qualified taxpayer, a deduction otherwise allowed under this part for any amount of wages paid or incurred by the qualified taxpayer as a trade or business expense to an eligible individual shall be reduced by the amount of the credit allowed by this section. (g) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section. (h) This section shall remain in effect only until December 1, 2027, and as of that date is repealed. (Amended by Stats. 2022, Ch. 55, Sec. 13. (AB 194) Effective June 30, 2022. Repealed as of December 1, 2027, by its own provisions.)
  27. 23630.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    Taxpayers may claim a credit equal to 55% of the fair market value of a qualified contribution if the contribution meets the section’s timing and approval requirements.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23630. (a) There shall be allowed as a credit against the “tax,” as defined in Section 23036, an amount equal to 55 percent of the fair market value of any qualified contribution made on or after January 1, 2000, and not later than June 30, 2008, on or after January 1, 2010, and not later than June 30, 2020, and on or after January 1, 2021, and not later than June 30, 2026, by the taxpayer during the taxable year to the state, any local government, or any designated nonprofit organization, pursuant to Division 28 (commencing with Section 37000) of the Public Resources Code. (b) For purposes of this section, “qualified contribution” means a contribution of property, as defined in Section 37002 of the Public Resources Code, that has been approved for acceptance by the Wildlife Conservation Board pursuant to Division 28 (commencing with Section 37000) of the Public Resources Code. (c) In the case of any pass-thru entity, the fair market value of any qualified contribution approved for acceptance under Division 28 (commencing with Section 37000) of the Public Resources Code shall be passed through to the partners or shareholders of the pass-thru entity in accordance with their interest in the pass-thru entity as of the date of the qualified contribution. For purposes of this subdivision, the term “pass-thru entity” means any partnership or “S” corporation. (d) (1) For a qualified contribution made on or after January 1, 2000, and before January 1, 2015, if the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the succeeding seven years if necessary, until the credit is exhausted. (2) For a qualified contribution made on or after January 1, 2015, if the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. (e) This credit shall be in lieu of any other credit or deduction that the taxpayer may otherwise claim pursuant to this part with respect to the property or any interest therein that is contributed. (Amended by Stats. 2021, Ch. 419, Sec. 2. (AB 1219) Effective September 30, 2021.)
  28. 23636.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a qualified taxpayer a tax credit equal to 17.5% of qualified wages paid to qualified full-time employees, subject to limits and filing rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23636. (a) For each taxable year beginning on or after January 1, 2016, and before January 1, 2031, a qualified taxpayer shall be allowed a credit against the “tax,” as defined in Section 23036, in an amount equal to 171/2 percent of qualified wages paid or incurred by the qualified taxpayer during the taxable year to qualified full-time employees, subject to the limitations under subdivision (c). (b) For purposes of this section: (1) “Annual full-time equivalent” means either of the following: (A) In the case of a qualified full-time employee paid hourly qualified wages, “annual full-time equivalent” means the total number of hours worked for the qualified taxpayer by the qualified full-time employee, not to exceed 2,000 hours per employee, divided by 2,000. (B) In the case of a salaried qualified full-time employee, “annual full-time equivalent” means the total number of weeks worked for the qualified taxpayer by the qualified employee divided by 52. (2) “Qualified full-time employee” means an individual that is employed in this state by the qualified taxpayer and satisfies both of the following: (A) The individual’s services for the qualified taxpayer are performed in this state and are at least 80 percent directly related to the qualified taxpayer’s prime contract or subcontract to design, test, manufacture property, or otherwise support production of property for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force. (B) The individual is paid compensation from the qualified taxpayer that satisfies either of the following conditions: (i) Is paid qualified wages by the qualified taxpayer for services not less than an average of 35 hours per week. (ii) Is paid a salary by the qualified taxpayer as compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code. (3) “Qualified taxpayer” means any taxpayer that is either a prime contractor awarded a prime contract or a major first-tier subcontractor awarded a subcontract to manufacture property for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force. For purposes of this paragraph, the term “prime contractor” means a contractor that was awarded a prime contract for the manufacturing of a new advanced strategic aircraft for the United States Air Force. For purposes of this paragraph, the term “major first-tier subcontractor” means a subcontractor that was awarded a subcontract in an amount of at least 35 percent of the amount of the initial prime contract awarded for the manufacturing of a new advanced strategic aircraft for the United States Air Force. (4) “Qualified wages” means wages paid or incurred by the qualified taxpayer during the taxable year with respect to qualified full-time employees that are direct labor costs, within the meaning of Section 263A of the Internal Revenue Code, relating to capitalization and inclusion in inventory costs of certain expenses, allocable to property manufactured in this state by the qualified taxpayer for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force. (5) “New advanced strategic aircraft for the United States Air Force” means a new advanced strategic aircraft developed and produced for the United States Air Force under the New Advanced Strategic Aircraft Program. (6) “New Advanced Strategic Aircraft Program” means the project to design, test, manufacture, or otherwise support production of a new advanced strategic aircraft for the United States Air Force under a contract that is expected to be awarded in the first or second calendar quarter of 2015. “New Advanced Strategic Aircraft Program” does not include any contract awarded prior to August 1, 2014, and does not include a program to upgrade, modernize, sustain, or otherwise modify a current United States Air Force bomber program, including, but not limited to, the B-52, B-1, or B-2 programs. (7) “Total annual full-time equivalents” means the number of a qualified taxpayer’s qualified full-time employees computed on an annual full-time equivalent basis for the taxable year. (c) (1) The total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall be as follows: (A) In years one through five of the credit, the total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall not exceed twenty- five million dollars ($25,000,000) per calendar year. (B) In years 6 through 10 of the credit, the total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall not exceed twenty-eight million dollars ($28,000,000) per calendar year. (C) In years 11 through 15 of the credit, the total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall not exceed thirty-one million dollars ($31,000,000) per calendar year. (2) The aggregate number of total annual full-time equivalents of all qualified taxpayers with respect to which a credit amount may be allowed under this section for a calendar year shall not exceed 1,100. (3) (A) The Franchise Tax Board shall allocate the credit to the qualified taxpayers on a first-come-first-served basis, determined by the date the qualified taxpayer’s timely filed original tax return is received by the Franchise Tax Board. If the returns of two or more qualified taxpayers are received on the same day and the amount of credit remaining to be allocated is insufficient to be allocated fully to each, the credit remaining shall be allocated to those qualified taxpayers on a pro rata basis. (B) For purposes of this paragraph, the date a return is received shall be determined by the Franchise Tax Board. The determination of the Franchise Tax Board as to the date a return is received and whether a return has been timely filed for purposes of this paragraph may not be reviewed in any administrative or judicial proceeding. (C) Any disallowance of a credit claimed due to the limitations specified in this subdivision shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that disallowance may be assessed by the Franchise Tax Board in the same manner as provided in Section 19051. (4) The credit allowed under this section must be claimed on a timely filed original return. (d) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the seven succeeding years if necessary, until the credit is exhausted. (e) A credit shall not be allowed unless the credit was reflected within the bid upon which the qualified taxpayer’s prime contract or subcontract to manufacture property for ultimate use in or as a component of a New Advanced Strategic Aircraft Program is based by reducing the amount of the bid by a good faith estimate of the amount of the credit allowable under this section. (f) All references to the credit and ultimate cost reductions incorporated into any successful bid that was awarded a prime contract or subcontract and for which a qualified taxpayer is making a claim shall be made available to the Franchise Tax Board upon request. (g) If the qualified taxpayer is allowed a credit pursuant to this section for qualified wages paid or incurred, only one credit shall be allowed to the taxpayer under this part with respect to any wage consisting in whole or in part of those qualified wages. (h) (1) The Franchise Tax Board may prescribe regulations necessary or appropriate to carry out the purposes of this section. (2) The Franchise Tax Board may also prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section. (i) This section shall remain in effect only until December 1, 2031, and as of that date is repealed. (Amended by Stats. 2016, Ch. 31, Sec. 274. (SB 836) Effective June 27, 2016. Repealed as of December 1, 2031, by its own provisions.)
  29. 23640.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section lets a qualified taxpayer claim a 20% credit for qualified expenditures on an eligible transmission project, up to $20 million per taxpayer per year, and allows carryover of unused credit.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23640. (a) For taxable years beginning on or after January 1, 2026, and before January 1, 2036, there shall be allowed to qualified taxpayer, a credit against the “tax,” as defined in Section 23036, in an amount equal to 20 percent of the qualified expenditures paid or incurred by the qualified taxpayer during the taxable year, not to exceed twenty million dollars ($20,000,000) per qualified taxpayer per taxable year. (b) For purposes of this section: (1) “Bank” means the California Infrastructure and Economic Development Bank established under Chapter 2 (commencing with Section 63021) of Division 1 of Title 6.7 of the Government Code. (2) “Eligible transmission project” has the same meaning as defined in Section 63049.73 of the Government Code. (3) “Qualified expenditures” means costs paid or incurred for planning, design, engineering, permitting, construction, and equipment directly related to the eligible transmission project or qualified wages paid or incurred to employees of a qualified taxpayer that perform services directly related to the eligible transmission project. (4) “Qualified taxpayer” means a taxpayer that is a participating party, as defined in subdivision (h) of section 63049.71 of the Government Code. (5) “Qualified wages” means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code. (c) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding seven years if necessary, until the credit is exhausted. (d) If the credit allowed by this section is claimed by the qualified taxpayer, a deduction otherwise allowed under this part for any amount of qualified expenditures paid or incurred by the qualified taxpayer shall be reduced by the amount of the qualified expenditures taken into account in calculating the credit allowed by this section. (e) If the credit allowed by this section is claimed by the qualified taxpayer, the taxpayer shall not earn a return on equity for the eligible transmission project pursuant to Article 10.5 (commencing with Section 63049.71) of Chapter 2 of Division 1 of Title 6.7 of the Government Code for the portion of the project for which the credit is claimed. (f) The bank shall inform the Franchise Tax Board of any eligible transmission project that the bank approves for financial assistance pursuant to subdivision (i) of Section 63049.73 of the Government Code and shall provide any other information the Franchise Tax Board requires for administration of the credit allowed by this section. (g) The Franchise Tax Board may prescribe regulations that are necessary or appropriate to carry out the purposes of this section. (h) Section 41 shall not apply to this section. (i) This section shall remain in effect only until December 1, 2036, and as of that date is repealed. (Added by Stats. 2025, Ch. 119, Sec. 66. (SB 254) Effective September 19, 2025. Repealed as of December 1, 2036, by its own provisions.)
  30. 23642.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    A tax credit is allowed for eligible access expenditures, with the credit generally equal to 50% of qualifying spending up to $250 for the taxable year.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23642. (a) For each taxable year beginning on or after January 1, 1996, there shall be allowed as a credit against the “tax,” as defined in Section 23036, the amount paid or incurred for eligible access expenditures. The credit shall be allowed in accordance with Section 44 of the Internal Revenue Code, relating to expenditures to provide access to disabled individuals, except that the credit amount specified in subdivision (b) shall be substituted for the credit amount specified in Section 44(a) of the Internal Revenue Code. (b) The credit amount allowed under this section shall be 50 percent of so much of the eligible access expenditures for the taxable year as do not exceed two hundred fifty dollars ($250). (c) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit is exhausted. (Amended by Stats. 2000, Ch. 862, Sec. 85. Effective January 1, 2001.)
  31. 23663.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    Certain eligible corporate tax credits may be assigned to an eligible assignee, but the assignee can use the credit only against its own tax and cannot pass it on again.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23663. (a) (1) Notwithstanding any other law to the contrary, for each taxable year beginning on or after July 1, 2008, any credit allowed to a taxpayer under this chapter that is an eligible credit may be assigned by that taxpayer to any eligible assignee. (2) A credit assigned under paragraph (1) may only be applied by the eligible assignee against the “tax” (as defined in Section 23036) of the eligible assignee in a taxable year beginning on or after January 1, 2010. (3) Except as specifically provided in this section, following an assignment of any eligible credit under this section, the eligible assignee shall be treated as if it originally earned the assigned credit. (b) For purposes of this section, the following definitions shall apply: (1) “Affiliated corporation” means a corporation that is a member of a commonly controlled group as defined in Section 25105. (2) “Eligible credit” shall mean: (A) Any credit earned by the taxpayer in a taxable year beginning on or after July 1, 2008, or (B) Any credit earned in any taxable year beginning before July 1, 2008, that is eligible to be carried forward to the taxpayer’s first taxable year beginning on or after July 1, 2008, under the provisions of this part. (3) “Eligible assignee” shall mean any affiliated corporation that is properly treated as a member of the same combined reporting group pursuant to Section 25101 or 25110 as the taxpayer assigning the eligible credit as of: (A) In the case of credits earned in taxable years beginning before July 1, 2008: (i) June 30, 2008, and (ii) The last day of the taxable year of the assigning taxpayer in which the eligible credit is assigned. (B) In the case of credits earned in taxable years beginning on or after July 1, 2008. (i) The last day of the first taxable year in which the credit was allowed to the taxpayer, and (ii) The last day of the taxable year of the assigning taxpayer in which the eligible credit is assigned. (c) (1) The election to assign any credit under subdivision (a) shall be irrevocable once made, and shall be made by the taxpayer allowed that credit on its original return for the taxable year in which the assignment is made. (2) The taxpayer assigning any credit under this section shall reduce the amount of its unused credit by the face amount of any credit assigned under this section, and the amount of the assigned credit shall not be available for application against the assigning taxpayer’s “tax” in any taxable year, nor shall it thereafter be included in the amount of any credit carryover of the assigning taxpayer. (3) The eligible assignee of any credit under this section may apply all or any portion of the assigned credits against the “tax” of the eligible assignee for the taxable year in which the assignment occurs, or any subsequent taxable year, subject to any carryover period limitations that apply to the assigned credit and also subject to the limitation in paragraph (2) of subdivision (a). (4) In no case may the eligible assignee sell, otherwise transfer, or thereafter assign the assigned credit to any other taxpayer. (d) (1) No consideration shall be required to be paid by the eligible assignee to the assigning taxpayer for assignment of any credit under this section. (2) In the event that any consideration is paid by the eligible assignee to the assigning taxpayer for the transfer of an eligible credit under this section, then: (A) No deduction shall be allowed to the eligible assignee under this part with respect to any amounts so paid, and (B) No amounts so received by the assigning taxpayer shall be includable in gross income under this part. (e) (1) The Franchise Tax Board shall specify the form and manner in which the election required under this section shall be made, as well as any necessary information that shall be required to be provided by the taxpayer assigning the credit to the eligible assignee. (2) Any taxpayer who assigns any credit under this section shall report any information, in the form and manner specified by the Franchise Tax Board, necessary to substantiate any credit assigned under this section and verify the assignment and subsequent application of any assigned credit. (3) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to paragraphs (1) and (2). (4) The Franchise Tax Board may issue any regulations necessary to implement the purposes of this section, including any regulations necessary to specify the treatment of any assignment that does not comply with the requirements of this section (including, for example, where the taxpayer and eligible assignee are not properly treated as members of the same combined reporting group on any of the dates specified in paragraph (3) of subdivision (b). (f) (1) The taxpayer and the eligible assignee shall be jointly and severally liable for any tax, addition to tax, or penalty that results from the disallowance, in whole or in part, of any eligible credit assigned under this section. (2) Nothing in this section shall limit the authority of the Franchise Tax Board to audit either the assigning taxpayer or the eligible assignee with respect to any eligible credit assigned under this section. (g) On or before June 30, 2013, the Franchise Tax Board shall report to the Joint Legislative Budget Committee, the Legislative Analyst, and the relevant policy committees of both houses on the effects of this section. The report shall include, but need not be limited to, the following: (1) An estimate of use of credits in the 2010 and 2011 taxable years by eligible taxpayers. (2) An analysis of effect of this section on expanding business activity in the state related to these credits. (3) An estimate of the resulting tax revenue loss to the state. (4) The report shall cover all credits covered in this section, but focus on the credits related to research and development, economic incentive areas, and low-income housing. (Amended by Stats. 2011, Ch. 296, Sec. 282. (AB 1023) Effective January 1, 2012.)
  32. 23664.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section gives a tax credit to eligible commercial cannabis businesses that meet specified employee-benefit and licensing requirements, but they must request a credit reservation and provide required information to the Franchise Tax Board.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23664. (a) (1) For each taxable year beginning on or after January 1, 2023, and before January 1, 2028, there shall be allowed a credit against the “tax,” as defined in Section 23036, to a qualified taxpayer equal to 25 percent of the total amount of the qualified taxpayer’s qualified expenditures in the taxable year, subject to paragraph (2). (2) (A) The credit allowable under this section in any taxable year to any qualified taxpayer shall be limited to a maximum of two hundred fifty thousand dollars ($250,000). (B) For qualified taxpayers that are required to be included in a combined report under Section 25101 or authorized to be included in a combined report under Section 25101.15, the limit specified in subparagraph (A) shall be the aggregate amount of the credit claimed by all taxpayers that are required to be or authorized to be included in a combined report and in no instance shall the aggregate amount of credit claimed by a combined group exceed the limit specified in subparagraph (A). (b) For purposes of this section: (1) “Full-time employee” means an individual who is either of the following: (A) Paid wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code by the qualified taxpayer for services not less than an average of 35 hours per week. (B) A salaried employee who was paid compensation during the taxable year for full-time employment, as described in Section 515 of the Labor Code, by the qualified taxpayer that is paid wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code. (2) “Minimum wage” means the wage established pursuant to Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code. (3) “Qualified expenditures” means amounts paid or incurred by a qualified taxpayer for any of the following: (A) Employment compensation for the full-time employees of the qualified taxpayer. For purposes of this subparagraph, “employment compensation” means wages paid to full-time employees who are paid no less than 150 percent but no more than 350 percent of the applicable minimum wage. The calculation of wages pursuant to this subparagraph may include the monetary value to the full-time employee of employer-provided group health insurance benefits, childcare benefits, employer contributions to employer-provided retirement benefits, or employer contributions to pension benefits. (B) Safety-related equipment, training, and services. For purposes of this subparagraph, “safety-related equipment, training, and services” means equipment primarily used by employees of cannabis licensees to ensure their personal and occupational safety or the safety of customers of the cannabis licensees; training for nonmanagement employees on workplace hazards, including, but not limited to, training required pursuant to subparagraph (A) of paragraph (11) of subdivision (a) of Section 26051.5 of the Business and Professions Code; and services, including, but not limited to, safety audits, security guards, security cameras, and fire risk mitigation. (C) Workforce development and safety training for employees of the qualified taxpayer. For purposes of this subparagraph, “workforce development” includes, but is not limited to, joint labor management training programs, membership in a joint apprenticeship training committee registered by the Division of Apprenticeship Standards, and a state-recognized high road training partnership as defined in Section 14005 of the Unemployment Insurance Code. (4) “Qualified taxpayer” means a commercial cannabis business, licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code, and that provides full-time employees with all of the following: (A) Employment compensation, as described in subparagraph (A) of paragraph (3). (B) Employer-provided group health insurance. (C) Employer-provided retirement benefits or pension benefits, including stock in the duly licensed commercial cannabis employer to employees under employee stock ownership plans where the employer pays for the full value of the stock. (D) Possesses a Type-10 or a Type-12 license pursuant to Section 26050 of the Business and Professions Code. (c) The total aggregate amount of the credit that may be allocated by credit reservations to all qualified taxpayers pursuant to this section and Section 17053.64 shall not exceed twenty million dollars ($20,000,000) for all taxable years, cumulatively. (d) To be eligible for the credit allowed by this section, a qualified taxpayer shall request a credit reservation from the Franchise Tax Board during the month of July for each taxable year or within 30 days of the start of their taxable year if the qualified taxpayer’s taxable year begins after July, in the form and manner prescribed by the Franchise Tax Board. (e) To obtain a credit reservation with respect to a qualified expenditure, the qualified taxpayer shall provide all necessary information, as determined by the Franchise Tax Board. (f) The Franchise Tax Board shall approve tentative credit reservations with respect to qualified expenditures incurred during a taxable year for qualified taxpayers, subject to the cap established under this section and Section 17053.64. (g) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and the seven succeeding years if necessary, until the credit is exhausted. (h) If the credit allowed by this section is claimed by the qualified taxpayer, any deduction or credit otherwise allowed under this part for any qualified expenditure made by the qualified taxpayer as a trade or business expense shall be reduced by the amount of the credit allowed by this section. (i) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section. (j) This section shall remain in effect only until December 1, 2028, and as of that date is repealed. (Added by Stats. 2022, Ch. 56, Sec. 16. (AB 195) Effective June 30, 2022. Repealed as of December 1, 2028, by its own provisions.)
  33. 23682.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    A qualified taxpayer may get a $10,000 credit against tax for taxable years starting on or after January 1, 2023 and before January 1, 2028.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23682. (a) For each taxable year beginning on or after January 1, 2023, and before January 1, 2028, there shall be allowed a credit against the “tax,” as defined in Section 23036, to a qualified taxpayer in an amount equal to ten thousand dollars ($10,000). (b) For purposes of this section, “qualified taxpayer” means an equity licensee that has received approval, including approval contingent upon the availability of funds, for the fee waiver and deferral program established pursuant to Section 26249 of the Business and Professions Code, as administered by the Department of Cannabis Control. (c) On January 1, 2024, and every six months thereafter, the Department of Cannabis Control shall provide the Franchise Tax Board with a list of qualified taxpayers for the purposes of administering this section. The Department of Cannabis Control may satisfy this requirement by maintaining a database that makes this information available to the Franchise Tax Board. (d) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding seven years if necessary, until the credit is exhausted. (e) This section and Section 17053.82 shall be known and may be cited as the Cannabis Equity Tax Credit. (f) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section. (g) This section shall remain in effect only until December 1, 2028, and as of that date is repealed. (Added by Stats. 2022, Ch. 56, Sec. 17. (AB 195) Effective June 30, 2022. Repealed as of December 1, 2028, by its own provisions.)
  34. 23685.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a qualified taxpayer to claim a California film tax credit for qualified expenditures, subject to detailed eligibility rules, caps, reporting requirements, and Film Commission certification.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23685. (a) (1) For taxable years beginning on or after January 1, 2011, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, in an amount equal to the applicable percentage, as specified in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. (2) The credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (g) for the qualified motion picture, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture. (3) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g). (4) For purposes of paragraphs (1) and (2), the applicable percentage shall be: (A) Twenty percent of the qualified expenditures attributable to the production of a qualified motion picture in California. (B) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California or an independent film. (b) For purposes of this section: (1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture. (2) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes. (3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture. (4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (2) of subdivision (g). (5) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following: (i) Employer contributions under any pension, profit-sharing, annuity, or similar plan. (ii) Employer-provided coverage under any accident or health plan for employees. (iii) The employer’s cost of life or disability insurance provided to employees. (B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (18) shall not be taken into account under this paragraph. (6) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) and a maximum budget of ten million dollars ($10,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 25 percent of the producing company. (7) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part. (8) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created. (9) (A) “Postproduction” means the final activities in a qualified motion picture’s production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, soundmixing, film-to-tape transfers, encoding, and color correction. (B) “Postproduction” does not include the manufacture or shipping of release prints. (10) “Preproduction” means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment, or is greenlit, with, for example, the establishment of a dedicated production office, the hiring of key crew members, and includes, but is not limited to, activities that include location scouting and execution of contracts with vendors of equipment and stage space. (11) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction. (12) “Production period” means the period beginning with preproduction and ending upon completion of postproduction. (13) “Qualified entity” means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual. (14) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the production of a qualified motion picture. (B) “Qualified individual” shall not include either of the following: (i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code. (ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer. (15) (A) “Qualified motion picture” means a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following: (i) A feature with a minimum production budget of one million dollars ($1,000,000) and a maximum production budget of seventy-five million dollars ($75,000,000). (ii) A movie of the week or miniseries with a minimum production budget of five hundred thousand dollars ($500,000). (iii) A new television series produced in California with a minimum production budget of one million dollars ($1,000,000) licensed for original distribution on basic cable. (iv) An independent film. (v) A television series that relocated to California. (B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied: (i) At least 75 percent of the production days occur wholly in California or 75 percent of the production budget is incurred for payment for services performed within the state and the purchase or rental of property used within the state. (ii) Production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission. For purposes of this section, a qualified motion picture is “completed” when the process of postproduction has been finished. (iii) The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code. (iv) Principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval. (C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated. (D) “Qualified motion picture” shall not include commercial advertising, music videos, a motion picture produced for private noncommercial use, such as weddings, graduations, or as part of an educational course and made by students, a news program, current events or public events program, talk show, game show, sporting event or activity, awards show, telethon or other production that solicits funds, reality television program, clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, one-half hour (air time) episodic television shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code. (16) “Qualified expenditures” means amounts paid or incurred to purchase or lease tangible personal property used within this state in the production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the production of a qualified motion picture. (17) (A) “Qualified taxpayer” means a taxpayer who has paid or incurred qualified expenditures and has been issued a credit certificate by the California Film Commission pursuant to subdivision (g). (B) (i) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, “pass-thru entity” means any entity taxed as a partnership or “S” corporation. (ii) In the case of an “S” corporation, the credit allowed under this section shall not be used by an “S” corporation as a credit against a tax imposed under Chapter 4.5 (commencing with Section 23800) of Part 11 of Division 2. (18) (A) “Qualified wages” means all of the following: (i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state. (ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the production of the qualified motion picture that are properly allocable to qualified wage amounts described in clause (i). (iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (14). (iv) Remuneration paid to an independent contractor who is a qualified individual for services performed within this state by that qualified individual. (B) “Qualified wages” shall not include any of the following: (i) Expenses, including wages, related to new use, reuse, clip use, licensing, secondary markets, or residual compensation, or the creation of any ancillary product, including, but not limited to, a soundtrack album, toy, game, trailer, or teaser. (ii) Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto. (iii) Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture. (iv) Expenses, including wages, paid per person per qualified motion picture for writers, directors, music directors, music composers, music supervisors, producers, and performers, other than background actors with no scripted lines. (19) “Residual compensation” means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production. (20) “Reuse” means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium. (21) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited. (22) “Television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, that filmed all of its prior season or seasons outside of California and for which the taxpayer certifies that the credit provided pursuant to this section is the primary reason for relocating to California. (c) (1) Notwithstanding subdivision (i) of Section 23036, in the case where the credit allowed by this section exceeds the taxpayer’s tax liability computed under this part, a qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. For purposes of this subdivision, “affiliated corporation” has the meaning provided in subdivision (b) of Section 25110, as that section was amended by Chapter 881 of the Statutes of 1993, as of the last day of the taxable year in which the credit is allowed, except that “100 percent” is substituted for “more than 50 percent” wherever it appears in the section, and “voting common stock” is substituted for “voting stock” wherever it appears in the section. (2) The election provided in paragraph (1): (A) May be based on any method selected by the qualified taxpayer that originally receives the credit. (B) Shall be irrevocable for the taxable year the credit is allowed, once made. (C) May be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayer’s affiliated corporations that assign and receive the credits. (D) Shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned. (3) (A) Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (6) of subdivision (b), to an unrelated party. (B) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit. (4) In the case where the credit allowed under this section exceeds the “tax,” the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted. (5) A credit shall not be sold pursuant to this subdivision to more than one taxpayer, nor may the credit be resold by the unrelated party to another taxpayer or other party. (6) A party that has been assigned or acquired tax credits under this paragraph shall be subject to the requirements of this section. (7) In no event may a qualified taxpayer assign or sell any tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer. (8) In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission and a taxpayer to whom the credit has been sold both claim the same amount of credit on their tax returns, the Franchise Tax Board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open. (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this subdivision. (10) Subdivision (i) of Section 23036 shall not apply to any credit sold pursuant to this subdivision. (11) For purposes of this subdivision: (A) An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (B) The unrelated party or parties that purchase a credit pursuant to paragraph (3) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (d) No credit shall be allowed pursuant to this section unless the qualified taxpayer provides the following to the California Film Commission: (1) Identification of each qualified individual. (2) The specific start and end dates of production. (3) The total wages paid. (4) The amount of qualified wages paid to each qualified individual. (5) The copyright registration number, as reflected on the certificate of registration issued under the authority of Section 410 of Title 17 of the United States Code, relating to registration of claim and issuance of certificate. The registration number shall be provided on the return claiming the credit. (6) The total amounts paid or incurred to purchase or lease tangible personal property used in the production of a qualified motion picture. (7) Information to substantiate its qualified expenditures. (8) Information required by the California Film Commission under regulations promulgated pursuant to subdivision (g) necessary to verify the amount of credit claimed. (e) The California Film Commission may prescribe rules and regulations to carry out the purposes of this section including any rules and regulations necessary to establish procedures, processes, requirements, and rules identified in or required to implement this section. The regulations shall include provisions to set aside a percentage of annual credit allocations for independent films. (f) If the qualified taxpayer fails to provide the copyright registration number as required in paragraph (5) of subdivision (d), the credit shall be disallowed and assessed and collected under Section 19051 until the procedures are satisfied. (g) For purposes of this section, the California Film Commission shall do the following: (1) On or after July 1, 2009, and before July 1, 2017, allocate tax credits to applicants. (A) Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, the following information: (i) The budget for the motion picture production. (ii) The number of production days. (iii) A financing plan for the production. (iv) The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the production of the qualified motion picture, to the extent possible. (v) All members of a combined reporting group, if known at the time of the application. (vi) Financial information, if available, including, but not limited to, the most recently produced balance sheets, annual statements of profits and losses, audited or unaudited financial statements, summary budget projections or results, or the functional equivalent of these documents of a partnership or owner of a single member limited liability company that is disregarded pursuant to Section 23038. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure. (vii) The names of all partners in a partnership not publicly traded or the names of all members of a limited liability company classified as a partnership not publicly traded for California income tax purposes that have a financial interest in the applicant’s qualified motion picture. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure. (viii) Detailed narratives, for use only by the Legislative Analyst’s Office in conducting a study of the effectiveness of this credit, that describe the extent to which the credit is expected to influence or affect filming and other business location decisions, hiring decisions, salary decisions, and any other financial matters of the applicant. (ix) Any other information deemed relevant by the California Film Commission or the Franchise Tax Board. (B) Establish criteria, consistent with the requirements of this section, for allocating tax credits. (C) Determine and designate applicants who meet the requirements of this section. (D) Process and approve, or reject, all applications on a first-come-first-served basis. (E) Subject to the annual cap established as provided in subdivision (i), allocate an aggregate amount of credits under this section and Section 17053.85, and allocate any carryover of unallocated credits from prior years. (2) Certify tax credits allocated to qualified taxpayers. (A) Establish a verification procedure for the amount of qualified expenditures paid or incurred by the applicant, including, but not limited to, updates to the information in subparagraph (A) of paragraph (1) of subdivision (g). (B) Establish audit requirements that must be satisfied before a credit certificate may be issued by the California Film Commission. (C) (i) Establish a procedure for a qualified taxpayer to report to the California Film Commission, prior to the issuance of a credit certificate, the following information: (I) If readily available, a list of the states, provinces, or other jurisdictions in which any member of the applicant’s combined reporting group in the same business unit as the qualified taxpayer that, in the preceding calendar year, has produced a qualified motion picture intended for release in the United States market. For purposes of this clause, “qualified motion picture” shall not include any episodes of a television series that were complete or in production prior to July 1, 2009. (II) Whether a qualified motion picture described in subclause (I) was awarded any financial incentive by the state, province, or other jurisdiction that was predicated on the performance of primary principal photography or postproduction in that location. (ii) The California Film Commission may provide that the report required by this subparagraph be filed in a single report provided on a calendar year basis for those qualified taxpayers that receive multiple credit certificates in a calendar year. (D) Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified under this section. The amount of credit shown in the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section. (3) Obtain, when possible, the following information from applicants that do not receive an allocation of credit: (A) Whether the qualified motion picture that was the subject of the application was completed. (B) If completed, in which state or foreign jurisdiction was the primary principal photography completed. (C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location. (4) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, the applicants, in electronic format when available, including, but not limited to, information provided pursuant to clauses (i) to (ix), inclusive, of subparagraph (A) of paragraph (1). (5) The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2. (h) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, the Franchise Tax Board, and the board with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. The list shall include the names and taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, of the qualified taxpayer. (2) (A) Notwithstanding paragraph (5) of subdivision (g), the California Film Commission shall annually post on its Internet Web site and make available for public release the following: (i) A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the production, and the total amount of qualified expenditures expected to be spent by the production. (ii) A narrative staff summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit. (B) Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record. (i) (1) The aggregate amount of credits that may be allocated in any fiscal year pursuant to this section and Section 17053.85 shall be an amount equal to the sum of all of the following: (A) One hundred million dollars ($100,000,000) in credits for the 2009–10 fiscal year and each fiscal year thereafter, through and including the 2016–17 fiscal year. (B) The unused allocation credit amount, if any, for the preceding fiscal year. (C) The amount of previously allocated credits not certified. (2) If the amount of credits applied for in any particular fiscal year exceeds the aggregate amount of tax credits authorized to be allocated under this section, such excess shall be treated as having been applied for on the first day of the subsequent fiscal year. However, credits may not be allocated from a fiscal year other than the fiscal year in which the credit was originally applied for or the immediately succeeding fiscal year. (3) Notwithstanding the foregoing, the California Film Commission shall set aside up to ten million dollars ($10,000,000) of tax credits each fiscal year for independent films allocated in accordance with rules and regulations developed pursuant to subdivision (e). (4) Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIII A of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature. (j) The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (e) upon adoption. (Amended by Stats. 2013, Ch. 76, Sec. 188. (AB 383) Effective January 1, 2014.)
  35. 23687.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section allows a tax credit for part of certain contributions to the College Access Tax Credit Fund, sets a $500 million aggregate cap, gives the California Educational Facilities Authority certification and rulemaking duties, and limits the section to December 1, 2028.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23687. (a) For taxable years beginning on or after January 1, 2017, and before January 1, 2028, there shall be allowed as a credit against the “tax,” as defined in Section 23036, an amount equal to 50 percent of the amount contributed by the taxpayer for the taxable year to the College Access Tax Credit Fund, as allocated and certified by the California Educational Facilities Authority. (b) (1) The aggregate amount of credit that may be allocated and certified pursuant to this section, Section 12207, and Section 17053.87 shall be an amount equal to five hundred million dollars ($500,000,000). (2) (A) For the purposes of this section, the California Educational Facilities Authority shall do all of the following: (i) On a first-come-first-served basis, allocate and certify tax credits to taxpayers under this section. (ii) Establish a procedure for taxpayers to contribute to the College Access Tax Credit Fund and to obtain from the California Educational Facilities Authority a certification for the credit allowed by this section. The procedure shall require the California Educational Facilities Authority to certify the contribution amount eligible for credit within 45 days following receipt of the contribution. (iii) Provide to the Franchise Tax Board a copy of each credit certificate issued for the calendar year by March 1 of the calendar year immediately following the year in which those certificates are issued. (B) (i) The California Educational Facilities Authority shall adopt any regulations necessary or appropriate to implement this paragraph. (ii) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any regulation adopted by the California Educational Facilities Authority pursuant to clause (i). (c) (1) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding five years if necessary, until the credit is exhausted. (2) A deduction shall not be allowed under this part for amounts taken into account under this section in calculating the credit allowed by this section. (d) The tax credit allowed by subdivision (a), subdivision (a) of Section 12207, and subdivision (a) of Section 17053.87 for donations to the College Access Tax Credit Fund shall be known as the College Access Tax Credit. (e) This section shall remain in effect only until December 1, 2028, and as of that date is repealed. (Amended by Stats. 2022, Ch. 976, Sec. 4. (AB 2880) Effective January 1, 2023. Repealed as of December 1, 2028, by its own provisions.)
  36. 23688.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    A qualified taxpayer may claim a 15% tax credit for qualifying food donations to a California food bank, subject to filing and documentation rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23688.5. (a) In the case of a qualified taxpayer who donates qualified donation items to a food bank located in California under Chapter 5 (commencing with Section 58501) of Part 1 of Division 21 of the Food and Agricultural Code, for taxable years beginning on or after January 1, 2017, and before January 1, 2027, there shall be allowed as a credit against the “tax,” defined by Section 23036, an amount equal to 15 percent of the qualified value of those qualified donation items. (b) For purposes of this section: (1) “Qualified donation item” means fresh fruits or fresh vegetables and the following raw agricultural products or processed foods: (A) All of the following: (i) “Fruits, nuts, or vegetables” as defined in Section 42510 of the Food and Agricultural Code. (ii) “Meat food product” as defined in Section 18665 of the Food and Agricultural Code. (iii) “Poultry” as defined in Section 18675 of the Food and Agricultural Code. (iv) “Eggs” as defined in Section 75027 of the Food and Agricultural Code. (v) “Fish” as defined in Section 58609 of the Food and Agricultural Code. (B) All of the following food as defined in Section 109935 of the Health and Safety Code: (i) Rice. (ii) Beans. (iii) Fruits, nuts, and vegetables in canned, frozen, dried, dehydrated, and 100 percent juice forms. (iv) Any cheese, milk, yogurt, butter, and dehydrated milk meeting the requirements in Division 15 (commencing with Section 32501) of the Food and Agricultural Code. (v) Infant formula subject to Section 114094.5 of the Health and Safety Code. (vi) Vegetable oil and olive oil. (vii) Soup, pasta sauce, and salsa. (viii) Bread and pasta. (ix) Canned meats and canned seafood. (2) (A) “Qualified taxpayer” means the person responsible for planting a crop, managing the crop, and harvesting the crop from the land. (B) (i) “Qualified taxpayer” also means the person responsible for growing or raising a qualified donation item, or harvesting, packing, or processing a qualified donation item, provided that person is not a retailer. (ii) As used in this subparagraph, “retailer” means a person primarily engaged in the business of making retail sales directly to the public. (3) (A) “Qualified value” shall be calculated by using the weighted average wholesale price based on the qualified taxpayer’s total like grade wholesale sales of the donated item sold within the calendar month of the qualified taxpayer’s donation. (B) If no wholesale sales of the donated item have occurred in the calendar month of the qualified taxpayer’s donation, the “qualified value” shall be equal to the nearest regional wholesale market price for the calendar month of the donation based upon the same grade products as published by the United States Department of Agriculture’s Agricultural Marketing Service or its successor. (c) If the credit allowed by this section is claimed by the qualified taxpayer, any deduction otherwise allowed under this part for that amount of the cost paid or incurred by the qualified taxpayer that is eligible for the credit shall be reduced by the amount of the credit provided in subdivision (a). (d) The qualified taxpayer shall provide to the food bank the qualified value of the qualified donation items and information regarding the origin of where the qualified donation items were grown, processed, or both grown and processed. Upon receipt of the qualified donation items, the food bank shall provide a certificate to the qualified taxpayer. The certificate shall contain a statement signed and dated by a person authorized by that food bank that the item is donated under Chapter 5 (commencing with Section 58501) of Part 1 of Division 21 of the Food and Agricultural Code. The certificate shall also contain the type and quantity of items donated, the name of the qualified taxpayer or the qualified taxpayers, the name and address of the food bank, and, as provided by the qualified taxpayer, the qualified value of the qualified donation items and their origins. Upon the request of the Franchise Tax Board, the qualified taxpayer shall provide a copy of the certification to the Franchise Tax Board. (e) The credit allowed by this section may be claimed only on a timely filed original return. (f) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and for the six succeeding years if necessary, until the credit has been exhausted. (g) This section shall be repealed on December 1, 2027. (h) The amendments made to this section by Chapter 431 of the Statutes of 2019 shall apply to taxable years beginning on or after January 1, 2020. (Amended by Stats. 2021, Ch. 82, Sec. 18. (AB 150) Effective July 16, 2021. Repealed as of December 1, 2027, by its own provisions.)
  37. 23689.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section creates a California business tax credit for eligible taxable years, with GO-Biz and the committee handling allocation and approval and the Franchise Tax Board handling compliance review and recapture-related assessment.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23689. (a) (1) For each taxable year beginning on and after January 1, 2014, and before January 1, 2030, there shall be allowed as a credit against the “tax,” as defined in Section 23036, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2. (2) The credit under this section shall be allocated by GO-Biz with respect to the 2013–14 fiscal year through and including the 2027–28 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors: (A) The number of jobs the taxpayer will create or retain in this state. (B) The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits. (C) The amount of investment in this state by the taxpayer. (D) The extent of unemployment or poverty in the area according to the United States Census in which the taxpayer’s project or business is proposed or located. (E) The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities. (F) The incentives available to the taxpayer in other states. (G) The duration of the proposed project and the duration the taxpayer commits to remain in this state. (H) The overall economic impact in this state of the taxpayer’s project or business. (I) The strategic importance of the taxpayer’s project or business to the state, region, or locality. (J) The opportunity for future growth and expansion in this state by the taxpayer’s business. (K) The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit. (L) For a credit allocated beginning with the 2018–19 fiscal year, the training opportunities offered by the taxpayer to its employees. (3) The written agreement entered into pursuant to paragraph (2) shall include: (A) Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period. (B) Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer. (C) Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement. (b) For purposes of this section: (1) “Committee” means the California Competes Tax Credit Committee established pursuant to Section 18410.2. (2) “GO-Biz” means the Governor’s Office of Business and Economic Development. (c) For purposes of this section, GO-Biz shall do the following: (1) Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty. (2) Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer. (3) Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2. (4) Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee. (5) Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee. (6) Post on its internet website all of the following: (A) The name of each taxpayer allocated a credit pursuant to this section. (B) The estimated amount of the investment by each taxpayer. (C) The estimated number of jobs created or retained. (D) The amount of the credit allocated to the taxpayer. (E) The amount of the credit recaptured from the taxpayer, if applicable. (F) The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county. (G) Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1). (7) Consider the extent to which the credit will influence the taxpayer’s ability, willingness, or both, to create jobs in this state that might not otherwise be created in the state by the taxpayer or any other taxpayer. GO-Biz may also consider other factors, including, but not limited to, the following: (A) The financial solvency of the taxpayer and the taxpayer’s ability to finance its proposed expansion. (B) The taxpayer’s current and prior compliance with federal and state laws. (C) Current and prior litigation involving the taxpayer. (D) The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section. (E) For allocation periods beginning with the 2023–24 fiscal year, the taxpayer’s willingness to relocate jobs into California from a state that has enacted a law that does any of the following: (i) Voids or repeals, or has the effect of voiding or repealing, existing state protections against discrimination on the basis of sexual orientation, gender identity, or gender expression. (ii) Authorizes or requires discrimination against same-sex couples or their families, or discrimination on the basis of sexual orientation, gender identity, or gender expression. (iii) Creates an exemption to antidiscrimination laws in order to permit discrimination against same-sex couples or their families, or permits discrimination on the basis of sexual orientation, gender identity, or gender expression. (iv) Denies or interferes with, or has the effect of denying or interfering with, a woman’s right to choose to bear a child or to choose and obtain an abortion, as provided by Article 2.5 (commencing with Section 123460) of Chapter 2 of Part 2 of Division 106 of the Health and Safety Code. (F) For allocation periods beginning with the 2023–24 fiscal year, the taxpayer’s commitment to treating their workforce fairly and creating quality, full-time, wage and salary jobs in the state, evidence of which may include, but not be limited to, the following: (i) Training, career ladder, apprenticeship, or preapprenticeship programs for nonsupervisorial employees. (ii) Joint labor-management letter of support. (iii) A high percentage of full-time wage and salary employees compared to part-time, temporary, and independent contractors. (iv) Little to no history of a bad safety record, or resolved or pending litigation, violations, citations, fines, or penalties relating to any state or federal environmental and labor laws within the last 10 years. (G) Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized. (8) (A) Implementation of subparagraphs (E) and (F) of paragraph (7) of this subdivision for the 2022–23 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the Governor’s Office of Business and Economic Development is hereby authorized to adopt emergency regulations to implement subparagraphs (E) and (F) of paragraph (7) of this subdivision during the 2022–23 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). (B) Nothing in this subdivision shall require the Governor’s Office of Business and Economic Development to approve emergency regulations. (d) For purposes of this section, the Franchise Tax Board shall do all of the following: (1) (A) Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz. (B) In the case of a taxpayer that is a “small business,” as defined in Section 23626, review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state. (2) Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination. (e) In the case where the credit allowed under this section exceeds the “tax,” as defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted. (f) Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committee’s recapture determination occurred. (g) (1) The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 17059.2 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E): (A) Thirty million dollars ($30,000,000) for the 2013–14 fiscal year, one hundred fifty million dollars ($150,000,000) for the 2014–15 fiscal year, two hundred million dollars ($200,000,000) for each fiscal year from 2015–16 to 2017–18, inclusive, one hundred eighty million dollars ($180,000,000) for each fiscal year from 2018–19 to 2020–21, inclusive, two hundred ninety million dollars ($290,000,000) for the 2021–22 fiscal year, and one hundred eighty million dollars ($180,000,000) for each fiscal year from 2022–23 to 2027–28, inclusive. (B) The unallocated credit amount, if any, from the preceding fiscal year. (C) The amount of any previously allocated credits that have been recaptured. (D) The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the California Department of Tax and Fee Administration, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 17059.2, and 23626 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year. (i) The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or the Chairperson’s designee, may determine. (ii) In no event shall the amount estimated in this subparagraph be less than zero dollars ($0). (E) (i) For the 2015–16 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636. (ii) If the amount available per fiscal year pursuant to this section and Section 17059.2 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 for the next fiscal year shall be reduced by the amount of that deficit. (iii) It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 shall continue if the repeal dates of the credits allowed by this section and Section 17059.2 are removed or extended. (2) (A) In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 2027–28 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 17059.2, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 2027–28 fiscal year. (B) It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636. (3) Each fiscal year through the 2017–18 fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 17059.2 shall be reserved for “small business,” as defined in Section 17053.73 or 23626. (4) Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer. (h) GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. (i) (1) A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall not restrict, broaden, or otherwise alter the ability of the taxpayer to assign that credit or any portion thereof in accordance with Section 23663. (2) A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section must comply with existing law on the date the agreement is executed. (j) (1) Upon the effective date of this section, the Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the 2029–30 fiscal year, inclusive. (2) The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts. (k) (1) Section 19542 shall apply to all information obtained by the Franchise Tax Board and GO-Biz for the purpose of administering the California Competes Tax Credit established under this section. (2) Notwithstanding Section 19542 and paragraph (1), the Franchise Tax Board may disclose information to GO-Biz and GO-Biz may disclose information to the Franchise Tax Board for administration of the California Competes Tax Credit established under this section. (l) This section shall remain in effect only until December 1, 2030, and as of that date is repealed. (Amended by Stats. 2022, Ch. 55, Sec. 14. (AB 194) Effective June 30, 2022. Repealed as of December 1, 2030, by its own provisions.)
  38. 23691.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section gives a rehabilitation tax credit to eligible taxpayers who get a tax credit allocation, subject to conditions, timing rules, and caps.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23691. For each taxable year beginning on or after January 1, 2021, and before January 1, 2027, there shall be allowed to a taxpayer that receives a tax credit allocation a credit against the “tax,” as defined in Section 23036, in an amount determined in accordance with Section 47 of the Internal Revenue Code, except as otherwise provided in this section. (a) (1) In lieu of the amount of credit computed pursuant to Section 47(a) of the Internal Revenue Code, except as provided in paragraph (2), the amount of credit for the taxable year shall be 20 percent of the qualified rehabilitation expenditures with respect to a certified historic structure. (2) The applicable percentage shall be 25 percent of the qualified rehabilitation expenditures with respect to a certified historic structure if that certified historic structure meets one of the following criteria: (A) The structure is located on federal surplus property, if obtained by a local agency under Section 54142 of the Government Code, on surplus state real property, as defined by Section 11011.1 of the Government Code, or on surplus land, as defined by subdivision (b) of Section 54221 of the Government Code. (B) The rehabilitated structure includes affordable housing for lower-income households, as defined by Section 50079.5 of the Health and Safety Code. (C) The structure is located in a designated census tract, as defined in paragraph (7) of subdivision (b) of Section 17053.73. (D) The rehabilitated structure is a part of a military base reuse authority established pursuant to Title 7.86 (commencing with Section 67800) of the Government Code. (E) The structure is a transit-oriented development that is a higher density, mixed-use development within a walking distance of one-half mile of a transit station. (b) For purposes of this section, the following definitions shall apply: (1) “Certified historic structure” has the same meaning as defined in Section 47(c)(3) of the Internal Revenue Code, that is a structure in this state and is listed on the California Register of Historical Resources. (2) “Qualified rehabilitation expenditure” has the same meaning as that term is defined in Section 47(c)(2) of the Internal Revenue Code, except that qualified rehabilitation expenditures may include expenditures in connection with the rehabilitation of a building without regard to whether any portion of the building is or is reasonably expected to be tax-exempt use property. (3) The amendments made by Section 13402(b)(1)(B) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 47(c)(2)(B)(iv) of the Internal Revenue Code, relating to certified historic structure, shall not apply. (c) (1) To be eligible for the credit allowed by this section, a taxpayer shall request a tax credit allocation from the California Tax Credit Allocation Committee, in conjunction with the Office of Historic Preservation. (2) To obtain a tax credit allocation, the taxpayer shall provide necessary information, as determined by the Office of Historic Preservation and the California Tax Credit Allocation Committee. (3) A tax credit allocation provided to a taxpayer shall not constitute a determination by the California Tax Credit Allocation Committee with respect to any of the requirements of this section regarding a taxpayer’s eligibility for the credit authorized by this section. (4) The Office of Historic Preservation shall establish in regulations the time period that a taxpayer who receives a tax credit allocation must commence rehabilitation after the issuance of the tax credit allocation. If rehabilitation is not commenced within the time period established by the office, the tax credit allocation shall be forfeited and the credit amount associated with the tax credit allocation shall be treated as an unused allocation tax credit amount. (d) A deduction shall not be allowed under this part for any expense for which a credit for that expense is allowed by this section. (e) If a credit is allowed under this section with respect to any property, the basis of that property shall be reduced by the amount of the credit allowed. (f) (1) A credit allowed under this section shall be claimed in the first taxable year in which the structure is placed in service. (2) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the seven succeeding years, if necessary, until the credit is exhausted. (g) For purposes of this section, the Office of Historic Preservation shall do all of the following: (1) Adopt regulations to implement the requirements of this section. The regulations shall comply with the requirements of the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). (2) Establish a written application, on a form jointly prescribed by the office and the California Tax Credit Allocation Committee, for the allocation of the tax credit. The written application shall require the applicant to include a summary of the expected economic benefits of the project. The economic benefits shall include, but are not limited to, all of the following: (A) The number of jobs created by the rehabilitation project, both during and after the rehabilitation of the structure. (B) The expected increase in state and local tax revenues derived from the rehabilitation project, including those from increased wages and property taxes. (C) Any additional incentives or contributions included in the rehabilitation project from federal, state, or local governments. (3) Establish a process to determine that applicants meet the requirements of this section and to ensure that the rehabilitation project meets the Secretary of the Interior’s Standards for Rehabilitation, as found in Part 67 of Title 36 of the Code of Federal Regulations. (4) Establish a process to approve, or reject, all tax credit allocation applications. (h) For purposes of this section, the California Tax Credit Allocation Committee shall do all of the following: (1) Establish a process jointly with the Office of Historic Preservation to implement the provisions of this section. (2) (A) Subject to the annual cap established as provided in subdivision (i), allocate on a first-come-first-served basis an aggregate amount of credits under this section and Section 17053.91, and allocate any carryover of unallocated credits from prior years. (B) A taxpayer shall be allocated a tax credit pursuant to the taxpayer’s tax credit allocation upon receipt by the California Tax Credit Allocation Committee of a cost certification for the qualified rehabilitation expenditures. For projects with qualified rehabilitation expenditures in excess of two hundred fifty thousand dollars ($250,000), the cost certification shall be issued by a licensed certified public accountant. (3) Certify tax credits allocated to taxpayers. (4) Provide the Franchise Tax Board an annual list of the taxpayers that were allocated a credit pursuant to this section and Section 17053.91 including each taxpayer’s taxpayer identification number, and the amount allocated to each taxpayer. (i) (1) The aggregate amount of credits that may be allocated in any calendar year pursuant to this section and Section 17053.91 shall be an amount equal to the sum of all of the following: (A) Fifty million dollars ($50,000,000) in tax credits for the 2021 calendar year and each calendar year thereafter, through and including the 2027 calendar year. (B) The unused allocation tax credit amount, if any, for the preceding calendar year. (2) Notwithstanding the foregoing, the California Tax Credit Allocation Committee shall set aside eight million dollars ($8,000,000) of tax credits that may be allocated each calendar year for taxpayers in the aggregate, pursuant to this paragraph and subparagraph (B) of paragraph (2) of subdivision (i) of Section 17053.91, with qualified rehabilitation expenditures of less than one million dollars ($1,000,000). After providing for the reallocation pursuant to subparagraph (C) of paragraph (2) of subdivision (i) of Section 17053.91, to the extent that this amount is not fully allocated in any calendar year, the unused portion shall become available in subsequent calendar years for allocation to other taxpayers, except those taxpayers subject to subparagraph (A) of paragraph (2) of subdivision (i) of Section 17053.91. (j) In the case of any application for tax credits by an entity treated as a partnership for income tax purposes: (1) Credits awarded to a partnership shall be allocated to the partners of that partnership in accordance with the partnership agreement, regardless of how the federal historic rehabilitation tax credit with respect to the project is allocated to the partners, or whether the allocation of the credit under the terms of the partnership agreement has substantial economic effect, within the meaning of Section 704(b) of the Internal Revenue Code. (2) To the extent the allocation of the credit to a partner under this section lacks substantial economic effect, any loss or deduction otherwise allowable under this part that is attributable to the sale or other disposition of that partner’s partnership interest made prior to the expiration of the tax credit recapture period for the project described in paragraph (1) shall not be allowed in the taxable year in which the sale or other disposition occurs, but shall instead be deferred until, and treated as if, it occurred in the first taxable year immediately following the taxable year in which the tax credit recapture period expires for the project described in paragraph (1). The credits awarded to a partnership shall be allocated to the partners of that partnership in accordance with the partnership agreement. (k) For purposes of this section, the provisions of subsection (a) of Section 50 of the Internal Revenue Code shall apply. (l) Notwithstanding any other provision of this part, a credit allowed pursuant to this section may reduce the “tax” below the tentative minimum tax, as defined by paragraph (1) of subdivision (a) of Section 23455. (m) This section shall remain in effect regardless of the expiration or repeal of Section 47 of the Internal Revenue Code, relating to rehabilitation credit. (n) The California Tax Credit Allocation Committee and the Office of Historic Preservation may charge a reasonable fee in an amount that does not exceed the reasonable costs incurred by the California Tax Credit Allocation Committee and the Office of Historic Preservation in fulfilling the responsibilities described in paragraphs (4) and (5) of subdivision (g) and subdivision (h) and paragraphs (4) and (5) of subdivision (g) and subdivision (h) of Section 17053.91. (o) (1) This section shall remain in effect only until December 1, 2027, and as of that date is repealed. (2) Unless otherwise specified in any bill providing for appropriations related to the Budget Act, for taxable years beginning on or after January 1, 2021, and before January 1, 2027, the amount of credit allowed pursuant to this section shall be zero dollars ($0). (Amended by Stats. 2025, Ch. 231, Sec. 84. (SB 711) Effective October 1, 2025. Repealed as of December 1, 2027, by its own provisions.)
  39. 23695.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section creates a California film tax credit for qualified taxpayers, subject to application, certification, verification, and allocation rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23695. (a) (1) For taxable years beginning on or after January 1, 2016, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, subject to a computation and ranking by the California Film Commission in subdivision (g) and the allocation amount categories described in subdivision (i), in an amount equal to 20 percent or 25 percent, whichever is the applicable credit percentage described in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. A credit shall not be allowed under this section for any qualified expenditures for the production of a motion picture in California if a credit has been claimed for those same expenditures under Section 23685. (2) Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (g) for the qualified motion picture, but in no instance prior to July 1, 2016, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture. (3) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g). (4) For purposes of paragraphs (1) and (2), the applicable credit percentage shall be: (A) Twenty percent of the qualified expenditures attributable to the production of a qualified motion picture in California, including, but not limited to, a feature, up to one hundred million dollars ($100,000,000) in qualified expenditures, or a television series that relocated to California that is in its second or subsequent years of receiving a tax credit allocation pursuant to this section or Section 23685. (B) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California in its first year of receiving a tax credit allocation pursuant to this section. (C) Twenty-five percent of the qualified expenditures, up to ten million dollars ($10,000,000), attributable to the production of a qualified motion picture that is an independent film. (D) Additional credits shall be allowed to a qualified motion picture whose applicable credit percentage is determined pursuant to subparagraph (A), in an aggregate amount not to exceed 5 percent of the qualified expenditures under that subparagraph, as follows: (i) (I) Five percent of qualified expenditures relating to original photography outside the Los Angeles zone. (II) For purposes of this clause: (ia) “Applicable period” means the period that commences with preproduction and ends when original photography concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone. (ib) “Los Angeles zone” means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Lake Castaic, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro Goldwyn Mayer, Inc. Conejo Ranch property is within the Los Angeles zone. (ic) “Original photography” includes principal photography and reshooting original footage. (id) “Qualified expenditures relating to original photography outside the Los Angeles zone” means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone. (ii) Five percent of the qualified expenditures relating to music scoring and music track recording by musicians attributable to the production of a qualified motion picture in California. (iii) Five percent of the qualified expenditures relating to qualified visual effects attributable to the production of a qualified motion picture in California. (b) For purposes of this section: (1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture. (2) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes. (3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture. (4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (g). (5) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following: (i) Employer contributions under any pension, profit-sharing, annuity, or similar plan. (ii) Employer-provided coverage under any accident or health plan for employees. (iii) The employer’s cost of life or disability insurance provided to employees. (B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (21) shall not be taken into account under this paragraph. (6) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 25 percent of the producing company. (7) “Jobs ratio” means the amount of qualified wages paid to qualified individuals divided by the amount of tax credit, not including any additional credit allowed pursuant to subparagraph (D) of paragraph (4) of subdivision (a), as computed by the California Film Commission. (8) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part. (9) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created. (10) “Pilot for a new television series” means the initial episode produced for a proposed television series. (11) (A) “Postproduction” means the final activities in a qualified motion picture’s production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction. (B) “Postproduction” does not include the manufacture or shipping of release prints or their equivalent. (12) “Preproduction” means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment, or is greenlit, with, for example, the establishment of a dedicated production office, the hiring of key crew members, and includes, but is not limited to, activities that include location scouting and execution of contracts with vendors of equipment and stage space. (13) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction. (14) “Production period” means the period beginning with preproduction and ending upon completion of postproduction. (15) “Qualified entity” means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual. (16) “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the production of a qualified motion picture. (17) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the production of a qualified motion picture. (B) “Qualified individual” shall not include either of the following: (i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code. (ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer. (18) (A) “Qualified motion picture” means a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following: (i) A feature with a minimum production budget of one million dollars ($1,000,000). (ii) A movie of the week or miniseries with a minimum production budget of five hundred thousand dollars ($500,000). (iii) A new television series of episodes longer than 40 minutes each of running time, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (iv) An independent film. (v) A television series that relocated to California. (vi) A pilot for a new television series that is longer than 40 minutes of running time, exclusive of commercials, that is produced in California, and with a minimum production budget of one million dollars ($1,000,000). (B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied: (i) At least 75 percent of the principal photography days occur wholly in California or 75 percent of the production budget is incurred for payment for services performed within the state and the purchase or rental of property used within the state. (ii) Production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission. For purposes of this section, a qualified motion picture is “completed” when the process of postproduction has been finished. (iii) The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code. (iv) Principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval unless death, disability, or disfigurement of the director or of a principal cast member, an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster, terrorist activities, or government sanction has directly prevented a production’s ability to begin principal photography within the prescribed 180-day commencement period. (C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated. (D) “Qualified motion picture” shall not include commercial advertising, music videos, a motion picture produced for private noncommercial use, such as weddings, graduations, or as part of an educational course and made by students, a news program, current events or public events program, talk show, game show, sporting event or activity, awards show, telethon or other production that solicits funds, reality television program, clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, one-half hour (air time) episodic television shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code. (19) (A) “Qualified taxpayer” means a taxpayer who has paid or incurred qualified expenditures, participated in the Career Readiness requirement, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (g). (B) (i) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, “pass-thru entity” means any entity taxed as a partnership or “S” corporation. (ii) In the case of an “S” corporation, the credit allowed under this section shall not be used by an “S” corporation as a credit against a tax imposed under Chapter 4.5 (commencing with Section 23800) of Part 11 of Division 2. (20) “Qualified visual effects” means visual effects where at least 75 percent or a minimum of ten million dollars ($10,000,000) of the qualified expenditures for the visual effects is paid or incurred in California. (21) (A) “Qualified wages” means all of the following: (i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state. (ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv). (iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (17). (iv) Remuneration paid to an independent contractor who is a qualified individual for services performed within this state by that qualified individual. (B) “Qualified wages” shall not include any of the following: (i) Expenses, including wages, related to new use, reuse, clip use, licensing, secondary markets, or residual compensation, or the creation of any ancillary product, including, but not limited to, a soundtrack album, toy, game, trailer, or teaser. (ii) Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto. (iii) Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture. (iv) Expenses, including wages, paid per person per qualified motion picture for writers, directors, music directors, music composers, music supervisors, producers, and performers, other than background actors with no scripted lines. (22) “Residual compensation” means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production. (23) “Reuse” means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium. (24) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited. (25) “Television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, with a minimum production budget of one million dollars ($1,000,000) per episode, that filmed its most recent season outside of California or has filmed all seasons outside of California and for which the taxpayer certifies that the credit provided pursuant to this section is the primary reason for relocating to California. (26) “Visual effects” means the creation, alteration, or enhancement of images that cannot be captured on a set or location during live action photography and therefore is accomplished in postproduction. It includes, but is not limited to, matte paintings, animation, set extensions, computer-generated objects, characters and environments, compositing (combining two or more elements in a final image), and wire removals. “Visual effects” does not include fully animated projects, whether created by traditional or digital means. (c) (1) Notwithstanding subdivision (i) of Section 23036, in the case where the credit allowed by this section exceeds the taxpayer’s tax liability computed under this part, a qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. For purposes of this subdivision, “affiliated corporation” has the meaning provided in subdivision (b) of Section 25110, as that section was amended by Chapter 881 of the Statutes of 1993, as of the last day of the taxable year in which the credit is allowed, except that “100 percent” is substituted for “more than 50 percent” wherever it appears in the section, and “voting common stock” is substituted for “voting stock” wherever it appears in the section. (2) The election provided in paragraph (1): (A) May be based on any method selected by the qualified taxpayer that originally receives the credit. (B) Shall be irrevocable for the taxable year the credit is allowed, once made. (C) May be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayer’s affiliated corporations that assign and receive the credits. (D) Shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned. (3) (A) Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (6) of subdivision (b), to an unrelated party. (B) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit. (4) In the case where the credit allowed under this section exceeds the “tax,” the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted. (5) A credit shall not be sold pursuant to this subdivision to more than one taxpayer, nor may the credit be resold by the unrelated party to another taxpayer or other party. (6) A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section. (7) In no event may a qualified taxpayer assign or sell any tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer. (8) In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission and a taxpayer to whom the credit has been sold both claim the same amount of credit on their tax returns, the Franchise Tax Board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open. (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this subdivision. (10) Subdivision (i) of Section 23036 shall not apply to any credit sold pursuant to this subdivision. (11) For purposes of this subdivision: (A) An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (B) The unrelated party or parties that purchase a credit pursuant to paragraphs (3) to (10), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (d) (1) No credit shall be allowed pursuant to this section unless the qualified taxpayer provides the following to the California Film Commission: (A) Identification of each qualified individual. (B) The specific start and end dates of production. (C) The total wages paid. (D) The total amount of qualified wages paid to qualified individuals. (E) The copyright registration number, as reflected on the certificate of registration issued under the authority of Section 410 of Title 17 of the United States Code, relating to registration of claim and issuance of certificate. The registration number shall be provided on the return claiming the credit. (F) The total amounts paid or incurred to purchase or lease tangible personal property used in the production of a qualified motion picture. (G) Information to substantiate its qualified expenditures. (H) Information required by the California Film Commission under regulations promulgated pursuant to subdivision (g) necessary to verify the amount of credit claimed. (I) Provides documentation verifying completion of the Career Readiness requirement. (2) (A) Based on the information provided in paragraph (1), the California Film Commission shall recompute the jobs ratio previously computed in subdivision (g) and compare this recomputed jobs ratio to the jobs ratio that the qualified taxpayer previously listed on the application submitted pursuant to subdivision (g). (B) (i) If the California Film Commission determines that the jobs ratio has been reduced by more than 10 percent for a qualified motion picture other than an independent film, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (ii) If the California Film Commission determines that the jobs ratio has been reduced by more than 20 percent for a qualified motion picture other than an independent film, the California Film Commission shall not accept an application described in subdivision (g) from that qualified taxpayer or any member of the qualified taxpayer’s controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (C) If the California Film Commission determines that the jobs ratio has been reduced by more than 30 percent for an independent film, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, plus 10 percent of the amount of credit that would otherwise have been allowed, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (D) For the purposes of this paragraph, “reasonable cause” means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (e). (e) (1) (A) Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall adopt rules and regulations to implement a Career Readiness requirement by which the California Film Commission shall identify training and public service opportunities that may include, but not be limited to, hiring interns, public service announcements, and community outreach and may prescribe rules and regulations to carry out the purposes of this section, including, subparagraph (D) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (g), and including any rules and regulations necessary to establish procedures, processes, requirements, application fee structure, and rules identified in or required to implement this section, including credit and logo requirements and credit allocation procedures over multiple fiscal years where the qualified taxpayer is producing a series of features that will be filmed concurrently. (B) Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governor’s Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (i), computing the jobs ratio as described in subdivisions (d) and (g), and defining “reasonable cause” pursuant to subparagraph (E) of paragraph (2) of subdivision (d). (2) (A) Implementation of this section for the 2015–16 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Film Commission is hereby authorized to adopt emergency regulations to implement this section during the 2015–16 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). (B) Nothing in this paragraph shall be construed to require the Governor’s Office of Business and Economic Development to approve emergency regulations adopted pursuant to this paragraph. (3) The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision. (f) If the qualified taxpayer fails to provide the copyright registration number as required in subparagraph (E) of paragraph (1) of subdivision (d), the credit shall be disallowed and assessed and collected under Section 19051 until the procedures are satisfied. (g) For purposes of this section, the California Film Commission shall do the following: (1) Subject to the requirements of subparagraphs (A) through (E), inclusive, of paragraph (2), on or after July 1, 2015, and before July 1, 2016, in one or more allocation periods per fiscal year, allocate tax credits to applicants. (2) On or after July 1, 2016, and before July 1, 2020, in two or more allocation periods per fiscal year, allocate tax credits to applicants. (A) Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, the following information: (i) The budget for the motion picture production. (ii) The number of production days. (iii) A financing plan for the production. (iv) The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the production of the qualified motion picture, to the extent possible. (v) All members of a combined reporting group, if known at the time of the application. (vi) Financial information, if available, including, but not limited to, the most recently produced balance sheets, annual statements of profits and losses, audited or unaudited financial statements, summary budget projections or results, or the functional equivalent of these documents of a partnership or owner of a single member limited liability company that is disregarded pursuant to Section 23038. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure. (vii) The names of all partners in a partnership not publicly traded or the names of all members of a limited liability company classified as a partnership not publicly traded for California income tax purposes that have a financial interest in the applicant’s qualified motion picture. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure. (viii) The amount of qualified wages the applicant expects to pay to qualified individuals. (ix) The amount of tax credit the applicant computes the qualified motion picture will receive, applying the applicable credit percentages described in paragraph (4) of subdivision (a). (x) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the qualified motion picture will be located in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant. (xi) Any other information deemed relevant by the California Film Commission or the Franchise Tax Board. (B) Establish criteria, consistent with the requirements of this section, for allocating tax credits. (C) Determine and designate applicants who meet the requirements of this section. (D) (i) For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following: (ii) For each allocation date and for each category, list each applicant from highest to lowest according to the jobs ratio as computed by the California Film Commission. (iii) Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest jobs ratio, working down the list, until the credit amount is exhausted. (iv) Pursuant to regulations adopted pursuant to subdivision (e), the California Film Commission may increase the jobs ratio by up to 25 percent if a qualified motion picture increases economic activity in California according to criteria developed by the California Film Commission that would include, but not be limited to, such factors as, the amount of the production and postproduction spending in California, the utilization of production facilities in California, and other criteria measuring economic impact in California as determined by the California Film Commission. (v) Notwithstanding any other provision, any television series, relocating television series, or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section, Section 17053.95, 17053.85, or 23685 shall be issued a credit for each subsequent year, for the life of that television series whenever credits are allocated within a fiscal year. (E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (i), allocate an aggregate amount of credits under this section and Section 17053.95, and allocate any carryover of unallocated credits from prior years and the amount of any credits reduced pursuant to paragraph (2) of subdivision (d). (3) Certify tax credits allocated to qualified taxpayers. (A) Establish a verification procedure for the amount of qualified expenditures paid or incurred by the applicant, including, but not limited to, updates to the information in subparagraph (A) of paragraph (2) of subdivision (g). (B) Establish audit requirements that must be satisfied before a credit certificate may be issued by the California Film Commission. (C) (i) Establish a procedure for a qualified taxpayer to report to the California Film Commission, prior to the issuance of a credit certificate, the following information: (I) If readily available, a list of the states, provinces, or other jurisdictions in which any member of the applicant’s combined reporting group in the same business unit as the qualified taxpayer that, in the preceding calendar year, has produced a qualified motion picture intended for release in the United States market. For purposes of this clause, “qualified motion picture” shall not include any episodes of a television series that were complete or in production prior to July 1, 2016. (II) Whether a qualified motion picture described in subclause (I) was awarded any financial incentive by the state, province, or other jurisdiction that was predicated on the performance of primary principal photography or postproduction in that location. (ii) The California Film Commission may provide that the report required by this subparagraph be filed in a single report provided on a calendar year basis for those qualified taxpayers that receive multiple credit certificates in a calendar year. (D) Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the jobs ratio computed under this section. The amount of credit shown in the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section. (4) Obtain, when possible, the following information from applicants that do not receive an allocation of credit: (A) Whether the qualified motion picture that was the subject of the application was completed. (B) If completed, in which state or foreign jurisdiction was the primary principal photography completed. (C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location. (5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, the applicants, in electronic format when available, including, but not limited to, information provided pursuant to clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2). (6) The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2. (h) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, the Franchise Tax Board, and the board with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. The list shall include the names and taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, of the qualified taxpayer. (2) (A) Notwithstanding paragraph (6) of subdivision (g), the California Film Commission shall annually post on its internet website and make available for public release the following: (i) A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the production, and the total amount of qualified expenditures expected to be spent by the production. (ii) A narrative staff summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit. (B) Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record. (3) The California Film Commission shall provide each city and county in California with an instructional guide that includes, but is not limited to, a review of best practices for facilitating motion picture production in local jurisdictions, resources on hosting and encouraging motion picture production, and the California Film Commissions’ Model Film Ordinance. The California Film Commission shall maintain on its internet website a list of initiatives by locality that encourage motion picture production in regions across the state. The list shall be distributed to each approved applicant for the program to highlight local jurisdictions that offer incentives to facilitate film production. (i) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.95 is the applicable amount described in the following, plus any amount described in subparagraph (B), (C), or (D): (i) Two hundred thirty million dollars ($230,000,000) in credits for the 2015–16 fiscal year. (ii) Three hundred thirty million dollars ($330,000,000) in credits for the 2016–17 fiscal year and each fiscal year thereafter, through and including the 2019–20 fiscal year. (B) The unused allocation credit amount, if any, for the preceding fiscal year. (C) The amount of previously allocated credits not certified. (D) The amount of any credits reduced pursuant to paragraph (2) of subdivision (d). (2) (A) Notwithstanding the foregoing, the California Film Commission shall allocate the credit amounts subject to the following categories: (i) Independent films shall be allocated 5 percent of the amount specified in paragraph (1). (ii) Features shall be allocated 35 percent of the amount specified in paragraph (1). (iii) A relocating television series shall be allocated 20 percent of the amount specified in paragraph (1). (iv) A new television series, pilots for a new television series, movies of the week, miniseries, and recurring television series shall be allocated 40 percent of the amount specified in paragraph (1). (B) Within 60 days after the allocation period, any unused amount within a category or categories shall be first reallocated to the category described in clause (iv) of subparagraph (A) and, if any unused amount remains, reallocated to another category or categories with a higher demand as determined by the California Film Commission. (C) Notwithstanding the foregoing, the California Film Commission may increase or decrease an allocation amount in subparagraph (A) by 5 percent, if necessary, due to the jobs ratio, the number of applications, or the allocation credit amounts available by category compared to demand. (D) With respect to a relocating television series issued a credit in a subsequent year pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), that subsequent credit amount shall be allowed from the allocation amount described in clause (iv) of subparagraph (A). (3) Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIII A of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature. (j) The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (e) upon adoption. (Amended by Stats. 2020, Ch. 8, Sec. 15. (AB 85) Effective June 29, 2020.)
  40. 23696.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section lets certain tax credits generated by a disregarded single-member LLC be assigned to the owning corporation, or to that corporation’s affiliate, if the stated conditions are met.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23696. (a) Notwithstanding anything to the contrary in Sections 23685 and 23695, and in Section 23698, as that section read on January 1, 2025, a credit, or any portion thereof, allowed under Section 23685, 23695, or 23698 and generated by a disregarded single member limited liability company shall not be ineligible for assignment to a corporation that, directly or indirectly, owns the disregarded single member limited liability company, or to an affiliated corporation of that corporation, based on either of the following: (1) The disregarded single member limited liability company is not considered a qualified taxpayer, as defined in subdivision (b) of Sections 23685 and 23695 and subdivision (b) of 23698, as that section read on January 1, 2025. (2) The amount of credit allowed under Section 23685, 23695, or 23698 does not exceed the tax liability of the disregarded single member limited liability company for purposes of paragraph (1) of subdivision (c) of Sections 23685 or 23695 or paragraph (1) of subdivision (c) of Section 23698, as that section read on January 1, 2025, respectively. (b) For purposes of this section, “affiliated corporation” has the same meaning as defined in paragraph (1) of subdivision (c) of Sections 23685 and 23695 and paragraph (1) of subdivision (c) of Section 23698, as that section read on January 1, 2025. (c) This section shall apply only when the credits affected by this section were assigned and claimed on a tax return timely filed with the Franchise Tax Board for taxable years beginning on or before January 1, 2025. (Amended by Stats. 2025, Ch. 462, Sec. 4. (SB 863) Effective January 1, 2026.)
  41. 23698.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section lets qualifying taxpayers claim California film tax credits for qualified motion picture production costs, subject to California Film Commission allocation, certification, caps, and reporting rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23698. (a) (1) For taxable years beginning on or after January 1, 2020, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, subject to a computation and ranking by the California Film Commission in subdivision (g) and the allocation amount categories described in subdivision (i), in an amount equal to 20 percent or 25 percent, whichever is the applicable credit percentage described in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. A credit shall not be allowed under this section for any qualified expenditures for the production of a motion picture in California if a credit has been claimed for those same expenditures under Section 23685 or 23695. (2) Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (g) for the qualified motion picture, but in no instance prior to July 1, 2020, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture. (3) (A) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g). (B) In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture: (i) (I) In the case of a feature, up to one hundred million dollars ($100,000,000). (II) Notwithstanding subclause (I), for taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), in the case of a feature, up to one hundred twenty million dollars ($120,000,000). (ii) (I) In the case of a miniseries described in clause (ii) of subparagraph (A) of paragraph (18) of subdivision (b), up to one hundred million dollars ($100,000,000). (II) Notwithstanding subclause (I), for taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), in the case of a miniseries described in clause (ii) of subparagraph (A) of paragraph (18) of subdivision (b), up to one hundred twenty million dollars ($120,000,000). (iii) (I) In the case of a television series described in clause (iii) or clause (v) of subparagraph (A) of paragraph (18) of subdivision (b), up to one hundred million dollars ($100,000,000) per season. (II) Notwithstanding subclause (I), for taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), in the case of a television series described in clause (iii) or clause (v) of subparagraph (A) of paragraph (18) of subdivision (b), up to one hundred twenty million dollars ($120,000,000). (iv) In the case of an independent film, up to ten million dollars ($10,000,000). (4) For purposes of paragraphs (1) and (2), the applicable credit percentage shall be: (A) Twenty percent of the qualified expenditures attributable to the production of a qualified motion picture in California, including, but not limited to, a feature or a television series that relocated to California that is in its second or subsequent years of receiving a tax credit allocation pursuant to this section, Section 23685, or Section 23695. (B) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California in its first year of receiving a tax credit allocation pursuant to this section. (C) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture that is an independent film. (D) Additional credits shall be allowed for the production of a qualified motion picture whose applicable credit percentage is determined pursuant to subparagraph (A), in an aggregate amount not to exceed 5 percent of the qualified expenditures under that subparagraph, as follows: (i) (I) Five percent of qualified expenditures, excluding qualified wages described in subparagraph (E), relating to original photography outside the Los Angeles zone. (II) For purposes of this clause and subparagraph (E): (ia) “Applicable period” means the period that commences with preproduction and ends when original photography concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone. (ib) “Los Angeles zone” means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone. (ic) “Original photography” includes principal photography and reshooting original footage. (id) “Qualified expenditures relating to original photography outside the Los Angeles zone” means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone. (ii) Five percent of the qualified expenditures relating to qualified visual effects attributable to the production of a qualified motion picture in California. (E) (i) Notwithstanding subparagraph (D), an amount equal to 10 percent of qualified wages paid for services performed relating to original photography outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone shall be allowed as an additional credit for the production of a qualified motion picture whose applicable credit percentage is determined pursuant to subparagraph (A). (ii) Notwithstanding subparagraph (D), an amount equal to 5 percent of qualified wages paid for services performed relating to original photography outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone shall be allowed as an additional credit for the production of a qualified motion picture whose applicable credit percentage is determined pursuant to subparagraph (B) or (C). (b) For purposes of this section: (1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture. (2) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes. (3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture. (4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (g). (5) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following: (i) Employer contributions under any pension, profit-sharing, annuity, or similar plan. (ii) Employer-provided coverage under any accident or health plan for employees. (iii) The employer’s cost of life or disability insurance provided to employees. (B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (21) shall not be taken into account under this paragraph. (6) (A) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 25 percent of the producing company. (B) Notwithstanding subparagraph (A), for taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company. (7) “Jobs ratio” means the amount of qualified wages paid to qualified individuals divided by the amount of tax credit, not including any additional credit allowed pursuant to subparagraphs (D) and (E) of paragraph (4) of subdivision (a), as computed by the California Film Commission. For the purposes of the calculation of the jobs ratio only, 70 percent of qualified expenditures for visual effects paid to third-party vendors for work performed in California shall be deemed to be qualified wages paid to a qualified individual. (8) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part. (9) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created. (10) “Pilot for a new television series” means the initial episode produced for a proposed television series. (11) (A) “Postproduction” means the final activities in a qualified motion picture’s production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction. (B) “Postproduction” does not include the manufacture or shipping of release prints or their equivalent. (12) “Preproduction” means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment, or is greenlit, with, for example, the establishment of a dedicated production office, the hiring of key crew members, and includes, but is not limited to, activities that include location scouting and execution of contracts with vendors of equipment and stage space. (13) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction. (14) “Production period” means the period beginning with preproduction and ending upon completion of postproduction. (15) “Qualified entity” means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual. (16) “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the production of a qualified motion picture. (17) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the production of a qualified motion picture. (B) “Qualified individual” shall not include either of the following: (i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code. (ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer. (18) (A) “Qualified motion picture” means a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following: (i) A feature with a minimum production budget of one million dollars ($1,000,000). (ii) A miniseries consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (iii) A new television series of episodes longer than 40 minutes each of running time, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (iv) An independent film. (v) A television series that relocated to California. (vi) (I) A pilot for a new television series that is longer than 40 minutes of running time, exclusive of commercials, that is produced in California, and with a minimum production budget of one million dollars ($1,000,000). For purposes of the credit allowed in subdivision (k), this subclause shall only apply for taxable years beginning before January 1, 2025. (II) For taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), a pilot for a new live action or animated series that is at least 20 minutes of running time, exclusive of commercials, and is produced in California with a minimum production budget of one million dollars ($1,000,000) per episode. (vii) For taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), a live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (viii) For taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), an animated film that is produced in California, with a minimum production budget of one million dollars ($1,000,000). (ix) For taxable years beginning on or after January 1, 2025, and only for purposes of the credit allowed in subdivision (k), a large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied: (i) At least 75 percent of the principal photography days occur wholly in California or 75 percent of the production budget is incurred for payment for services performed within the state and the purchase or rental of property used within the state. (ii) Production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission. For purposes of this section, a qualified motion picture is “completed” when the process of postproduction has been finished. (iii) The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code. (iv) Principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval if the qualified motion picture has a budget with qualified expenditures of less than one hundred million dollars ($100,000,000), and no later than 240 days after the date of that approval in the case of a qualified motion picture with a budget of qualified expenditures with at least one hundred million dollars ($100,000,000), unless death, disability, or disfigurement of the director or of a principal cast member; an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster; terrorist activities; or government sanction has directly prevented a production’s ability to begin principal photography within the prescribed 180- or 240-day commencement period. (C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated. (D) “Qualified motion picture” shall not include commercial advertising, music videos, a motion picture produced for private noncommercial use, such as weddings, graduations, or as part of an educational course and made by students, a news program, current events or public events program, talk show, game show, sporting event or activity, awards show, telethon or other production that solicits funds, reality television program, except as specified in clause (ix) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, one-half hour (air time) episodic television shows, except as specified in clause (vii) of subparagraph (A), or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code. (19) (A) “Qualified taxpayer” means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695 and has been issued a credit certificate by the California Film Commission pursuant to subdivision (g). (B) (i) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, “pass-thru entity” means any entity taxed as a partnership or “S” corporation. (ii) In the case of an “S” corporation, the credit allowed under this section shall not be used by an “S” corporation as a credit against a tax imposed under Chapter 4.5 (commencing with Section 23800) of Part 11 of Division 2. (20) “Qualified visual effects” means visual effects where at least 75 percent or a minimum of ten million dollars ($10,000,000) of the qualified expenditures for the visual effects are paid or incurred in California. (21) (A) “Qualified wages” means all of the following: (i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state. (ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv). (iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (17). (iv) Remuneration paid to an independent contractor who is a qualified individual for services performed within this state by that qualified individual. (B) “Qualified wages” shall not include any of the following: (i) Expenses, including wages, related to new use, reuse, clip use, licensing, secondary markets, or residual compensation, or the creation of any ancillary product, including, but not limited to, a soundtrack album, toy, game, trailer, or teaser. (ii) Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto. (iii) Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture. (iv) Expenses, including wages, paid per person per qualified motion picture for writers, directors, music directors, music composers, music supervisors, producers, and performers, other than background actors with no scripted lines. (22) “Recurring television series” means any television series that was previously approved and issued a credit allocation letter under this section. (23) “Residual compensation” means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production. (24) “Reuse” means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium. (25) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited. (26) “Television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, with a minimum production budget of one million dollars ($1,000,000) per episode, that filmed at least 75 percent of principal photography days in its most recent season outside of California or has filmed all seasons outside of California and for which the taxpayer certifies that the credit provided pursuant to this section is the primary reason for relocating to California. (27) “Visual effects” means the creation, alteration, or enhancement of images that cannot be captured on a set or location during live action photography and therefore is accomplished in postproduction. It includes, but is not limited to, matte paintings, animation, set extensions, computer-generated objects, characters and environments, compositing (combining two or more elements in a final image), and wire removals. “Visual effects” does not include fully animated projects, whether created by traditional or digital means. (c) (1) A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. For purposes of this subdivision, “affiliated corporation” has the meaning provided in subdivision (b) of Section 25110 as of the last day of the taxable year in which the credit is allowed, except that “100 percent” is substituted for “more than 50 percent” wherever it appears in the section, and “voting common stock” is substituted for “voting stock” wherever it appears in the section. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation. (2) The election provided in paragraph (1): (A) May be based on any method selected by the qualified taxpayer that originally receives the credit. (B) Shall be irrevocable for the taxable year the credit is allowed, once made. (C) May be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayer’s affiliated corporations that assign and receive the credits. (D) Shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned. (3) (A) Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (6) of subdivision (b), to an unrelated party. (B) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit. (4) In the case where the credit allowed under this section exceeds the “tax,” the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted. (5) A credit shall not be sold pursuant to this subdivision to more than one taxpayer, nor may the credit be resold by the unrelated party to another taxpayer or other party. (6) A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section. (7) In no event may a qualified taxpayer assign or sell any tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer. (8) In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission and a taxpayer to whom the credit has been sold both claim the same amount of credit on their tax returns, the Franchise Tax Board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open. (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this subdivision. (10) Subdivision (g) or (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision. (11) For purposes of this subdivision: (A) An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (B) The unrelated party or parties that purchase a credit pursuant to paragraphs (3) to (10), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (d) (1) No credit shall be allowed pursuant to this section unless the qualified taxpayer provides the following to the California Film Commission: (A) Identification of each qualified individual. (B) The specific start and end dates of production. (C) The total wages paid. (D) The total amount of qualified wages paid to qualified individuals. (E) Aggregate data for individuals whose wages are excluded from qualified wages by clause (iv) of subparagraph (B) of paragraph (21) of subdivision (b), including their gender, ethnic, and racial makeup. (F) The copyright registration number, as reflected on the certificate of registration issued under the authority of Section 410 of Title 17 of the United States Code, relating to registration of claim and issuance of certificate. The registration number shall be provided on the return claiming the credit. (G) The total amounts paid or incurred to purchase or lease tangible personal property used in the production of a qualified motion picture. (H) Information to substantiate its qualified expenditures. (I) Information required by the California Film Commission under regulations promulgated pursuant to subdivision (g) necessary to verify the amount of credit claimed. (J) Data regarding the diversity of the workforce employed by the applicant on the qualified motion picture, as described in subdivision (g). (K) Documentation verifying completion of the Career Readiness requirement. (L) Documentation verifying that the qualified taxpayer paid a fee as described in subdivision (e). (2) (A) Based on the information provided in paragraph (1), the California Film Commission shall recompute the jobs ratio previously computed in subdivision (g) and compare this recomputed jobs ratio to the jobs ratio that the qualified taxpayer previously listed on the application submitted pursuant to subdivision (g). (B) (i) If the California Film Commission determines that the jobs ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (ii) If the California Film Commission determines that the jobs ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (g) from that qualified taxpayer or any member of the qualified taxpayer’s controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (C) For the purposes of this paragraph, “reasonable cause” means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (e). (e) (1) (A) Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall adopt rules and regulations to implement a pilot Career Pathways Training program including a fee to be paid by the qualified taxpayer, if the qualified taxpayer receives a credit under this section, to fund technical skills training to individuals from underserved communities for entry into film and television industry jobs. The California Film Commission shall (i) identify a not-for-profit fiscal agent with direct relationships to industry skills training programs to manage the funds; and (ii) engage labor-management jointly administered training programs with skills training focused on the entertainment industry to implement the program with California Film Commission approval and oversight. With regard to the Career Readiness requirement in Section 23695, the California Film Commission shall identify training and public service opportunities that may include, but not be limited to, hiring interns, public service announcements, and community outreach shall continue. The California Film Commission may prescribe rules and regulations to carry out the purposes of this section, including, subparagraph (D) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (g), and including any rules and regulations necessary to establish procedures, processes, requirements, application fee structure, and rules identified in or required to implement this section, including credit and logo requirements and credit allocation procedures over multiple fiscal years where the qualified taxpayer is producing a series of features that will be filmed concurrently. (B) Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governor’s Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (i), computing the jobs ratio as described in subdivisions (d) and (g), and defining “reasonable cause” pursuant to subparagraph (C) of paragraph (2) of subdivision (d). (2) (A) Implementation of this section for the 2020–21 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Film Commission is hereby authorized to adopt emergency regulations to implement this section during the 2020–21 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). (B) Nothing in this paragraph shall be construed to require the Governor’s Office of Business and Economic Development to approve emergency regulations adopted pursuant to this paragraph. (3) The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision. (f) If the qualified taxpayer fails to provide the copyright registration number as required in subparagraph (E) of paragraph (1) of subdivision (d), the credit shall be disallowed and assessed and collected under Section 19051 until the procedures are satisfied. (g) For purposes of this section, the California Film Commission shall do the following: (1) Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2020, and before July 1, 2025, in two or more allocation periods per fiscal year, allocate tax credits to applicants. (2) (A) Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, the following information: (i) The budget for the motion picture production. (ii) The number of production days. (iii) A financing plan for the production. (iv) The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the production of the qualified motion picture, to the extent possible. (v) All members of a combined reporting group, if known at the time of the application. (vi) The amount of qualified wages the applicant expects to pay to qualified individuals. (vii) The amount of tax credit the applicant computes the qualified motion picture will receive, applying the applicable credit percentages described in paragraph (4) of subdivision (a). (viii) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the qualified motion picture will be located in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant. (ix) The applicant’s written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available. (x) The ethnic and racial makeup and gender of individuals whose wages are excluded from qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (21) of subdivision (b). (xi) A summary of the applicant’s voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (21) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (x) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission. (xii) Any other information deemed relevant by the California Film Commission or the Franchise Tax Board. (B) Establish criteria, consistent with the requirements of this section, for allocating tax credits. (C) Determine and designate applicants who meet the requirements of this section. (D) (i) For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following: (ii) For each allocation date and for each category, list each applicant from highest to lowest according to the jobs ratio as computed by the California Film Commission. (iii) Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest jobs ratio, working down the list, until the credit amount is exhausted. (iv) (I) Pursuant to regulations adopted pursuant to subdivision (e), the California Film Commission may increase the jobs ratio by up to 25 percent if a qualified motion picture increases economic activity in California according to criteria developed by the California Film Commission that would include, but not be limited to, such factors as, the amount of the production and postproduction spending in California, the utilization of scoring musicians in California, and other criteria measuring economic impact in California as determined by the California Film Commission. (II) For qualified motion pictures that are described in subparagraph (D) of paragraph (8) of subdivision (k), the jobs ratio shall be equal to the product of the jobs ratio calculated in paragraph (7) of subdivision (b) and 133 percent. (v) Notwithstanding any other law, any television series, relocating television series, or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section, including subdivision (k), Section 17053.98, including subdivision (k), or Section 17053.85, 17053.95, 23685, or 23695 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year. For taxable years beginning before January 1, 2025, the California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the amount reserved in its prior fiscal year Credit Allocation Letter or Letters, or if no amounts were reserved in the prior fiscal year, the most immediate prior fiscal year in which a Credit Allocation Letter or Letters were received. For taxable years beginning on or after January 1, 2025, the California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount, as defined in paragraph (23) of subdivision (b) of Section 23698.1. In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated: (I) Notwithstanding clause (iii) of subparagraph (A) of paragraph (2) of subdivision (i), the California Film Commission may redirect up to 100 percent of the credit amounts allocated to the relocating television series category to recurring television series for that fiscal year until the shortfall or projected shortfall is eliminated. (II) Notwithstanding clause (iv) of subparagraph (A) of paragraph (2) of subdivision (i), the California Film Commission may redirect up to 100 percent of the credit amounts allocated to a new television series to recurring television series for that fiscal year until the shortfall or projected shortfall is eliminated. (III) Notwithstanding clause (ii) of subparagraph (A) of paragraph (2) of subdivision (i), the California Film Commission may redirect up to 100 percent of the credit allocations from the features category to the recurring television series category for that fiscal year until the shortfall is eliminated. (IV) Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 2024–25 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 2024–25 fiscal year as specified in subdivision (i). Notwithstanding paragraph (3), the credit allocations that are subtracted from 2024–25 shall not be certified until July 1, 2025, or later. (V) The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated. (E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (i), allocate an aggregate amount of credits under this section and Section 17053.98, and allocate any carryover of unallocated or unused credits from prior years and Sections 17053.85, 17053.95, 23685, and 23695, and the amount of any credits reduced pursuant to paragraph (2) of subdivision (d). (3) Certify tax credits allocated to qualified taxpayers. (A) Establish a verification procedure to update the information in subparagraph (A) of paragraph (2) of subdivision (g), including, but not limited to, all of the following: (i) The amounts of qualified expenditures paid or incurred by the applicant. (ii) The diversity of the workforce employed by the applicant. (iii) The ethnic and racial makeup and gender of individuals whose wages are excluded from qualified wages by clause (iv) of subparagraph (B) of paragraph (21) of subdivision (b). (B) Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission. (C) (i) Establish a procedure for a qualified taxpayer to report to the California Film Commission, prior to the issuance of a credit certificate, the following information: (I) If readily available, a list of the states, provinces, or other jurisdictions in which any member of the applicant’s combined reporting group in the same business unit as the qualified taxpayer that, in the preceding calendar year, has produced a qualified motion picture intended for release in the United States market. For purposes of this clause, “qualified motion picture” shall not include any episodes of a television series that were complete or in production prior to July 1, 2020. (II) Whether a qualified motion picture described in subclause (I) was awarded any financial incentive by the state, province, or other jurisdiction that was predicated on the performance of primary principal photography or postproduction in that location. (ii) The California Film Commission may provide that the report required by this subparagraph be filed in a single report provided on a calendar year basis for those qualified taxpayers that receive multiple credit certificates in a calendar year. (D) Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the jobs ratio computed under this section. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section. (4) Obtain, when possible, the following information from applicants that do not receive an allocation of credit: (A) Whether the qualified motion picture that was the subject of the application was completed. (B) If completed, in which state or foreign jurisdiction was the primary principal photography completed. (C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location. (5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analyst’s Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to clauses (i) to (xii), inclusive, of subparagraph (A) of paragraph (2) and the diversity workplans provided pursuant to clause (iv) of subparagraph (B) of paragraph (2) of subdivision (k). (6) The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2. (7) (A) Notwithstanding any other law, on or after July 1, 2025, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections. (B) For purposes of this section, “previously allocated credits not certified” means either: (i) Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits. (ii) The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i). (8) Notwithstanding any other law, on or after July 1, 2025, the California Film Commission may allocate, pursuant to this section, any credit amounts described in subparagraphs (B) and (E) of paragraph (1) of subdivision (i) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections. (9) The California Film Commission shall submit a report to the Legislature, on an annual basis beginning January 1, 2022, on aggregate diversity information for the productions allocated tax credits allowed in this section and the diversity of the motion picture production industry in California more generally. (h) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, the Franchise Tax Board, and the California Department of Tax and Fee Administration with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. The list shall include the names and taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, of the qualified taxpayer. (2) (A) Notwithstanding paragraph (6) of subdivision (g), the California Film Commission shall annually post on its internet website and make available for public release the following: (i) A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the production, and the total amount of qualified expenditures expected to be spent by the production. (ii) A narrative staff summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit. (iii) For qualified taxpayers allocated a credit, the aggregate diversity information collected pursuant to clauses (iv) and (xii) of subparagraph (A) of paragraph (2) of subdivision (g) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (g). (B) Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). (3) The California Film Commission shall provide each city and county in California with an instructional guide that includes, but is not limited to, a review of best practices for facilitating motion picture production in local jurisdictions, resources on hosting and encouraging motion picture production, and the California Film Commission’s Model Filming Ordinance. The California Film Commission shall maintain on its internet website a list of initiatives by locality that encourage motion picture production in regions across the state. The list shall be distributed to each approved applicant for the program to highlight local jurisdictions that offer incentives to facilitate film production. (i) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98, except as provided in subdivision (k) of this section and subdivision (k) of Section 17053.98, is three hundred thirty million dollars ($330,000,000), plus any amount described in subparagraph (B), (C), (D), or (E) in credits for the 2020–21 fiscal year and each fiscal year thereafter, through and including the 2024–25 fiscal year, except as provided in paragraph (7) of subdivision (g), plus the amount described in subparagraph (F) in credits for the 2021–22 and 2022–23 fiscal years. (B) (i) Subject to clauses (ii) and (iii), the unused allocation credit amount, if any, for the preceding fiscal year. (ii) The amount of unused credit allocation attributable to independent films shall only be allocated according to clause (i) of subparagraph (A) of paragraph (2). (iii) The total amount of any unused credit allocation amount that is remaining shall only be allocated pursuant to clause (iv) of subparagraph (A) of paragraph (2). (C) The amount of previously allocated credits not certified. (D) The amount of any credits reduced pursuant to paragraph (2) of subdivision (d). (E) That portion of any unused allocation credit amount, if any, attributable to Section 17053.85, 17053.95, 23685, or 23695 available for that fiscal year in a manner as determined by regulations promulgated by the California Film Commission. (F) (i) For fiscal years 2021–22 and 2022–23, the California Film Commission shall allocate an additional fifteen million dollars ($15,000,000) in credits to be granted exclusively to television series that relocate to California. (I) Notwithstanding subparagraph (A) of paragraph (2) of this subdivision and clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), the moneys allocated pursuant to this subparagraph shall not be redirected or reallocated. (II) Notwithstanding paragraph (25) of subdivision (b), for purposes of this subparagraph, a “television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, with a minimum production budget of one million dollars ($1,000,000) per episode that both filmed at least 75 percent of principal photography days for at least one episode outside of California and has not filmed more than 25 percent of principal photography days for any episode inside of California. (ii) For fiscal years 2021–22 and 2022–23, the California Film Commission shall allocate an additional seventy-five million dollars ($75,000,000) in credits to be granted exclusively to recurring television series. (2) (A) Notwithstanding the foregoing, and subject to paragraph (4) of this subdivision and changes in allocations pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), the California Film Commission shall allocate the credit amounts subject to the following categories: (i) Independent films with qualified expenditures of ten million dollars ($10,000,000) or less shall be allocated 4.8 percent of the amount specified in paragraph (1). Independent films with qualified expenditures in excess of ten million dollars ($10,000,000) shall be allocated 3.2 percent of the amount specified in paragraph (1). These amounts shall be in addition to any unused allocation credit amount, if any, for the preceding fiscal year as described in subparagraph (B) of paragraph (1). (ii) Features shall be allocated 35 percent of the amount specified in paragraph (1). (iii) A relocating television series shall be allocated 17 percent of the amount specified in paragraph (1). (iv) A new television series, pilots for a new television series, miniseries, and recurring television series shall be allocated 40 percent of the amount specified in paragraph (1), plus any unused allocation credit amount, if any, for the preceding fiscal year as described in subparagraph (B) of paragraph (1). (B) Within any allocation period for credits to a relocating television series, any unused amount shall be reallocated to the category described in clause (iv) of subparagraph (A) and, if any unused amount remains, reallocated in the next allocation period for credits to a relocating television series. (C) With respect to a relocating television series issued a credit in a subsequent year pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), that subsequent credit amount shall be allowed from the allocation amount described in clause (iv) of subparagraph (A). (3) Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIII A of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature. (4) A qualified motion picture, as defined in subdivision (k), shall not be eligible for an allocation under subdivisions (a) to (j), inclusive, if it receives a credit under subdivision (k) during that fiscal year. (j) The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (e) upon adoption. (k) (1) For taxable years beginning on or after January 1, 2022, and before January 1, 2032, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, subject to allocation by the California Film Commission, in an amount equal to: (A) For credits allocated before July 1, 2025, 20 percent or 25 percent, whichever is the applicable credit percentage described in paragraph (4) of subdivision (a), as modified by paragraph (3) of this subdivision, of the qualified expenditures for the production of a qualified motion picture produced in the state at a certified studio construction project. (B) For credits allocated on or after July 1, 2025, 35 percent or 40 percent, whichever is the applicable credit percentage described in paragraph (4) of subdivision (a) of Section 23698.1, as modified by paragraph (3) of this subdivision, of the qualified expenditures for the production of a qualified motion picture produced in the state at a certified studio construction project. (2) For purposes of this subdivision, the definitions in subdivision (b) shall apply except as otherwise provided in this subdivision. (A) “Certified studio construction project” means a construction or renovation project certified for a period of five years by the California Film Commission as having met all of the following criteria: (i) The project provides for the construction or renovation of one or more soundstages located in the state. (ii) Actual construction or renovation expenditures are not less than twenty-five million dollars ($25,000,000) of actual construction or renovation expenditures made over not more than five continuous calendar years. (iii) The construction or renovation of each certified studio construction project is performed in accordance with Section 17053.99. (iv) The construction or renovation of each certified studio construction project commences pursuant to a foundation permit or a structural building permit for the construction or renovation that is issued after the effective date of the act adopting this subdivision. (v) The certified studio construction project applicant or its affiliates shall not have received a California Competes Grant under Section 12096.6 of the Government Code for wages or investment related to construction of the studio construction project. (B) “Qualified motion picture” means a qualified motion picture, as defined in subdivision (b), that meets all of the following requirements: (i) During the production period, the qualified motion picture films at least 50 percent of its principal photography stage shooting days on a soundstage or soundstages certified as a certified studio construction project. (ii) During the production period, the qualified motion picture pays or incurs at least five million dollars ($5,000,000) in qualified wages for filming on a soundstage or soundstages certified as a certified studio construction project. (iii) For taxable years beginning before January 1, 2025, is produced by a qualified taxpayer that is either of the following: (I) More than 50 percent owned, directly or indirectly, by the same owner or owners of the soundstage or soundstages that is part of a certified studio construction project on which the production is filmed. (II) Entered into a contract or lease of 10 years or more with the owner or owners of a certified studio construction project on which the production is filmed. (iv) Provides a diversity workplan that is approved by the California Film Commission. (C) For purposes of this subdivision, a qualified taxpayer and a taxpayer include a passthrough entity and a disregarded entity. (3) (A) The diversity workplan required pursuant to clause (iv) of subparagraph (B) of paragraph (2) shall include all of the following: (i) A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages paid by race, ethnicity, gender, disability status, and for taxable years beginning on or after January 1, 2025, veteran status. (ii) A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (21) of subdivision (b), with respect to both compensation and to the representation of diversity in the creative aspects of the motion picture. (iii) A plan of what strategies the motion picture will employ to achieve the goals in clauses (i) and (ii). (B) The diversity workplan shall include goals that are broadly reflective of California’s population, in terms of race, ethnicity, gender, disability status, and for taxable years beginning on or after January 1, 2025, veteran status. For taxable years beginning on or after January 1, 2025, the diversity workplan shall indicate the ZIP Code for those members of the workforce whose wages are qualified expenditures and those whose wages are not qualified expenditures. (C) The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law. (D) (i) The California Film Commission shall not certify any tax credit under this subdivision until they have received a final diversity report from the qualified motion picture applicant. (ii) The final diversity report shall calculate and provide evidence for the extent to which the applicant met the diversity goals laid out in their diversity workplan. (iii) The California Film Commission shall have the authority to audit the final diversity report to determine if the diversity goals set forth in the applicant’s diversity workplan for the motion picture production were achieved. (iv) If the California Film Commission determines that the qualified motion picture applicant has met or made a good faith effort to meet the diversity goals in its diversity workplan, the applicant’s credit percentage described in paragraph (1) shall be increased by up to four percentage points as follows: (I) By two percentage points if the California Film Commission determines that the applicant has met or made a good faith effort to meet the diversity goals with respect to the diversity of the workforce employed by the applicant in its diversity workplan statement. (II) By two percentage points if the California Film Commission determines that the applicant has met or made a good faith effort to meet the diversity goals with respect to individuals whose wages are excluded from qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (21) of subdivision (b), in its diversity workplan statement. (E) The California Film Commission, in consultation with the Governor’s Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this paragraph. The guidelines shall be posted on the California Film Commission’s internet website. (4) The credit allowed under this subdivision shall be administered in accordance with subdivisions (a), (b), (c), (d), (h), and (l), except that paragraph (1) of subdivision (a) shall not apply, paragraph (7) of subdivision (b) shall not apply, and paragraph (2) of subdivision (d) shall not apply. (5) Subparagraph (A) of paragraph (2), subparagraphs (A), (B), and (C) of paragraph (3), and paragraphs (4), (5), and (6) of subdivision (g) shall apply. (6) A conflict between this subdivision and any other subdivisions in this section shall be reconciled in favor of this subdivision. (7) The aggregate amount of credit allocated by the California Film Commission pursuant to subdivisions (a) to (j), inclusive, of this section and Section 17053.98 shall not be reduced by the tax credit allowed pursuant to this subdivision. The amount of credit allowed by this subdivision shall not be limited by subdivision (i). (8) (A) The credit allocated pursuant to this subdivision shall be allowed for the taxable year in which the California Film Commission issues a credit certificate in accordance with the procedures provided for in subdivision (g) for the qualified motion picture. The California Film Commission shall issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. (B) The California Film Commission, commencing with fiscal year 2021–22, shall allocate tax credits each year to qualified motion pictures meeting the criteria of this subdivision. The total amount of credits that may be allocated under this subdivision is one hundred fifty million dollars ($150,000,000). For taxable years beginning before January 1, 2025, the amount of credit that may be allocated to a qualified motion picture under this subdivision shall not exceed the greater of twelve million dollars ($12,000,000), or seven hundred fifty thousand dollars ($750,000) per episode, for a season of a television series. For taxable years beginning on or after January 1, 2025, the amount of credit that may be allocated to a qualified motion picture under this subdivision shall not exceed the greater of twenty-one million dollars ($21,000,000) or one million three hundred thousand dollars ($1,300,000) per episode, for a season of a television series. Recurring television series receiving an initial allocation under this subdivision shall be allocated for subsequent seasons no more than allowed under this paragraph. (C) In any year the tax credits under this paragraph have been allocated by the California Film Commission, a qualified motion picture or a recurring television series that satisfies the criteria of this subdivision, but have not received an allocation of credits, may apply to receive an allocation of credits pursuant to subdivision (i). (D) A qualified motion picture that satisfies the criteria of this subdivision, other than a recurring television series described in subparagraph (E) of this paragraph, that does not receive a credit allocation under this subdivision because the total amount of credits authorized for the program in subparagraph (B) has been allocated or the qualified motion picture commenced production during the sixth year the certified studio construction project has been certified by the California Film Commission, or any year thereafter, may apply for a credit allocation under subdivisions (a) through (j), inclusive, subject to the jobs ratio enhancement in subclause (II) of clause (iv) of subparagraph (D) of paragraph (2) of subdivision (g). (E) A recurring television series that satisfies the criteria of this subdivision and that is no longer eligible for a credit allocation under this subdivision for a reason described in subparagraph (D) shall receive a credit allocation under subdivisions (a) through (j), inclusive, pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g). (F) Credits shall be allocated based on the assumption that the motion picture meets the diversity criteria specified in clause (iv) of subparagraph (D) of paragraph (3). (G) If any successor tax credit program that modifies or replaces the program specified in subdivisions (a) through (j), inclusive, of this section or Section 17053.98 is enacted, both of the following shall apply: (i) A qualified motion picture described in subparagraph (D) may apply to receive an allocation of credits under the successor program. (ii) A recurring television series described in subparagraph (E) shall receive an allocation of credits under the successor program. (9) A qualified motion picture meeting the requirements of this subdivision that receives a credit allocation during the five-year period the certified studio construction project is certified by the California Film Commission shall be allowed a credit under this subdivision for subsequent seasons for the life of that recurring television series as long as the qualified motion picture continues to satisfy the criteria of this subdivision and to the extent the total credit amount the California Film Commission is permitted to allocate pursuant to subparagraph (B) of paragraph (8) has not previously been allocated. (10) Within six months of the effective date of this subdivision, the California Film Commission shall: (A) Establish procedures to certify a certified studio construction project. (B) Establish procedures to verify a qualified motion picture has met the criteria established in this section for filming in a certified studio construction project facility. That procedure shall include a requirement that the qualified motion picture pay 0.5 percent of the approved credit amount to the Career Pathways Training program specified in subdivision (e). (C) (i) Implementation of this subdivision for the 2023–24 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Film Commission is hereby authorized to adopt emergency regulations to implement this subdivision during the 2023–24 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). (ii) The California Film Commission shall adopt regulations in order to implement this paragraph. (iii) The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision. (11) In the case where the credit allowed by this subdivision exceeds the taxpayer’s tax liability computed under this part, the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted. (12) Upon completion of construction or renovation of the soundstage or soundstages, the certified studio construction project applicant shall certify to the California Film Commission that all contractors and subcontractors performing construction work on the soundstage or soundstages were required to use a skilled and trained workforce to perform such work in accordance with subdivision (b) of Section 17053.99. (13) (A) Upon completion of construction or renovation of the soundstage or soundstages, the soundstage or soundstages shall be continuously operated, maintained, and repaired by any of the following: (i) A workforce that is paid at least the general prevailing rate of per diem wages for the type of work and geographic area, as determined by the Director of Industrial Relations pursuant to Sections 1773 and 1773.9 of the Labor Code, if such services are performed by a workforce that is employed directly, or indirectly through a motion picture payroll services company, by the owner or affiliate of the owner of the soundstage or lessee of the soundstage described in subclause (II) of clause (iii) of subparagraph (B) of paragraph (2) of this subdivision. (ii) A skilled and trained workforce as defined in Chapter 2.9 (commencing with Section 2600) of Part 1 of Division 2 of the Public Contract Code, if such services are provided by third-party vendors. (B) Each year following completion of construction or renovation of the soundstage or soundstages that a qualified motion picture is allocated a tax credit pursuant to this subdivision, the certified studio construction project applicant shall certify to the California Film Commission both of the following: (i) The total amount of payments to third-party vendors or qualified wages for operation, maintenance, and repair of the certified soundstage. (ii) The amount and percentage of the total amount of payments to third-party vendors or qualified wages for operation, maintenance, and repair of the certified soundstage performed by each workforce described in subparagraph (A). (C) If the percentage paid to workers in clause (i) of subparagraph (A) is certified to be 90 percent of the total amount under clause (i) of subparagraph (B) or greater, the qualified taxpayer shall be entitled to 100 percent of the applicable credit issued under this subdivision for the period. If the percentage paid to workers in clause (i) of subparagraph (A) is certified to be less than 90 percent of the total amount under clause (i) of subparagraph (B) but greater than or equal to 75 percent of the total amount under clause (i) of subparagraph (B), the qualified taxpayer shall be entitled to 50 percent of the applicable credit issued under this subdivision for the period. If the percentage paid to workers in clause (i) of subparagraph (A) is certified to be less than 75 percent of the total amount under clause (i) of subparagraph (B), the qualified taxpayer shall not be entitled to any credit issued under this subdivision for the applicable period. (14) (A) Except as provided in subparagraph (B), the changes made to this subdivision by the act adding this paragraph shall apply to taxable years beginning on or after January 1, 2023. (B) The changes made to subparagraphs (A) and (B) of paragraph (2) by the act adding this paragraph shall apply for all taxable years to any certified studio construction project that has been certified, and any qualified motion picture that has been allocated a credit, pursuant to this subdivision. (l) Section 41 shall not apply to the credits allowed by this section. (Amended by Stats. 2025, Ch. 27, Sec. 4. (AB 1138) Effective July 3, 2025.)
  42. 23698.1.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. )

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    This section creates a California film tax credit for qualified taxpayers who produce qualified motion pictures and meet the listed conditions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 3.5. Tax Credits [23608 - 23698.1] ( Chapter 3.5 added by Stats. 1976, Ch. 168. ) ## 23698.1. (a) (1) For taxable years beginning on or after January 1, 2025, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, subject to a computation and ranking by the California Film Commission in subdivision (g) and the allocation amount categories described in subdivision (i), in an amount equal to 35 or 40 percent, whichever is the applicable credit percentage described in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. A credit shall not be allowed under this section for any qualified expenditures for the production of a motion picture in California if a credit has been claimed for those same expenditures under Section 23685, 23695, or 23698. (2) Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (g) for the qualified motion picture, but in no instance prior to July 1, 2025, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture. (3) (A) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g). (B) In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture: (i) In the case of a feature, up to one hundred twenty million dollars ($120,000,000). (ii) In the case of a miniseries or limited series described in clause (ii) of subparagraph (A) of paragraph (19) of subdivision (b), up to one hundred twenty million dollars ($120,000,000). (iii) In the case of a television series described in clause (iii) or clause (v) of subparagraph (A) of paragraph (19) of subdivision (b), up to one hundred twenty million dollars ($120,000,000) per season. (iv) In the case of an independent film, up to twenty million dollars ($20,000,000). (4) For purposes of paragraphs (1) and (2), the applicable credit percentage shall be as follows: (A) Thirty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California, including, but not limited to, a feature or a television series that relocated to California that is in its second or subsequent years of receiving a tax credit allocation pursuant to this section, or Section 23685, 23695, or 23698. (B) Forty percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California in its first year of receiving a tax credit allocation pursuant to this section. (C) Thirty-five percent of the qualified expenditures attributable to the production of a qualified motion picture that is an independent film. (D) Additional credits shall be allowed for the production of a qualified motion picture which applicable credit percentage is determined pursuant to subparagraph (A), in an aggregate amount not to exceed 5 percent of the qualified expenditures under that subparagraph, as follows: (i) (I) Five percent of qualified expenditures, excluding qualified wages described in subparagraph (E), relating to original photography outside the Los Angeles zone. (II) For purposes of this clause and subparagraph (E): (ia) “Applicable period” means the period that commences with preproduction and ends when original photography concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone. (ib) “Los Angeles zone” means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone. (ic) “Original photography” includes principal photography and reshooting original footage. (id) “Qualified expenditures relating to original photography outside the Los Angeles zone” means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone. (ii) Five percent of the qualified expenditures relating to qualified visual effects attributable to the production of a qualified motion picture in California. (E) (i) Notwithstanding subparagraph (D), an amount equal to 10 percent of qualified wages paid for services performed relating to original photography outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone shall be allowed as an additional credit for the production of a qualified motion picture which applicable credit percentage is determined pursuant to subparagraph (A) or (C). (ii) Notwithstanding subparagraph (D), an amount equal to 5 percent of qualified wages paid for services performed relating to original photography outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone shall be allowed as an additional credit for the production of a qualified motion picture which applicable credit percentage is determined pursuant to subparagraph (B). (b) For purposes of this section: (1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture. (2) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes. (3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture. (4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (g). (5) “Diversity workplan checklist” means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan. (6) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following: (i) Employer contributions under any pension, profit sharing, annuity, or similar plan. (ii) Employer-provided coverage under any accident or health plan for employees. (iii) The employer’s cost of life or disability insurance provided to employees. (B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (21) shall not be taken into account under this paragraph. (7) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company. (8) “Jobs ratio” means the amount of qualified wages paid to qualified individuals divided by the amount of tax credit, not including any additional credit allowed pursuant to subparagraphs (D) and (E) of paragraph (4) of subdivision (a), as computed by the California Film Commission. For the purposes of the calculation of the jobs ratio only, 70 percent of qualified expenditures for visual effects paid to third-party vendors for work performed in California shall be deemed to be qualified wages paid to a qualified individual. (9) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part. (10) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created. (11) “Pilot for a new television series” means the initial episode produced for a proposed television series. (12) (A) “Postproduction” means the final activities in a qualified motion picture’s production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction. (B) “Postproduction” does not include the manufacture or shipping of release prints or their equivalent. (13) “Preproduction” means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment, or is greenlit, with, for example, the establishment of a dedicated production office, the hiring of key crew members, and includes, but is not limited to, activities that include location scouting and execution of contracts with vendors of equipment and stage space. (14) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction. (15) “Production period” means the period beginning with preproduction and ending upon completion of postproduction. (16) “Qualified entity” means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual. (17) “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the production of a qualified motion picture. (18) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the production of a qualified motion picture. (B) “Qualified individual” shall not include either of the following: (i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code. (ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer. (19) (A) “Qualified motion picture” means a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following: (i) A feature with a minimum production budget of one million dollars ($1,000,000). (ii) A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (iii) An independent film. (iv) A television series that relocated to California. (v) A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, that is produced in California, and with a minimum production budget of one million dollars ($1,000,000). (vi) A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (vii) An animated film that is produced in California, with a minimum production budget of one million dollars ($1,000,000). (viii) A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode. (B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied: (i) At least 75 percent of the principal photography days occur wholly in California or 75 percent of the production budget is incurred for payment for services performed within the state and the purchase or rental of property used within the state. (ii) Production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission. For purposes of this section, a qualified motion picture is “completed” when the process of postproduction has been finished. (iii) The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code. (iv) (I) Except as provided in subclause (II), principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval if the qualified motion picture has a budget with qualified expenditures of less than one hundred million dollars ($100,000,000), and no later than 240 days after the date of that approval in the case of a qualified motion picture with a budget of qualified expenditures with at least one hundred million dollars ($100,000,000), unless death, disability, or disfigurement of the director or of a principal cast member; an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster; terrorist activities; or government sanction has directly prevented a production’s ability to begin principal photography within the prescribed 180- or 240-day commencement period. (II) Notwithstanding subclause (I), a production that has not previously received an allocation under this section or Section 23685, 23695, or 23698, and that completed principal photography of the previous season more than 48 months prior to the application for a credit allocation under this section, shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission. (III) Notwithstanding subclauses (I) and (II), a television series that did not commence principal photography prior to July 1, 2025, and applied for but did not receive an allocation under this section for its first season filming in California and makes an application for allocation of credit for its second season filming in California shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission. (v) (I) At least 75 percent of production costs for picture editing and postproduction sound labor and services shall be incurred in California. (II) This requirement shall only apply to a qualified motion picture applying for an allocation of credits under this section pursuant to subparagraph (G) of paragraph (8) of subdivision (k) of Section 17053.98 or Section 23698. (vi) Provides a diversity workplan checklist. (C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated. (D) “Qualified motion picture” shall not include commercial advertising, music videos, a motion picture produced for private noncommercial use, such as weddings, graduations, or as part of an educational course and made by students, a news program, current events or public events program, talk show, game show, sporting event or activity, awards show, telethon or other production that solicits funds, reality television program, except as specified in clause (ix) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code. (20) (A) “Qualified taxpayer” means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (g). (B) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, “pass-thru entity” means any entity taxed as a partnership or “S” corporation. (C) In the case of an “S” corporation, the credit allowed under this section shall not be used by an “S” corporation as a credit against a tax imposed under Chapter 4.5 (commencing with Section 23800) of Part 11 of Division 2. (21) “Qualified visual effects” means visual effects where at least 75 percent or a minimum of ten million dollars ($10,000,000) of the qualified expenditures for the visual effects are paid or incurred in California. (22) (A) “Qualified wages” means all of the following: (i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state. (ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv). (iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (17). (iv) Remuneration paid to an independent contractor who is a qualified individual for services performed within this state by that qualified individual. (B) “Qualified wages” shall not include any of the following: (i) Expenses, including wages, related to new use, reuse, clip use, licensing, secondary markets, or residual compensation, or the creation of any ancillary product, including, but not limited to, a soundtrack album, toy, game, trailer, or teaser. (ii) Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto. (iii) Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture. (iv) Expenses, including wages, paid per person per qualified motion picture for writers, directors, music directors, music composers, music supervisors, producers, and performers, other than background actors with no scripted lines. (23) (A) “Recurring television allocation amount” means the sum of the base year allocation and the product of all of the following: (i) The base year allocation. (ii) The number of subsequent years. (iii) Three percent. (B) For purposes of this paragraph, the following definitions apply: (i) “Base year allocation” means the amount received by the recurring television series in its fiscal year 2025–26 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 2025–26, in the next fiscal year in which a Credit Allocation Letter or Letters were received. (ii) “The number of subsequent years” means the number of full or partial fiscal years that have elapsed since the fiscal year in with the base year allocation was made. (24) “Recurring television series” means any television series that was previously approved and issued a credit allocation letter under this section. (25) “Residual compensation” means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production. (26) “Reuse” means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium. (27) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited. (28) “Television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, with a minimum production budget of one million dollars ($1,000,000) per episode, that filmed at least 75 percent of principal photography days in its most recent season outside of California or has filmed all seasons outside of California and for which the taxpayer certifies that the credit provided pursuant to this section is the primary reason for relocating to California. (c) (1) (A) A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation. (B) For purposes of the election provided in subparagraph (A), all of the following shall apply: (i) The election may be based on any method selected by the qualified taxpayer that originally receives the credit. (ii) Once the election is made, it shall be irrevocable for the taxable year the credit is allowed. (iii) The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayer’s affiliated corporations that assign and receive the credits. (iv) The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned. (C) For purposes of this paragraph, “affiliated corporation” has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that “100 percent” is substituted for “more than 50 percent” wherever it appears in the section, and “voting common stock” is substituted for “voting stock” wherever it appears in the section. (2) Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (7) of subdivision (b), to an unrelated party. (3) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit. (4) In the case where the credit allowed under this section exceeds the “tax,” the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted. (5) A credit shall not be sold pursuant to this subdivision to more than one taxpayer, nor may the credit be resold by the unrelated party to another taxpayer or other party. (6) A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section. (7) In no event may a qualified taxpayer assign or sell any tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer. (8) In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission and a taxpayer to whom the credit has been sold both claim the same amount of credit on their tax returns, the Franchise Tax Board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open. (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this subdivision. (10) Subdivision (g) or (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision. (11) For purposes of this subdivision, the following shall apply: (A) The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (10), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (B) An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a). (d) (1) No credit shall be allowed pursuant to this section unless the qualified taxpayer provides the following to the California Film Commission: (A) Identification of each qualified individual. (B) The specific start and end dates of production. (C) The total wages paid. (D) The total amount of qualified wages paid to qualified individuals. (E) Aggregate data for individuals whose wages are excluded from qualified wages by clause (iv) of subparagraph (B) of paragraph (22) of subdivision (b), including their gender, ethnic, and racial makeup. (F) The copyright registration number, as reflected on the certificate of registration issued under the authority of Section 410 of Title 17 of the United States Code, relating to registration of claim and issuance of certificate. The registration number shall be provided on the return claiming the credit. (G) The total amounts paid or incurred to purchase or lease tangible personal property used in the production of a qualified motion picture. (H) Information to substantiate its qualified expenditures. (I) Information required by the California Film Commission under regulations promulgated pursuant to subdivision (g) necessary to verify the amount of credit claimed. (J) Data regarding the diversity of the workforce employed by the applicant on the qualified motion picture, as described in subdivision (g). (K) Documentation verifying completion of the Career Readiness requirement. (L) Documentation verifying that the qualified taxpayer paid the Career Pathways Program fee. (2) (A) Based on the information provided in paragraph (1), the California Film Commission shall recompute the jobs ratio previously computed in subdivision (g) and compare this recomputed jobs ratio to the jobs ratio that the qualified taxpayer previously listed on the application submitted pursuant to subdivision (g). (B) (i) If the California Film Commission determines that the jobs ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (ii) If the California Film Commission determines that the jobs ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (g) from that qualified taxpayer or any member of the qualified taxpayer’s controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs ratio reduction. (C) For the purposes of this paragraph, “reasonable cause” means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (e). (e) (1) (A) Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following: (i) Subparagraph (D) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (g). (ii) Any rules and regulations necessary to establish procedures, processes, requirements, and applications. (iii) (I) Continuing a Career Pathways Program established pursuant to subdivision (e) of Sections 17053.98 and 23698, and pursuant to paragraph (10) of subdivision (g) of this section and Section 17053.98.1, to fund technical skills training for individuals from underserved communities for entry into film and television jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount for a qualified motion picture. The program shall work with nonprofit organizations that have an established record of training and job placement in the entertainment industry, focus on training individuals from traditionally underserved communities, and offer training courses focused on skilled, technical positions that would be eligible for qualified wages if performed on a qualified motion picture as well as administrative- and industry-related technical occupations or soft skills training for the motion picture industry. (II) Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture. (iv) (I) Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g). The evaluation shall be included in the annual report to the Legislature. (II) Independent films are not subject to an increase to the fee pursuant to subclause (I). (B) Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governor’s Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (i), computing the jobs ratio as described in subdivisions (d) and (g), and defining “reasonable cause” pursuant to subparagraph (C) of paragraph (2) of subdivision (d). (2) The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision. (f) If the qualified taxpayer fails to provide the copyright registration number as required in subparagraph (E) of paragraph (1) of subdivision (d), the credit shall be disallowed and assessed and collected under Section 19051 until the procedures are satisfied. (g) For purposes of this section, the California Film Commission shall do all of the following: (1) (A) Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2025, and before July 1, 2030, in four or more allocation periods per fiscal year, allocate tax credits to applicants. (B) The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program pursuant to subparagraph (E) of paragraph (10). (2) (A) Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information: (i) The budget for the motion picture production. (ii) The number of production days. (iii) A financing plan for the production. (iv) The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the production of the qualified motion picture, to the extent possible. (v) The amount of qualified wages the applicant expects to pay to qualified individuals. (vi) The amount of tax credit the applicant computes the qualified motion picture will receive, applying the applicable credit percentages described in paragraph (4) of subdivision (a). (vii) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the qualified motion picture will be located in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant. (viii) The applicant’s written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available. (ix) If applicable, summary of the applicant’s voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (22) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (xi) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission. (x) Any other information deemed relevant by the California Film Commission or the Franchise Tax Board. (B) Establish criteria, consistent with the requirements of this section, for allocating tax credits. (C) Determine and designate applicants who meet the requirements of this section. (D) For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following: (i) For each allocation date and for each category, list each applicant from highest to lowest according to the jobs ratio as computed by the California Film Commission. (ii) Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest jobs ratio, working down the list, until the credit amount is exhausted. (iii) (I) Pursuant to regulations adopted pursuant to subdivision (e), the California Film Commission may increase the jobs ratio by up to 25 percent if a qualified motion picture increases economic activity in California according to criteria developed by the California Film Commission that would include, but not be limited to, those factors as, the amount of the production and postproduction spending in California, the employment of scoring musicians in California, and other criteria measuring economic impact in California as determined by the California Film Commission. The criteria developed by the California Film Commission shall not assess fewer points for the employment of scoring musicians in California than any other category within the jobs ratio bonus. (II) For qualified motion pictures that are described in clause (i) of subparagraph (G) of paragraph (8) of subdivision (k) of Section 17053.98 and Section 23698, the jobs ratio shall be equal to the product of the jobs ratio calculated in paragraph (8) of subdivision (b) and 133 percent. (iv) (I) Notwithstanding any other law, any television series, relocating television series, or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, or 23698 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year. (II) Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this subclause. (III) The California Film Commission shall limit the amount of credits any recurring television series, including a recurring television series under subdivision (k) of Section 23698, receives in a subsequent season to no more than the recurring television allocation amount. (IV) In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated: (V) (ia) Notwithstanding clause (iii) of subparagraph (A) of paragraph (2) of subdivision (i), the California Film Commission may redirect up to 100 percent of the credit amounts allocated to the relocating television series category to recurring television series for that fiscal year until the shortfall or projected shortfall is eliminated. (ib) Notwithstanding clause (iv) of subparagraph (A) of paragraph (2) of subdivision (i), the California Film Commission may redirect up to 100 percent of the credit amounts allocated to a new television series to recurring television series for that fiscal year until the shortfall or projected shortfall is eliminated. (ic) Notwithstanding clause (ii) of subparagraph (A) of paragraph (2) of subdivision (i), the California Film Commission may redirect up to 100 percent of the credit allocations from the features category to the recurring television series category for that fiscal year until the shortfall is eliminated. (id) Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 2029–30 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 2029–30 fiscal year as specified in subdivision (i). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 2029–30 fiscal year shall not be certified until July 1, 2030, or later. (ie) The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated. (E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (i), allocate an aggregate amount of credits under this section and Section 17053.98.1, and allocate any carryover of unallocated or unused credits from prior years and Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 and the amount of any credits reduced pursuant to paragraph (2) of subdivision (d). (3) Certify tax credits allocated to qualified taxpayers and do all of the following: (A) Establish a verification procedure to do both of the following: (i) Update the information in subparagraph (A) of paragraph (2) of subdivision (g), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant. (ii) Ensure that the final safety evaluation report required pursuant to Section 9152 of the Labor Code has been submitted. (B) Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission. (C) Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the jobs ratio computed under this section. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section. (D) (i) Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii). (ii) The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following: (I) A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of California’s population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following: (ia) A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages. (ib) A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages. (ic) A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II). (id) Other requirements as the California Film Commission shall determine by regulation. (II) An interim assessment on the qualified taxpayer’s efforts to meet the diversity workplan prior to the commencement of principal photography. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings. (III) A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code. (iii) The California Film Commission, in consultation with the Governor’s Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commission’s internet website. (iv) The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law. (v) This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less. (vi) The requirements of this subparagraph shall not apply to a recurring television series receiving an allocation of credits under this section pursuant to clause (ii) of subparagraph (G) of paragraph (8) of subdivision (k) of Section 17053.98 or Section 23698 and fulfills the diversity workplan and report requirements pursuant to subdivision (k) of Section 17053.98 or Section 23698. (vii) A qualified motion picture described in subparagraph (D) of paragraph (8) of subdivision (k) of Section 17053.98 or Section 23698 that applies for an allocation of credits under this section shall be subject to the requirements of this subparagraph and not those of clause (iv) of subparagraph (B) of paragraph (2) of subdivision (k) of Sections 17053.98 and 23698 and paragraph (3) of subdivision (k) of Sections 17053.98 and 23698. (4) Obtain, when possible, the following information from applicants that do not receive an allocation of credit: (A) Whether the qualified motion picture that was the subject of the application was completed. (B) If completed, in which state or foreign jurisdiction was the primary principal photography completed. (C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location. (5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analyst’s Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclause (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3). (6) The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2. (7) (A) Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections. (B) For purposes of this section, “previously allocated credits not certified” means either of the following: (i) Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits. (ii) The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i). (8) Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amounts described in subparagraphs (B) and (E) of paragraph (1) of subdivision (i) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections. (9) The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2027, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (5) of subdivision (b) were included. In the event that a report is required pursuant to paragraph (9) of subdivision (g) of Section 17053.98 and Section 23698 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code. (10) (A) The California Film Commission shall expand the number of nonprofit organizations that partner with the Career Pathways program to build upon their ongoing efforts to provide access to the widest cross section of Californians, including historically disadvantaged and underrepresented individuals seeking training and employment opportunities in motion picture and television production. (B) (i) The California Film Commission shall establish an application process for career-based nonprofit organizations to obtain approval as a Career Pathways Program. (ii) The application shall be submitted to the California Film Commission’s fiscal agent during a request for proposal process initiated by the fiscal agent. (iii) The first request for proposal process shall be initiated by the California Film Commission or its fiscal agent prior to the first allocation of credits allowed under this section. (iv) The second request for proposal process shall be initiated by the California Film Commission or its fiscal agent as needed in response to changes in program revenue or training partners, but no later than July 1, 2027. (v) Subsequent request for proposal processes shall be initiated by the California Film Commission or its fiscal agent as the commission deems necessary. (C) The California Film Commission shall approve Career Pathways programs. Career Pathways programs shall meet all of the following requirements: (i) Be conducted by a nonprofit organization that has an established record of training and job placement in the entertainment industry. (ii) Be focused on training individuals 18 years or older from traditionally underserved communities. (iii) Offer training courses focused on one or more of the following: (I) Skilled, technical positions that would be eligible for qualified wages if performed on a qualified motion picture. (II) Administrative- and industry-related technical occupations. (III) Soft skills training for the motion picture industry. (iv) Meet minimum qualifications and standards for high-quality, skill-based training programs, as determined by the California Film Commission through regulations and in consultation with stakeholders. (D) To ensure the Career Pathways Program is successful and has a meaningful impact, the California Film Commission and its fiscal agent shall, in addition to the requirements specified in subparagraph (C), consider the following aspects when evaluating applications: (i) Availability of participants. (ii) Fiscal agent administrative resources. (iii) Overlap with the focus areas of currently approved organizations, including, but not limited to, industry role focus and student outreach focus. (iv) Specific industry labor needs, as determined by the fiscal agent and based on information provided by industry and labor stakeholders. (E) Before July 1, 2026, the California Film Commission shall develop criteria to incentivize supplemental placement of 1 to 4 trainees from the Career Pathways Program per qualified production. The placement of the trainees shall not displace otherwise anticipated or necessary hiring of experienced employees. Trainee wages shall be excluded from a production’s qualified wages for purposes of the jobs ratio and incentive calculation. (11) Beginning January 1, 2025, the California Film Commission shall collect information to the extent available and based on data provided by the Career Pathways Training program, about the breakdown of spending by the Career Pathways Program, how participation in the Career Pathways Program by both program partners and participants has changed in comparison to prior years, whether graduates of the program are accessing jobs in the film industry upon completion of the program, what projects the students have worked on, whether those projects received a tax credit, whether students are employed in California or another state, and the aggregated self-reported and voluntarily provided ethnic, racial, gender, disability status, veteran status, and ZIP Code of those individuals. The California Film Commission shall report to the Legislature, in compliance with Section 9795 of the Government Code, and publish on its internet website an annual report about the Career Pathways Training program, with the above information. Such information shall be reported for participants for five years following a participant’s completion of the Career Pathways Training program, to the extent the information is available. This paragraph shall be applicable consistent with federal and state law. (h) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, the Franchise Tax Board, and the California Department of Tax and Fee Administration with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. The list shall include the names and taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, of the qualified taxpayer. (2) (A) Notwithstanding paragraph (6) of subdivision (g), the California Film Commission shall annually post on its internet website and make available for public release all of the following: (i) A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the production, and the total amount of qualified expenditures expected to be spent by the production. (ii) A narrative staff summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit. (iii) The diversity report submitted annually to the Legislature described in paragraph (2) of subdivision (g) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (g). (B) Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). (3) The California Film Commission shall provide each city and county in California with an instructional guide that includes, but is not limited to, a review of best practices for facilitating motion picture production in local jurisdictions, resources on hosting and encouraging motion picture production, and the California Film Commission’s Model Filming Ordinance. The California Film Commission shall maintain on its internet website a list of initiatives by locality that encourage motion picture production in regions across the state. The list shall be distributed to each approved applicant for the program to highlight local jurisdictions that offer incentives to facilitate film production. (i) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.1, except as provided in subdivision (k) of Section 23698 and subdivision (k) of Section 17053.98, is seven hundred fifty million dollars ($750,000,000), plus any amount described in subparagraph (B), (C), (D), or (E) in credits for the 2025–26 fiscal year and each fiscal year thereafter, through and including the 2029–30 fiscal year, except as provided in paragraph (7) of subdivision (g). (B) (i) Subject to clauses (ii) and (iii), the unused allocation credit amount, if any, for the preceding fiscal year. (ii) The amount of unused credit allocation attributable to independent films shall only be allocated according to clause (i) of subparagraph (A) of paragraph (2). (iii) The total amount of any unused credit allocation amount that is remaining shall only be allocated pursuant to clause (iv) of subparagraph (A) of paragraph (2). (C) The amount of previously allocated credits not certified. (D) The amount of any credits reduced pursuant to paragraph (2) of subdivision (d). (E) That portion of any unused allocation credit amount, if any, attributable to Section 17053.85, 17053.95, 17053.98, 23685, 23695, or 23698 available for that fiscal year in a manner as determined by regulations promulgated by the California Film Commission. (2) (A) Notwithstanding the foregoing, and subject to paragraph (4) of this subdivision and changes in allocations pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate up to 30 percent of the funds within any category amongst the remaining categories to maximize the amount of total credits allocated: (i) Independent films with qualified expenditures of ten million dollars ($10,000,000) or less shall be allocated 5 percent of the amount specified in paragraph (1). Independent films with qualified expenditures in excess of ten million dollars ($10,000,000) shall be allocated 5 percent of the amount specified in paragraph (1). These amounts shall be in addition to any unused allocation credit amount, if any, for the preceding fiscal year as described in subparagraph (B) of paragraph (1). (ii) Features and animated films shall be allocated 35 percent of the amount specified in paragraph (1). (iii) A relocating television series shall be allocated 15 percent of the amount specified in paragraph (1). (iv) A television series described in clause (ii), (v), (vi), or (viii) of subparagraph (A) of paragraph (19) of subdivision (b) and a recurring television series shall be allocated 40 percent of the amount specified in paragraph (1), plus any unused allocation credit amount, if any, for the preceding fiscal year as described in subparagraph (B) of paragraph (1). (B) Within any allocation period for credits to a relocating television series, any unused amount shall be reallocated to the category described in clause (iv) of subparagraph (A) and, if any unused amount remains, reallocated in the next allocation period for credits to a relocating television series. (C) With respect to a relocating television series issued a credit in a subsequent year pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), that subsequent credit amount shall be allowed from the allocation amount described in clause (iv) of subparagraph (A). (3) Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIII A of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature. (4) A qualified motion picture, as defined in subdivision (k) of Sections 17053.98 and 23698, shall not be eligible for an allocation under subdivisions (a) to (j), inclusive, if it receives a credit under subdivision (k) of Section 17053.98 or Section 23698 during that fiscal year. (j) The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (e) upon adoption. (k) (1) A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount. (2) For purposes of this subdivision, the following definitions shall apply: (A) “Annual refundable amount” means 20 percent of the total refundable amount. (B) (i) “Credit amount” means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g). (ii) In the case of a pass-thru entity, the “credit amount” means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this clause, the term “pass-thru entity” means any partnership, “S” corporation, or limited liability company treated as a partnership. (iii) In the case of an assigned credit, the “credit amount” means the credit amount that was assigned to the taxpayer. (C) “Refundable period” means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g), and the succeeding four taxable years. (D) “Total refundable amount” means 90 percent of the credit amount that exceeds the “tax” in the first taxable year of the refundable period. (3) The refund shall be computed as follows: (A) (i) In the first taxable year of the refundable period, the credit amount shall be allowed against the “tax” computed under this part for the taxable year. (ii) If the credit allowed by this section exceeds the “tax” in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer. (B) (i) In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the “tax” computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer. (ii) If the qualified taxpayer’s tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayer’s “tax.” (4) (A) In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year. (B) In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayer’s “tax” or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period. (C) Notwithstanding paragraph (3) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period. (5) Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election. (6) An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board. (7) A taxpayer that purchases a credit pursuant to subdivision (c) cannot elect to be paid a refund pursuant to this subdivision. (Amended by Stats. 2025, Ch. 27, Sec. 5. (AB 1138) Effective July 3, 2025.)
  43. 237.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    This section creates a property tax exemption for qualifying tribal housing property and lets a tribe or tribally designated housing entity make payments in lieu of tax.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 237. (a) (1) Subject to the requirements set forth in paragraph (2), there is exempt from taxation under this part that portion of the assessed value of property, owned and operated by a federally recognized Indian tribe, its tribally designated housing entity, or, for a property that has received a reservation of low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code of 1986, a limited partnership that includes a federally recognized Indian tribe or its tribally designated housing entity as the sole general partner, that corresponds to that portion of the property that is continuously available to, or occupied by, lower income households, as defined in Section 50079.5 of the Health and Safety Code or applicable federal, state, or local financing agreements, at rents that do not exceed those prescribed by Section 50053 of the Health and Safety Code, or rents that do not exceed those prescribed by the terms of the applicable federal, state, or local financing agreements or financial assistance agreements. (2) The exemption set forth in subdivision (a) applies only if the property and entity meet the following requirements: (A) At least 30 percent of the property’s housing units are either continuously available to, or occupied by, lower income households, as defined in Section 50079.5 of the Health and Safety Code or applicable federal, state, or local financing agreements, at rents that do not exceed those prescribed by Section 50053 of the Health and Safety Code, or rents that do not exceed those prescribed by the terms of the applicable federal, state, or local financing agreements or financial assistance agreements. (B) The tribally designated housing entity, if applicable, is nonprofit. (C) No part of the net earnings of the housing entity inure to the benefit of any private shareholder or individual, except for a limited partner in a property that has received a reservation of low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code of 1986. (b) In lieu of the tax imposed by this part, a tribe or tribally designated housing entity may agree to make payments to a county, city, city and county, or political subdivision of the state for services, improvements, or facilities provided by that entity for the benefit of a low-income housing project owned and operated by the tribe or tribally designated housing entity. Any payments in lieu of tax may not exceed the estimated cost to the city, county, city and county, or political subdivision of the state of the services, improvements, or facilities to be provided. (c) A tribe or tribally designated housing entity applying for an exemption under this section shall provide the following documents to the assessor: (1) Documents establishing that the designating tribe is federally recognized. (2) Documents establishing that the tribally designated housing entity, if applicable, has been designated by the tribe. (3) Documents establishing that there is a deed restriction, agreement, or other legally binding document requiring that the property be used in compliance with subparagraph (A) of paragraph (2) of subdivision (a). (d) This exemption shall be known as the “tribal housing exemption.” (Amended by Stats. 2024, Ch. 498, Sec. 2. (SB 1527) Effective September 22, 2024.)
  44. 23701.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

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    Certain nonprofit organizations can be exempt from the corporation tax if they meet the listed filing and recognition requirements, and the Franchise Tax Board can issue, suspend, revoke, or withhold acknowledgment in specified cases.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701. (a) Organizations which are organized and operated for nonprofit purposes within the provisions of a specific section of this article, or are defined in Section 23701h (relating to certain title-holding companies) or Section 23701x (relating to certain title-holding companies), are exempt from taxes imposed under this part, except as provided in this article or in Article 2 (commencing with Section 23731) of this chapter if both of the following occur: (1) An application for exemption is submitted in the form prescribed by the Franchise Tax Board. (2) The Franchise Tax Board issues a determination exempting the organization from tax. (b) (1) Notwithstanding subdivision (a), an organization organized and operated for nonprofit purposes in accordance with Section 23701a, 23701d, 23701e, 23701f, 23701g, or 23701w shall be exempt from taxes imposed by this part, except as provided in this article or in Article 2 (commencing with Section 23731), upon its submission to the Franchise Tax Board of one of the following: (A) A copy of the determination letter or ruling issued by the Internal Revenue Service recognizing the organization’s exemption from federal income tax under Section 501(a) of the Internal Revenue Code, as an organization described in Section 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), or (c)(19) of the Internal Revenue Code. (B) A copy of the group exemption letter issued by the Internal Revenue Service that states that both the central organization and all of its subordinates are tax-exempt under Section 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), or (c)(19) of the Internal Revenue Code and substantiation that the organization is included in the federal group exemption letter as a subordinate organization. (2) (A) Upon receipt of the documents required in subparagraph (A) or (B) of paragraph (1), the Franchise Tax Board shall issue an acknowledgment that the organization is exempt from taxes imposed by this part, except as provided in this article or in Article 2 (commencing with Section 23731). The acknowledgment may refer to the organization’s recognition by the Internal Revenue Service of exemption from federal income tax as an organization described in Section 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), or (c)(19) of the Internal Revenue Code and, if applicable, the organization’s subordinate organization status under a federal group exemption letter. The effective date of an organization’s exemption from state income tax pursuant to this subdivision shall be no later than the effective date of the organization’s recognition of exemption from federal income tax as an organization described in Section 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), or (c)(19) of the Internal Revenue Code, or its status as a subordinate organization under a federal group exemption letter, as applicable. (B) Notwithstanding any other provision of this subdivision, an organization formed as a California corporation or qualified to do business in California that, as of the date of receipt by the Franchise Tax Board of the documents required under paragraph (1), is listed by the Secretary of State or Franchise Tax Board as “suspended” or “forfeited” may not establish its exemption under paragraph (1) and shall not receive an acknowledgment referred to under subparagraph (A) from the Franchise Tax Board until that corporation is listed by the Secretary of State and the Franchise Tax Board as an “active” corporation. (3) If, for federal income tax purposes, an organization’s exemption from tax as an organization described in Section 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), or (c)(19) of the Internal Revenue Code is suspended or revoked, the organization shall notify the Franchise Tax Board of the suspension or revocation, in the form and manner prescribed by the Franchise Tax Board. Upon notification, the board shall suspend or revoke, whichever is applicable, for state income tax purposes, the organization’s exemption under paragraph (1). (4) This subdivision shall not be construed to prevent the Franchise Tax Board from revoking the exemption of an organization that is not organized or operated in accordance with California law, this chapter, or Section 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(7), or (c)(19) of the Internal Revenue Code. (5) If the Franchise Tax Board suspends or revokes the exemption of an organization pursuant to paragraph (3) or (4), the exemption shall be reinstated only upon compliance with this section, regardless of whether the organization can establish exemption under paragraph (1). (c) This section shall not prevent a determination from having retroactive effect and does not prevent the issuance of a determination with respect to a domestic organization which was in existence prior to January 1, 1970, and exempt under prior law without the submission of a formal application or payment of a filing fee. For the purpose of this section, the term “domestic” means created or organized under the laws of this state. (d) The Franchise Tax Board may prescribe rules and regulations to implement the provisions of this article. (e) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2021. (Amended by Stats. 2020, Ch. 59, Sec. 2. (SB 934) Effective January 1, 2021.)
  45. 23701a

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

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    Certain labor, agricultural, and horticultural organizations are exempt from this part, with an exception for some cooperative organizations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701a. (a) Labor, agricultural, or horticultural organizations other than cooperative organizations described in Section 24404 or 24405 (unless the cooperative organization is determined by the Internal Revenue Service to be an organization described in Section 501(c)(5) of the Internal Revenue Code of 1954, as amended). For purposes of this section, the term “agricultural” includes the art or science of cultivating land, harvesting crops or aquatic resources, or raising livestock. (b) The amendments to this section by the act adding this subdivision shall be applied in the computation of taxes for taxable years beginning on or after January 1, 1983. (Amended by Stats. 2000, Ch. 862, Sec. 91. Effective January 1, 2001.)
  46. 23701b

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

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    This section identifies a fraternal order described in Section 501(c)(8) of the Internal Revenue Code.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701b. A fraternal order described in Section 501(c)(8) of the Internal Revenue Code. (Repealed and added by Stats. 2000, Ch. 252, Sec. 2. Effective January 1, 2001.)
  47. 23701c

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

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    This section identifies a cemetery company described in Internal Revenue Code section 501(c)(13).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701c. A cemetery company described in Section 501(c)(13) of the Internal Revenue Code. (Repealed and added by Stats. 2000, Ch. 252, Sec. 4. Effective January 1, 2001.)
  48. 23701d

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Certain nonprofit corporations, community chests, and trusts qualify for exemption if they are organized and operated only for listed exempt purposes and meet the section’s restrictions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701d. (a) A corporation, community chest or trust, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involved the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation (except as otherwise provided in Section 23704.5), and which does not participate in, or intervene in (including the publishing or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. An organization is not organized exclusively for exempt purposes listed above unless its assets are irrevocably dedicated to one or more purposes listed in this section. Dedication of assets requires that in the event of dissolution of an organization or the impossibility of performing the specific organizational purposes the assets would continue to be devoted to exempt purposes. Assets shall be deemed irrevocably dedicated to exempt purposes if the articles of organization provide that upon dissolution the assets will be distributed to an organization which is exempt under this section or Section 501(c)(3) of the Internal Revenue Code or to the federal government, or to a state or local government for public purposes; or by a provision in the articles of organization, satisfactory to the Franchise Tax Board; that the property will be distributed in trust for exempt purposes; or by establishing that the assets are irrevocably dedicated to exempt purposes by operation of law. The irrevocable dedication requirement shall not be a sole basis for revocation of an exempt determination made by the Franchise Tax Board prior to the effective date of this amendment. (b) (1) In the case of a qualified amateur sports organization— (A) The requirement of subdivision (a) that no part of its activities involves the provision of athletic facilities or equipment shall not apply. (B) That organization shall not fail to meet the requirements of subdivision (a) merely because its membership is local or regional in nature. (2) For purposes of this subdivision, “qualified amateur sports organization” means any organization organized and operated exclusively to foster national or international amateur sports competition if that organization is also organized and operated primarily to conduct national or international competition in sports or to support and develop amateur athletes for national or international competition in sports. (Amended by Stats. 2013, Ch. 536, Sec. 5. (AB 1173) Effective January 1, 2014.)
  49. 23701e

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section lists certain organizations described in Section 501(c)(6) as exempt corporations, but excludes the phrase about professional football leagues.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701e. A business league, chamber of commerce, real estate board, or a board of trade described in Section 501(c)(6) of the Internal Revenue Code, except that the phrase “or professional football leagues (whether or not administering a pension fund for football players)” shall not apply. (Repealed and added by Stats. 2000, Ch. 252, Sec. 6. Effective January 1, 2001.)
  50. 23701f

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section describes certain Section 501(c)(4) organizations and says an organization is not treated as organized exclusively for exempt purposes unless its assets are irrevocably dedicated to Section 501(c)(4) purposes.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701f. (a) A civic league, social welfare organization, or local organization of employees described in Section 501(c)(4) of the Internal Revenue Code, except as otherwise provided. (b) An organization is not organized exclusively for exempt purposes under Section 501(c)(4) of the Internal Revenue Code unless its assets are irrevocably dedicated to one or more purposes listed in Section 501(c)(4) of the Internal Revenue Code. (Repealed and added by Stats. 2000, Ch. 252, Sec. 8. Effective January 1, 2001.)
  51. 23701g

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section identifies a social organization described in Internal Revenue Code section 501(c)(7).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701g. A social organization described in Section 501(c)(7) of the Internal Revenue Code. (Repealed and added by Stats. 2000, Ch. 252, Sec. 10. Effective January 1, 2001.)
  52. 23701h

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Certain title-holding companies are described as exempt, and a qualifying LLC can be treated as a corporation for this section.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701h. (a) A corporation described in Section 501(c)(2) of the Internal Revenue Code, relating to certain title-holding companies. (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of subdivision (b) of Section 23038, for purposes of applying Section 501(c)(2) of the Internal Revenue Code under this section, the term “corporation” includes a limited liability company that is classified as a partnership or as a disregarded entity. (2) A limited liability company that, under the authority of this section, is exempt from the tax imposed by this part is also exempt from the tax and fees imposed under Chapter 10.6 (commencing with Section 17941) of Part 10. (Amended by Stats. 2003, Ch. 633, Sec. 7. Effective September 30, 2003.)
  53. 23701i

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section identifies a voluntary employees’ beneficiary association described in IRC Section 501(c)(9).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701i. A voluntary employees’ beneficiary association described in Section 501(c)(9) of the Internal Revenue Code. (Amended by Stats. 2015, Ch. 359, Sec. 29. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)
  54. 23701j

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section identifies a teacher’s retirement fund association described in Section 501(c)(11) of the Internal Revenue Code.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701j. A teacher’s retirement fund association described in Section 501(c)(11) of the Internal Revenue Code. (Repealed and added by Stats. 2000, Ch. 252, Sec. 14. Effective January 1, 2001.)
  55. 23701k

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Religious or apostolic corporations with a common or community treasury can be exempt under this section if their members report each member’s pro rata share of the corporation’s net income in gross income.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701k. Religious or apostolic corporations, if such corporations have a common treasury or community treasury even if such corporations engaged in business for the common benefit of the members, but only if the members thereof include (at the time of filing their returns) in their gross income their entire pro rata shares, whether distributed or not, of the net income of the corporation for such year. Any amount so included in the gross income of a member shall be treated as a dividend received. (Added by renumbering Section 23701h by Stats. 1951, Ch. 343.)
  56. 23701l

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    A domestic fraternal society described in IRC Section 501(c)(10) is exempt from this part, unless another provision says otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701l. (a) A domestic fraternal society described in Section 501(c)(10) of the Internal Revenue Code, except as otherwise provided. (b) For purposes of this section, the term “domestic” means created or organized in the United States or under the law of the United States or of any state or territory therein. (Repealed and added by Stats. 2000, Ch. 252, Sec. 16. Effective January 1, 2001.)
  57. 23701n

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    A supplemental unemployment compensation trust described in IRC 501(c)(17) is covered by this section, except as otherwise provided.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701n. (a) A supplemental unemployment compensation trust described in Section 501(c)(17) of the Internal Revenue Code, except as otherwise provided. (b) The following references in Section 501(c)(17)(E) of the Internal Revenue Code shall be modified as follows: (1) The phrase “under Section 23701” shall be substituted for the phrase “under subsection (a).” (2) The phrase “Section 23701i” shall be substituted for the phrase “paragraph (9) of this subsection.” (Repealed and added by Stats. 2000, Ch. 252, Sec. 18. Effective January 1, 2001.)
  58. 23701p

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    A trust or plan is covered only if it meets the cited federal requirements and is not already exempt from taxation under Section 17631.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701p. A trust or plan which meets the requirements of Public Law 87-792, 76 U.S. Stats. 809, approved October 10, 1962 (the Self-Employed Individuals Tax Retirement Bill of 1962), but only if such trust or plan is not exempt from taxation under Section 17631. (Added by Stats. 1967, Ch. 1709.)
  59. 23701r

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Political organizations are taxed on their political organization taxable income, and some related filing and exemption rules apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701r. (a) A political organization.However, a political organization shall be subject to tax under this part with respect to its “political organization taxable income” and such income shall be subject to tax as provided by Chapter 3 (commencing with Section 23501). (b) For purposes of this section, the political organization taxable income of any organization for any taxable year is an amount equal to the excess over one hundred dollars ($100) (if any) of— (1) The gross income for the taxable year (excluding any exempt function income), over (2) The deductions allowed by this part which are directly connected with the production of the gross income (excluding exempt function income). (c) For purposes of this section, the term “exempt function income” means any amount received as— (1) A contribution of money or other property, (2) Membership dues, a membership fee or assessment from a member of the political organization, or (3) Proceeds from a political fundraising or entertainment event, or proceeds from the sale of political campaign materials, which are not received in the ordinary course of any trade or business, to the extent such amount is segregated for use only for the exempt function of the political organization. (d) For purposes of this part, if any political organization— (1) Contributes any amount to or for the use of any political organization which is treated as exempt from tax under subdivision (a) of this section, (2) Contributes any amount to or for the use of any organization described in paragraph (1) or (2) of Section 509(a) of the Internal Revenue Code of 1954, which is exempt from tax under Section 23701, or (3) Deposits any amount in the General Fund or the Treasury of the United States or in the General Fund of any state or local government, such amount shall be treated as an amount not diverted for the personal use of the candidate or any other person. No deduction shall be allowed under this part for the contribution or deposit of any amount described in the preceding sentence. (e) For purposes of this section— (1) The term “political organization” means a party, committee, association, fund, (including the trust of an individual candidate) or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function. (2) The term “exempt function” means the function of influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, or local public office or office in a political organization, or the election of Presidential or Vice Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. The term includes the making of expenditures relating to an office described in the preceding sentence which, if incurred by the individual, would be allowable as a deduction under Section 162(a) of the Internal Revenue Code. (3) The term “contributions” has the same meaning as provided in paragraph (2) of subdivision (b) of Section 24434. (4) The term “expenditures” has the same meaning as provided in paragraph (3) of subdivision (b) of Section 24434. (f) For purposes of paragraph (1) of subdivision (e), a separate segregated fund (within the meaning of Section 610 of Title 18 of the United States Code or of any similar state statute, or within the meaning of any state statute which permits the segregation of dues money for exempt functions, within the meaning of paragraph (2) of subdivision (e)) which is maintained by an organization described in Sections 23701a through 23701p or Section 23701s which is exempt from tax under Section 23701 shall be treated as a separate organization. (g) (1) For purposes of this section, a fund established and maintained by an individual who holds, has been elected to, or is a candidate (within the meaning of paragraph (3)) for nomination or election to, any federal, state, or local elective public office for use by such individual exclusively for the preparation and circulation of such individual’s newsletter shall, except as provided in paragraph (2), be treated as if such fund constituted a political organization. (2) In the case of any fund described in paragraph (1) the exempt function shall be only the preparation and circulation of the newsletter. (3) For purposes of paragraph (1), “candidate” means with respect to any federal, state, or local elective public office, an individual who does both of the following: (A) Publicly announces that they are a candidate for nomination or election to that office. (B) Meets the qualifications prescribed by law to hold that office. (h) The requirements set forth in subdivision (a) of Section 23701 shall not apply to a political organization or newsletter fund described in this section. However, in the case of a corporation incorporated or organized in this state or qualified to do business in this state, such corporation shall either pay the minimum tax provided in Section 23153 or obtain a certificate of exemption from the Franchise Tax Board before the corporation files with the Secretary of State its articles of incorporation or a duly certified copy thereof. (i) The requirements set forth in Section 23772 or Section 23774 shall not apply to a political organization or newsletter fund. Further, the requirements set forth in Sections 18505, 18506, and 18601 shall not apply to a political organization or newsletter fund described in this section, except that if it has political organization taxable income for any taxable year, the political organization shall be required to file income tax returns or statements as determined by the Franchise Tax Board under Chapter 3 (commencing with Section 23501). (Amended by Stats. 2020, Ch. 59, Sec. 3. (SB 934) Effective January 1, 2021.)
  60. 23701s

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    An employee-funded pension trust described in IRC 501(c)(18) is exempt, except as otherwise provided, and the last sentence of IRC 501(c)(18) about excess contributions under IRC 4979 does not apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701s. (a) An employee-funded pension trust described in Section 501(c)(18) of the Internal Revenue Code, except as otherwise provided. (b) The last sentence in Section 501(c)(18) of the Internal Revenue Code, relating to excess contributions under Section 4979, shall not apply. (Amended by Stats. 2005, Ch. 691, Sec. 53. Effective October 7, 2005.)
  61. 23701t

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    A homeowners’ association can qualify for this tax exemption only if it meets the section’s income, spending, earnings, and trust-holding conditions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701t. (a) A homeowners’ association organized and operated to provide for the acquisition, construction, management, maintenance, and care of residential association property if all of the following apply: (1) Sixty percent or more of the gross income of the organization for the taxable year consists solely of amounts received as membership dues, fees, and assessments from either of the following: (A) Tenant-stockholders or owners of residential units, residences, or lots. (B) Owners of time-share rights to use, or time-share ownership interests in, association property in the case of a time-share association. (2) Ninety percent or more of the expenditures of the organization for the taxable year are expenditures for the acquisition, construction, management, maintenance, and care of association property and, in the case of a time-share association, for activities provided to or on behalf of members of the association. (3) No part of the net earnings inures (other than by providing management, maintenance, and care of association property or by a rebate of excess membership dues, fees, or assessments) to the benefit of any private shareholder or individual. (4) Amounts received as membership dues, fees, and assessments not expended for association purposes during the taxable year are transferred to and held in trust to provide for the management, maintenance, and care of association property and common areas. (b) The term “association property” means: (1) Property held by the organization. (2) Property held in common by the members of the organization. (3) Property within the organization privately held by the members of the organization. In the case of a time-share association, “association property” includes property in which the time-share association, or members of the association, have rights arising out of recorded easements, covenants, or other recorded instruments to use property related to the time-share project. (c) A homeowners’ association shall be subject to tax under this part with respect to its “homeowners’ association taxable income,” and that income shall be subject to tax as provided by Chapter 3 (commencing with Section 23501). (1) For purposes of this section, the term “homeowners’ association taxable income” of any organization for any taxable year means an amount equal to the excess over one hundred dollars ($100) (if any) of— (A) The gross income for the taxable year (excluding any exempt function income), over (B) The deductions allowed by this part which are directly connected with the production of the gross income (excluding exempt function income). (2) For purposes of this section, the term “exempt function income” means any amount received as membership fees, dues, and assessments from tenant-shareholders or owners of residential units, residences, or lots, or owners of time-share rights to use, or time-share ownership interests in, association property in the case of a time-share association. (d) The term “homeowners’ association” includes a condominium management association, a residential real estate management association, a time-share association, and a cooperative housing corporation. (e) “Cooperative housing corporation” includes, but is not limited to, a limited-equity housing cooperative, as defined in Section 33007.5 of the Health and Safety Code, organized either as a nonprofit public benefit corporation pursuant to Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code, or a nonprofit mutual benefit corporation pursuant to Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code. (f) The term “time-share association” means any organization (other than a condominium management association) organized and operated to provide for the acquisition, construction, management, maintenance, and care of association property if any member thereof holds a time-share right to use, or a time-share ownership interest in, real property constituting association property. (g) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998. (Amended by Stats. 2003, Ch. 62, Sec. 291. Effective January 1, 2004.)
  62. 23701u

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section sets conditions for certain nonprofit public benefit corporations to qualify for exempt treatment, including exclusive exempt/charitable use, asset dedication rules, and a limited purpose tied to financing government property projects.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701u. An organization is operated exclusively for exempt purposes listed in Section 23701f and its net earnings are devoted exclusively to charitable purposes if that organization is a nonprofit public benefit corporation organized under Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code, and if the specific and primary purpose for which the corporation is formed is to render financial assistance to government by financing, refinancing, acquiring, constructing, improving, leasing, selling, or otherwise conveying property of any kind to government. This financing ability shall be limited to the issuance of certificates of participation, or similar security arrangements. For purposes of this section, “government” means the State of California, a city, city and county, county, school district, board of education, public corporation, hospital district, and any other special district. An organization is not organized exclusively for the exempt purposes referred to in the first paragraph unless its assets are irrevocably dedicated to one or more purposes listed in Section 23701f. Dedication of assets requires that in the event of dissolution of an organization or the impossibility of performing the specific organizational purposes, including default of lease payments, the assets would continue to be devoted to exempt purposes. Assets shall be deemed irrevocably dedicated to exempt purposes if the articles of organization provide that upon dissolution the assets will be distributed to an organization which is exempt under this section, Section 23701d, or Section 23701f, or under Section 501(c)(3) or Section 501(c)(4) of the Internal Revenue Code or to the federal government, or to a state or local government for public purposes; or by a provision in the articles of organization, satisfactory to the Franchise Tax Board, that the property will be distributed in trust for exempt purposes; or by establishing that the assets are irrevocably dedicated to exempt purposes by operation of law. Any organization that has had its exemption revoked by the Franchise Tax Board for failure to comply with Section 23701f may request a further review of its status under this section. (Added by Stats. 1987, Ch. 1481, Sec. 1. Effective September 30, 1987.)
  63. 23701v

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    An eligible organization of mobilehome owners is not disqualified just because it manages, maintains, or cares for the park it bought.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701v. (a) An organization of owners of manufactured homes or mobilehomes, who are tenants in a mobilehome park, formed for the purpose of purchasing the mobilehome park to convert it to condominium, stock cooperative, or other resident ownership interests. (b) An organization shall not fail to meet the requirements of subdivision (a) merely because it manages, maintains, or cares for the mobilehome park it has purchased. (Amended by Stats. 1990, Ch. 1270, Sec. 4.)
  64. 23701w

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section identifies a veteran’s organization, using the federal tax-code definition in Section 501(c)(19).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701w. A veteran’s organization, as defined by Section 501(c)(19) of the Internal Revenue Code. (Amended by Stats. 2005, Ch. 691, Sec. 54. Effective October 7, 2005.)
  65. 23701x

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section says certain title-holding corporations or trusts are covered, and treats some LLCs as corporations for this purpose; an exempt LLC is also exempt from the tax and fees under Chapter 10.6.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701x. (a) A corporation or trust described in Section 501(c)(25) of the Internal Revenue Code, relating to certain title-holding companies. (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of subdivision (b) of Section 23038, for purposes of applying Section 501(c)(25) of the Internal Revenue Code under this section, the term “corporation” includes a limited liability company that is classified as a partnership or as a disregarded entity. (2) A limited liability company that, under the authority of this section, is exempt from the tax imposed by this part is also exempt from the tax and fees imposed under Chapter 10.6 (commencing with Section 17941) of Part 10. (Amended by Stats. 2003, Ch. 633, Sec. 8. Effective September 30, 2003.)
  66. 23701y

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Credit unions defined in the referenced Financial Code section are exempt from most state, county, and municipal taxes and licenses, with listed exceptions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701y. A credit union as defined in Section 14002 of the Financial Code. In addition, those credit unions are exempt from all other taxes and licenses, state, county, and municipal, imposed upon those credit unions, except taxes upon their real property, local utility user taxes, sales and use taxes, state energy resources surcharges, state emergency telephone users surcharges, unrelated business income taxes pursuant to Section 23731, motor vehicle and other vehicle registration license fees, and any other tax or license fee imposed by the state upon vehicles, motor vehicles, or the operation thereof. (Added by Stats. 1999, Ch. 675, Sec. 1. Effective October 10, 1999.)
  67. 23701z

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section describes an organization formed under Corporations Code Section 5005.1 by three or more corporations to pool self-insured claims or losses.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23701z. An organization established pursuant to Section 5005.1 of the Corporations Code by three or more corporations as an arrangement for the pooling of self-insured claims or losses of those corporations. (Added by Stats. 1996, Ch. 954, Sec. 41.1. Effective September 26, 1996.)
  68. 23702.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Section 23702 says Section 502 of the Internal Revenue Code applies, with specified reference changes, and denies exemption in certain feeder-organization situations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23702. Section 502 of the Internal Revenue Code, relating to feeder organizations, shall apply, except as otherwise provided. (a) Exemption shall not be allowed to any organization on the basis that all of its profits are payable to another organization exempt from taxation under either Section 501 of the Internal Revenue Code or this article, if that business activity is being conducted by a separate organization. (b) The reference to Section 501 of the Internal Revenue Code, relating to exemption, shall be modified to refer to Section 23701. (c) The reference to Sections 512 and 512(b)(3) of the Internal Revenue Code, relating to the exclusion of the deriving of rents from the definition of “trade or business,” shall be modified to refer to Section 23732. (Repealed and added by Stats. 2000, Ch. 252, Sec. 22. Effective January 1, 2001.)
  69. 23703.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section defines “charitable corporation” and sets filing-based rules for revoking or restoring a charitable corporation’s tax exemption.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23703. (a) For purposes of this section, “charitable corporation” means a corporation defined in Section 12582.1 of the Government Code that is required to comply with the filing requirements set forth in Article 7 (commencing with Section 12580) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code. (b) (1) The exemption granted to a charitable corporation under the provisions of Article 1 (commencing with Section 23701) shall be revoked by the Franchise Tax Board in accordance with this section if the charitable corporation fails to file with the Attorney General any registration or periodic report required by Article 7 (commencing with Section 12580) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code. (2) A revocation shall occur under this section only after the Attorney General has first notified the Franchise Tax Board in writing that a charitable corporation has failed to file any registration or periodic report on or before the due date thereof, and the Franchise Tax Board has mailed a notice to the charitable corporation stating that the Franchise Tax Board intends to revoke the exemption if the charitable corporation does not file with the Attorney General all past due and currently due documents required by Article 7 (commencing with Section 12580) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code. (3) After receipt of all required documents from a charitable corporation, the Attorney General shall provide prompt notification to the Franchise Tax Board and the charitable corporation that the charitable corporation has filed all past due and currently due documents required by Article 7 (commencing with Section 12580) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code. (c) (1) If the Franchise Tax Board does not obtain notification from the Attorney General pursuant to paragraph (3) of subdivision (b) that the charitable corporation has complied with the filing requirements described in subdivision (b) by the last day of the applicable period, the Franchise Tax Board shall revoke the exemption granted to the charitable corporation pursuant to Section 23777 on the first day after the applicable period. (2) For purposes of this subdivision, the applicable period means: (A) For notifications of noncompliance from the Attorney General that are received by the Franchise Tax Board before the effective date of the act adding this section, the applicable period shall be 120 days after the effective date of the act adding this section. (B) For notifications of noncompliance from the Attorney General that are received by the Franchise Tax Board on or after the effective date of the act adding this section, the applicable period shall be 120 days after the Franchise Tax Board mails notification of the intent to revoke the exemption granted to the charitable corporation. (d) For a charitable corporation whose exemption has been disallowed pursuant to Section 23703, as amended by Section 94 of Chapter 862 of the Statutes of 2000, prior to the effective date of the act adding this section, the Franchise Tax Board may reestablish that charitable corporation’s exempt status under Section 23778, after receipt of notification from the Attorney General pursuant to paragraph (3) of subdivision (b) that the filing requirements set forth in Article 7 (commencing with Section 12580) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code have been fulfilled. For purposes of reestablishing the charitable corporation’s exempt status under Section 23778, disallowance under Section 23703, as amended by Section 94 of Chapter 862 of the Statutes of 2000, shall be considered a revocation of exemption. (e) This section shall apply with respect to notifications of noncompliance received from the Attorney General before, on, or after the effective date of the act adding this section. (Repealed and added by Stats. 2012, Ch. 710, Sec. 2. (SB 1341) Effective January 1, 2013.)
  70. 23703.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section applies California’s version of IRC 501(p) to suspensions of tax-exempt status for certain organizations, with specified modifications and limits.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23703.5. Section 501(p) of the Internal Revenue Code, relating to suspension of tax-exempt status of terrorist organizations, shall apply, except as otherwise provided: (a) References to Section 501(a) of the Internal Revenue Code shall be modified to refer to Section 23701. (b) Section 501(p)(4) of the Internal Revenue Code is modified by substituting the phrase “under Part 10 (commencing with Section 17001) and this part” for the phrase “under any provision of this title, including Sections 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), and 2522” contained therein. (c) This section shall apply only during the period described in Section 501(p)(3) of the Internal Revenue Code that the federal tax exemption of the organization described in Section 501(p)(2) of the Internal Revenue Code is suspended for federal income tax purposes under Section 501(p)(1) of the Internal Revenue Code. (d) Section 501(p)(5) of the Internal Revenue Code shall not apply and in lieu thereof, notwithstanding any other provision of law, no organization or other person may challenge a suspension under this section, a designation or identification described in Section 501(p)(2) of the Internal Revenue Code, the period of suspension described in Section 501(p)(3) of the Internal Revenue Code, or a denial of a deduction under Section 501(p)(4) of the Internal Revenue Code as modified in subdivision (b) in any administrative or judicial proceeding relating to the California tax liability of the organization or other person. (e) (1) Credit or refund (with interest) with respect to an overpayment shall be made if all of the following apply with respect to that overpayment: (A) The tax exemption of any organization described in Section 501(p)(2) of the Internal Revenue Code is suspended under this section. (B) Each designation and identification described in Section 501(p)(2) of the Internal Revenue Code which has been made with respect to that organization is determined to be erroneous under Section 501(p)(6) of the Internal Revenue Code for federal income tax purposes. (C) The erroneous designations and identifications result in an overpayment of income tax for any taxable year by that organization. (2) If the credit or refund of any overpayment of tax described in subparagraph (C) of paragraph (1) is prevented at any time by the operation of any law or rule of law (including res judicata), the credit or refund may nevertheless be allowed or made if the claim therefor is filed before the close of the one-year period beginning on the date of the last determination described in subparagraph (B) of paragraph (1). (f) This section shall apply to designations made before, on, or after November 11, 2003. (Amended by Stats. 2005, Ch. 691, Sec. 55. Effective October 7, 2005.)
  71. 23703.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Section 501(q) of the Internal Revenue Code applies, with specific California substitution rules and exceptions stated in this section.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23703.7. Section 501(q) of the Internal Revenue Code, relating to special rules for credit counseling organizations, shall apply, except as otherwise provided. (a) The phrase “Section 23701” shall be substituted for “subsection (a)” in Section 501(q)(1) of the Internal Revenue Code. (b) The phrase “described in Section 23701d or Section 23701f” shall be substituted for “described in paragraph (3) or (4) of subsection (c)” in Section 501(q)(1) of the Internal Revenue Code. (c) The phrase “described in Section 23701d and exempt from tax under Section 23701” shall be substituted for “described in subsection (c)(3) and exempt from tax under subsection (a)” in each place that it appears in Section 501(q)(1)(E) of the Internal Revenue Code. (d) The phrase “described in Section 23701d shall not be exempt from tax under Section 23701” shall be substituted for “described in paragraph (3) of subsection (c) shall not be exempt from tax under subsection (a)” in Section 501(q)(2)(A) of the Internal Revenue Code. (e) The phrase “described in Section 23701d and exempt from tax under Section 23701 on January 1, 2009,” shall be substituted for “described in paragraph (3) of subsection (c) and exempt from tax under subsection (a) on the date of the enactment of this subsection” in Section 501(q)(2)(B)(ii) of the Internal Revenue Code. (f) The phrase “January 1, 2010,” shall be substituted for “the date of the enactment of this subsection” in Section 501(q)(2)(B)(ii)(I) of the Internal Revenue Code. (g) The phrase “described in Section 23701f shall not be exempt from tax under Section 23701” shall be substituted for “described in paragraph (4) of subsection (c) shall not be exempt from tax under subsection (a)” in Section 501(q)(3) of the Internal Revenue Code. (Added by Stats. 2010, Ch. 14, Sec. 60. (SB 401) Effective January 1, 2011.)
  72. 23704.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section applies California’s rules for cooperative hospital service organizations and makes specific substitutions and additions to referenced federal tax provisions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23704. Section 501(e) of the Internal Revenue Code, relating to cooperative hospital service organizations, shall apply, except as otherwise provided. (a) References to Section 501(c)(3) of the Internal Revenue Code, relating to charitable organizations, shall be modified to refer to Section 23701d. (b) References to Section 501(a) of the Internal Revenue Code, relating to exemptions, shall be modified to refer to Section 23701. (c) The services which may be provided under Section 501(e)(1) of the Internal Revenue Code shall include laundry services. (d) Section 501(e)(1)(B)(iii) of the Internal Revenue Code is modified by substituting the phrase “owned and operated by the United States, the State, or a county or political subdivision thereof, or an agency or instrumentality of any of the foregoing” for the phrase “owned and operated by the United States, a State, the District of Columbia, or a possession of the United States, or a political subdivision or an agency or instrumentality of any of the foregoing.” (e) References to Section 170(b)(1)(A)(iii) of the Internal Revenue Code, relating to the deductibility of contributions to hospitals, shall be modified to refer to subdivision (e) of Section 23736. (Repealed and added by Stats. 2000, Ch. 252, Sec. 24. Effective January 1, 2001.)
  73. 23704.3.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section says Internal Revenue Code Section 501(o) applies, but the cross-reference to Section 501(c)(3) is changed to mean California Section 23701d.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23704.3. Section 501(o) of the Internal Revenue Code, relating to treatment of hospitals participating in provider-sponsored organizations, shall apply, except that the reference to Section 501(c)(3) of the Internal Revenue Code, relating to charitable organizations, shall be modified to refer to Section 23701d. (Repealed and added by Stats. 2000, Ch. 252, Sec. 26. Effective January 1, 2001.)
  74. 23704.4.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section makes IRC Section 501(k) apply, except as otherwise provided, and changes or excludes certain related IRC references.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23704.4. Section 501(k) of the Internal Revenue Code, relating to the treatment of certain organizations providing care of children, shall apply, except as otherwise provided. (a) The reference to Section 501(c)(3) of the Internal Revenue Code, relating to charitable organizations, shall be modified to refer to Section 23701d. (b) The reference to Section 2522(a)(2) of the Internal Revenue Code, relating to the computation of taxable gifts or Internal Revenue Code Section 2055, relating to transfers for public, charitable, and religious uses, shall not apply. (Amended by Stats. 2007, Ch. 130, Sec. 227. Effective January 1, 2008.)
  75. 23704.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section applies IRC Section 501(h), with exceptions, and changes certain IRC references to California exemption provisions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23704.5. Section 501(h) of the Internal Revenue Code, relating to expenditures by public charities engaged in activities to influence legislation, shall apply, except as otherwise provided. (a) The reference to Section 501(a) of the Internal Revenue Code, relating to exemption from taxation, shall be modified to refer to Section 23701. (b) The reference to Section 501(c)(3) of the Internal Revenue Code, relating to charitable organizations, shall be modified to refer to Section 23701d. (Repealed and added by Stats. 2000, Ch. 252, Sec. 30. Effective January 1, 2001.)
  76. 23704.6.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section makes Internal Revenue Code Section 504 apply, with specified modifications to certain cross-references, except as otherwise provided.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23704.6. Section 504 of the Internal Revenue Code, relating to status after organization ceases to qualify for exemption under Section 501(c)(3) because of substantial lobbying or because of political activities, shall apply, except as otherwise provided. (a) The reference to Section 501(a) of the Internal Revenue Code, relating to exemption from taxation, shall be modified to refer to Section 23701. (b) The reference to Section 501a(c)(3) of the Internal Revenue Code, relating to charitable organizations, shall be modified to refer to Section 23701d. (c) The reference to Section 501(c)(4) of the Internal Revenue Code, relating to civic leagues, social welfare organizations, and local associations of employees, shall be modified to refer to Section 23701f. (Repealed and added by Stats. 2000, Ch. 252, Sec. 32. Effective January 1, 2001.)
  77. 23705.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Certain employer-plan organizations lose tax exemption unless the plan meets federal requirements, and a related federal notice must also be filed with the Franchise Tax Board.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23705. (a) (1) An organization described in Section 23701i (voluntary employee’s beneficiary associations) or 23701q (qualified group legal service plans) which is part of a plan of an employer shall not be exempt from tax under Section 23701, unless that plan meets the requirements of Section 505(b) of the Internal Revenue Code. (2) Paragraph (1) shall not apply to any organization described in Section 505(a)(2) of the Internal Revenue Code. (b) A copy of any notice filed with the Secretary of the Treasury, pursuant to Section 505(c) of the Internal Revenue Code, relating to application for tax-exempt status, shall be filed at the same time and in the same manner with the Franchise Tax Board. (Amended by Stats. 2005, Ch. 691, Sec. 56. Effective October 7, 2005.)
  78. 23706.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Exemptions granted by California statutes on or after January 1, 1985 for state instrumentalities must be provided for in this part of the code.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23706. Any exemption from the bank and corporation franchise tax under Chapter 2 (commencing with Section 23101) or the corporation income tax under Chapter 3 (commencing with Section 23501), granted by any California statute on or after January 1, 1985, for an organization which is an instrumentality of this state, shall be provided for in this part of the code. (Added by Stats. 1985, Ch. 1461, Sec. 87. Effective October 1, 1985.)
  79. 23707.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section says a private foundation’s status can end only in specified ways, including notice to the Franchise Tax Board or transferring all net assets to qualifying organizations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23707. (a) Except as provided in subdivision (b), the status of any organization as a private foundation shall be terminated only if— (1) Such organization notifies the Franchise Tax Board (at such time and in such manner as the Franchise Tax Board may by regulations prescribe) of its intent to accomplish such termination, or (2) Such organization has been terminated by the Attorney General of this state or by action taken pursuant to Section 507 of the Internal Revenue Code. (b) (1) The status as a private foundation of any organization shall be terminated if— (A) Such organization distributes all of its net assets to one or more organizations described below (other than clauses (vii), (viii), (ix) or (x)) each of which has been in existence and so described for a continuous period of at least 60 calendar months immediately preceding such distribution and exempt from tax under Section 23701d of the Revenue and Taxation Code or Section 501(c)(3) of the Internal Revenue Code during the last 60 months, or— (i) A church or a convention or association of churches, (ii) An educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, (iii) An organization the principal purpose or functions of which are the providing of medical or hospital care or medical education or medical research, if the organization is a hospital, or if the organization is a medical research organization directly engaged in the continuous active conduct of medical research in conjunction with a hospital, and during the calendar year in which the contribution is made such organization is committed to spend such contributions for such research before January 1 of the fifth calendar year which begins after the date such contribution is made. (iv) An organization which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under Section 23701d) from the United States or any state or political subdivision thereof or from direct or indirect contributions from the general public, and which is organized and operated exclusively to receive, hold, invest, and administer property and to make expenditures to or for the benefit of a college or university which is an organization referred to in clause (ii) of this subparagraph and which is an agency or instrumentality of a state or political subdivision thereof, or which is owned or operated by a state or political subdivision thereof or by an agency or instrumentality of one or more states or political subdivisions, (v) A governmental unit referred to in Section 170(c)(1) of the Internal Revenue Code, (vi) An organization referred to in Section 170(c)(2) of the Internal Revenue Code which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under Section 23701d) from a governmental unit referred to in Section 170(c)(1) of the Internal Revenue Code or from direct or indirect contributions from the general public, (vii) A private operating foundation (as defined in Section 4942(j) (3) of the Internal Revenue Code), (viii) Any other private foundation (as defined in Section 509(a) of the Internal Revenue Code) which, not later than the 15th day of the third month after the close of the foundation’s taxable year in which contributions are received, makes qualifying distributions (as defined in Section 4942(g) of the Internal Revenue Code, as amended by P.L. 94-455, without regard to paragraph (3) thereof), which are treated, after the application of Section 4942(g)(3) of the Internal Revenue Code as distributions out of corpus (in accordance with Section 4942(h) of the Internal Revenue Code) in an amount equal to 100 percent of such contributions, and with respect to which the taxpayer maintains adequate records or other sufficient evidence from the foundation showing that the foundation made such qualifying distributions, (ix) A private foundation all of the contributions to which are pooled in a common fund and which would be described in paragraph (3) of Section 509(a) of the Internal Revenue Code but for the right of any substantial contributor (hereafter in this clause called “donor”) or his spouse to designate annually the recipients, from among organizations described in paragraph (1) of Section 509(a) of the Internal Revenue Code, of the income attributable to the donor’s contribution to the fund and to direct (by deed or by will) the payment, to an organization described in such paragraph (1), of the corpus in the common fund shall apply only if all the income of the common fund is required to be (and is) distributed to one or more organizations described in such paragraph (1) not later than the 15th day of the third month after the close of the taxable year in which the income is realized by the fund and only if all of the corpus attributable to any donor’s contribution to the fund is required to be (and is) distributed to one or more of such organizations not later than one year after his death or after the death of his surviving spouse if she has the right to designate the recipients of such corpus, and (x) An organization described in paragraph (2) or (3) of Section 509(a) of the Internal Revenue Code. (B) Such organization meets the requirements of Section 507(b)(1)(B) or paragraph (1), (2), or (3) of Section 509(a) of the Internal Revenue Code, whichever applies, and furnishes copies of its federal notice of termination of its private foundation status to the Franchise Tax Board. (2) For purposes of this part, in the case of a transfer of assets of any private foundation to another private foundation pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization, the transferee foundation shall not be treated as a newly created organization. (Amended by Stats. 1983, Ch. 488, Sec. 94. Effective July 28, 1983.)
  80. 23708.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section defines “organization exempt from tax,” sets notice rules for certain organizations described in Section 23701d, and lets the Franchise Tax Board exempt some organizations by regulation.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23708. (a) For the purposes of this part, unless otherwise indicated in context, the term “an organization exempt from tax” shall mean an organization which has satisfied the provisions of Section 23701. (b) Except as provided in subdivision (c), any organization (including an organization in existence on December 31, 1970) which is described in Section 23701d and which does not notify the Franchise Tax Board at such time and such manner as the Franchise Tax Board may prescribe, that it is not a private foundation shall be presumed to be a private foundation. The time prescribed for giving notice under this subdivision shall not expire before the 90th day after the day on which the regulations first prescribed under this subdivision become final. (c) Subdivision (b) shall not apply to— (1) Churches, their integrated auxiliaries, and conventions or associations of churches, or (2) Any organization which is not a private foundation (as defined in Section 23709). (3) The Franchise Tax Board may by regulations exempt (to the extent and subject to such conditions as may be prescribed in such regulations) from the provisions of subdivision (b)— (A) Educational organizations which normally maintain a regular faculty and curriculum and normally have a regularly enrolled body of pupils or students in attendance at the place where their educational activities are regularly carried on; and (B) Any other class of organizations with respect to which the Franchise Tax Board determines that full compliance with the provisions of subdivision (b) is not necessary to the efficient administration of the provisions of this title relating to private foundations. (d) (1) No gift or bequest made to an organization upon which the tax provided by Section 507(c) of the Internal Revenue Code has been imposed shall be allowed as a deduction under Section 24357, if such gift or bequest is made— (A) By any person after notification of termination is made under Section 507(a) of the Internal Revenue Code, or (B) By a substantial contributor (as defined in Section 507(d)(2) of the Internal Revenue Code) in his taxable year which includes the first day on which action is taken by such organization which culminates in the imposition of tax under Section 507(c) of the Internal Revenue Code and any subsequent taxable year. (2) No gift or bequest made to an organization shall be allowed as a deduction under Section 24357, if such gift or bequest is made— (A) To a private foundation or trust described in Section 4947 of the Internal Revenue Code in a taxable year for which it fails to meet the requirements of subdivision (e) of this section (determined without regard to subparagraphs (B) and (C) of paragraph (2) of subdivision (e) of this section), or (B) To any organization that has not established its exemption under Section 23701d or Section 501(c)(3) of the Internal Revenue Code for the period concerned. (3) Paragraph (1) shall not apply if the entire amount of the unpaid portion of the tax imposed under Section 507(c) of the Internal Revenue Code is abated. (e) (1) A private foundation shall not be exempt from taxation under Section 23701d unless its governing instrument includes provisions the effects of which are— (A) To require its income for each taxable year to be distributed at such time and in such manner as not to subject the foundation to tax under Section 4942 of the Internal Revenue Code, as amended by P.L. 94-455, and (B) To prohibit the foundation from engaging in any act of self-dealing (as defined in Section 4941 of the Internal Revenue Code) from retaining any excess business holdings (as defined in Section 4943 of the Internal Revenue Code), from making any investments in such manner as to subject the foundation to tax under Section 4944 of the Internal Revenue Code. (2) In the case of any organization organized before January 1, 1970, paragraph (1) shall not apply— (A) To any taxable year beginning before January 1, 1972, (B) To any period after December 31, 1971, during the pendency of any judicial proceeding begun before January 1, 1972, by the private foundation which is necessary to reform, or to excuse such foundation from compliance with, its governing instrument or any other instrument in order to meet the requirements of paragraph (1), and (C) To any period after the termination of any judicial proceeding described in subparagraph (B) during which its governing instrument or any other instrument does not permit it to meet the requirements of paragraph (1). (3) This subdivision shall not apply to require the inclusion in governing instruments of any provisions inconsistent with this subdivision. (f) Notwithstanding any of the requirements of this section, if they are determined to be met under federal law they are also met for state purposes. (Amended by Stats. 1983, Ch. 488, Sec. 95. Effective July 28, 1983.)
  81. 23709.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section defines “private foundation,” “support,” and “gross investment income” for this part.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23709. (a) For the purposes of this part the term “private foundation” means a domestic or foreign organization defined in the Internal Revenue Code as a private foundation. (b) For the purposes of this part, if an organization is a private foundation (within the meaning of subdivision (a)) on December 31, 1970, or becomes a private foundation on any subsequent date, such organization shall be treated as a private foundation for all periods after December 31, 1970, or after such subsequent date, unless its status as such is terminated. (c) For purposes of this part, an organization the status of which as a private foundation is terminated shall be treated as an organization created on the day after the date of such termination, except in the case of a transfer of assets of any private foundation to another private foundation pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization, the transferee shall not be treated as a newly created organization. (d) For purposes of this part, the term “support” includes (but is not limited to)— (1) Gifts, grants, contributions, or membership fees, (2) Gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities in any activity which is not an unrelated trade or business (within the meaning of Section 23734), (3) Net income from unrelated business activities, whether or not such activities are carried on regularly as a trade or business, (4) Gross investment income (as defined in subdivision (e)), (5) Tax revenues levied for the benefit of an organization and either paid to or expended on behalf of such organization, and (6) The value of services or facilities (exclusive of services or facilities generally furnished to the public without charge) furnished by a governmental unit referred to in Section 170(c)(1) of the Internal Revenue Code to an organization without charge. Such term does not include any gain from the sale or other disposition of property which would be considered as gain from the sale or exchange of a capital asset, or the value of exemption from any federal, state, or local tax or any similar benefit. (e) For purposes of this section, the term “gross investment income” means the gross amount of income from interest, dividends, rents, and royalties, but not including any such income to the extent included in computing the tax imposed by Section 23731. (Amended by Stats. 1983, Ch. 488, Sec. 96. Effective July 28, 1983.)
  82. 23710.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    An exempt organization does not lose its tax exemption just because it runs bingo games, if the bingo proceeds are used only for charitable purposes.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23710. Any organization exempted from taxes imposed under this part pursuant to the provisions of this article shall not be disqualified for such exemption on the basis that it conducts bingo games pursuant to Section 326.5 of the Penal Code, provided that the proceeds from those games are used exclusively for charitable purposes. (Added by Stats. 1988, Ch. 11, Sec. 58. Effective February 19, 1988. Applicable to income years beginning on or after January 1, 1987, by Sec. 95 of Ch. 11.)
  83. 23711.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section adopts federal Section 529 qualified tuition program rules in California, with specific modifications, exceptions, and reporting requirements.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23711. Section 529 of the Internal Revenue Code, relating to qualified state tuition programs, shall apply, except as otherwise provided. (a) Section 529(a) of the Internal Revenue Code is modified as follows: (1) By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” in lieu of the phrase “under this subtitle.” (2) By substituting “Article 2 (commencing with Section 23731)” in lieu of “section 511.” (b) A copy of the report required to be filed with the Secretary of the Treasury under Section 529(d) of the Internal Revenue Code shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section. (c) (1) The amendments made by Section 302(a)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(e) of the Internal Revenue Code, relating to other definitions and special rules, shall apply except as otherwise provided. (2) The amendments made by Section 302(b)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(c)(3) of the Internal Revenue Code, relating to distributions, shall apply, except as otherwise provided. (3) The amendments made by Section 302(c)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529(c)(3)(D) of the Internal Revenue Code, relating to special rule for contributions of refunded amounts, shall apply, except as otherwise provided. (d) (1) The amendments made by Section 11025(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 529(c)(3)(C) of the Internal Revenue Code, relating to change in beneficiaries or programs, shall apply, except as otherwise provided. (2) (A) The amendments made by Section 11032(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 529(c) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors, shall not apply, except as otherwise provided. (B) The amendments made by Section 11032(a)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 529(e)(3)(A) of the Internal Revenue Code, relating to qualified higher education expenses, shall not apply, except as otherwise provided. (C) In the case of any distribution made under Section 529(e)(3)(A) of the Internal Revenue Code, as amended by Section 11032(a)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), that would be treated for federal income tax purposes as a “qualified higher education expense” under Section 529(c)(7) of the Internal Revenue Code, as added by Section 11032(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), the amount of that distribution shall, notwithstanding anything in Section 529 of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code. (D) Any distribution includable in the gross income of a distributee under subparagraph (C) shall not affect the exempt status of the qualified tuition program under Section 529 of the Internal Revenue Code for purposes of this part. (e) (1) Section 529(c)(3)(E) of the Internal Revenue Code, relating to special rollovers to Roth IRAs from long-term qualified tuition programs, shall not apply. (2) In the case of any distribution made under Section 529(c)(3)(E) of the Internal Revenue Code, relating to the special rollover to Roth IRAs from long-term qualified tuition programs, treated for federal income tax purposes as a “qualified rollover contribution” under Section 408A(e)(1)(C) of the Internal Revenue Code, the amount of that distribution shall, notwithstanding Section 529 or Section 408A of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code. (3) Any distribution includable in the gross income of a distributee under paragraph (2) shall not affect the exempt status of the qualified tuition program under Section 529 of the Internal Revenue Code for purposes of this part. (Amended by Stats. 2025, Ch. 231, Sec. 85. (SB 711) Effective October 1, 2025.)
  84. 23711.4.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    This section applies Section 529A to California ABLE programs, with stated modifications, and requires a copy of the required federal report to be filed with the Franchise Tax Board.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23711.4. For taxable years beginning on or after January 1, 2016, Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, added by Section 102 of Division B of Public Law 113-295, shall apply, except as otherwise provided. (a) Section 529A(a) of the Internal Revenue Code is modified as follows: (1) By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” in lieu of the phrase “under this subtitle.” (2) By substituting “Article 2 (commencing with Section 23731)” in lieu of “Section 511.” (b) Section 529A(c)(3)(A) of the Internal Revenue Code is modified by substituting “2.5 percent” in lieu of “10 percent.” (c) A copy of the report required to be filed with the Secretary of the Treasury under Section 529A(d) of the Internal Revenue Code, relating to reports shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section. (d) (1) The amendments made by Section 303(a) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 529A(b)(1) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. (2) The amendments made by Section 303(b) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Sections 529A(d)(3) and 529A(e) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. (3) The amendments made by Section 303(c) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Sections 529A(d)(4) and 529A(c)(1)(C)(i) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. (e) The amendments made by Section 11024(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 529A(b)(2)(B) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. (f) (1) For taxable years beginning on or after January 1, 2026, the amendments made by Section 124 of the Consolidated Appropriations Act, 2023 (Public Law 117-328) to Section 529A(e) of the Internal Revenue Code, relating to qualified ABLE programs, shall apply, except as otherwise provided. (2) For purposes of complying with Section 41, the goal, purpose, objective, performance indicators, and data collection requirements for the tax expenditure allowed by this subdivision shall be as specified in subdivision (f) of Section 17140.4. (Amended by Stats. 2023, Ch. 324, Sec. 2. (AB 339) Effective January 1, 2024.)
  85. 23711.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    The income of the Golden State Scholarshare Trust is exempt from taxes imposed under this part.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23711.5. The Golden State Scholarshare Trust, established pursuant to Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code, is an instrumentality of this state and the income of the Scholarshare trust shall be exempt from taxes imposed under this part. The Scholarshare trust is established and shall be maintained as a qualified state tuition program as defined in Section 529 of the Internal Revenue Code. (Added by renumbering Section 24328 by Stats. 2003, Ch. 455, Sec. 8. Effective January 1, 2004.)
  86. 23712.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. )

    Verify source ↗

    Section 530 of the Internal Revenue Code applies here, with specific modifications and exceptions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 1. Exemptions From This Part [23701 - 23712] ( Article 1 added by Stats. 1949, Ch. 557. ) ## 23712. Section 530 of the Internal Revenue Code, relating to Coverdell education savings accounts, shall apply, except as otherwise provided. (a) Section 530(a) of the Internal Revenue Code is modified as follows: (1) By substituting the phrase “under Part 10 (commencing with Section 17001) and this part” for the phrase “under this subtitle.” (2) By substituting “Article 2 (commencing with Section 23731)” for “section 511.” (b) For taxable years beginning before January 1, 2002, Section 530(b)(1) of the Internal Revenue Code, relating to Coverdell education savings account, is modified to additionally require that upon the date that the designated beneficiary becomes 30 years of age, any balance to the credit of the beneficiary shall be distributed within 30 days after the date the beneficiary becomes 30 years of age to that beneficiary. (c) Section 530(d) of the Internal Revenue Code is modified as follows: (1) By substituting the phrase “under Part 10 (commencing with Section 17001) in the manner as provided in Section 72(b) of the Internal Revenue Code, as modified by Part 10” for the phrase “in the manner as provided in Section 72(b)” in Section 530(d)(1) of the Internal Revenue Code. (2) (A) By substituting the phrase “tax imposed by Part 10 (commencing with Section 17001)” for the phrase “tax imposed by this chapter” in Section 530(d)(4)(A) of the Internal Revenue Code. (B) By substituting the phrase “increased by 21/2 percent” for the phrase “increased by 10 percent” in Section 530(d)(4)(A) of the Internal Revenue Code. (C) By substituting the phrase “shall be included in the contributor’s gross income under Part 10 (commencing with Section 17001) or this part” for the phrase “shall be included in gross income” in Section 530(d)(4)(C) of the Internal Revenue Code. (D) For taxable years beginning before January 1, 2005: (i) By additionally providing that Section 530(d)(4)(A) of the Internal Revenue Code shall not apply if the payment or distribution is made on account of the attendance of the designated beneficiary at the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, to the extent that the amount of the payment or distribution does not exceed the costs of advanced education (as defined by Section 2005(e)(3) of Title 10 of the United States Code, as in effect on November 11, 2003) attributable to that attendance. (ii) The amendments made to this section by Section 12 of Chapter 552 of the Statutes of 2004 shall apply to taxable years beginning after December 31, 2002. (d) For purposes of Part 10 (commencing with Section 17001) and this part, in the case of a custodial account treated as a trust by reason of Section 530(g) of the Internal Revenue Code, the custodian of that account shall be treated as the trustee thereof. (e) A copy of the report, which is required to be filed with the Secretary of the Treasury under Section 530(h) of the Internal Revenue Code, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section. (f) Section 109(d)(2) of Public Law 110-245, relating to application of amendments to deaths from injuries occurring on or after October 7, 2001, and before enactment, shall apply, except as otherwise provided. (Amended by Stats. 2010, Ch. 14, Sec. 61. (SB 401) Effective January 1, 2011.)
  87. 23731.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    Exempt organizations and trusts are subject to tax on unrelated business taxable income, except as this article provides otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23731. Every organization or trust exempt under this chapter, except as provided in this article, is subject to the tax imposed upon its unrelated business taxable income, as defined in Section 23732, as follows: (a) Corporations (other than banks and financial corporations), associations, and business trusts are subject to the tax imposed under Section 23501. (b) Trusts are subject to the tax imposed by subdivision (e) of Section 17041. This section applies to taxable years beginning after December 31, 1970. (Amended by Stats. 2000, Ch. 862, Sec. 96. Effective January 1, 2001.)
  88. 23732.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    This section makes Internal Revenue Code Section 512 apply, with stated California modifications and one exception.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23732. Section 512 of the Internal Revenue Code, relating to unrelated business taxable income, applies, except as otherwise provided. (a) Section 512(a)(2) of the Internal Revenue Code, relating to special rule for foreign organizations, does not apply. (b) Section 512(a)(3) of the Internal Revenue Code, relating to special rules applicable to organizations described in paragraph (7), (9), (17), or (20) of Section 501(c), shall be modified as follows: (1) The reference to Section 501(c)(7) of the Internal Revenue Code shall be modified to refer to Section 23701g. (2) The reference to Section 501(c)(9) of the Internal Revenue Code shall be modified to refer to Section 23701i. (3) The reference to Section 501(c)(17) of the Internal Revenue Code shall be modified to refer to Section 23701n. (4) The reference to Section 501(c)(20) of the Internal Revenue Code shall be modified to refer to Section 23701q. (c) Section 512(d) of the Internal Revenue Code, relating to treatment of dues of agricultural or horticultural organizations, shall be modified by substituting “Section 23701a” for “Section 501(c)(5)” of the Internal Revenue Code. (Amended by Stats. 2015, Ch. 303, Sec. 490. (AB 731) Effective January 1, 2016.)
  89. 23734.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    Section 513 of the Internal Revenue Code applies here, except as otherwise provided, but Section 513(g) does not apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23734. (a) Section 513 of the Internal Revenue Code, relating to unrelated trade or business, shall apply, except as otherwise provided. (b) Section 513(g) of the Internal Revenue Code, relating to certain pole rentals, shall not apply. (Amended by Stats. 1993, Ch. 877, Sec. 39. Effective October 6, 1993.)
  90. 23735.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    This section makes certain federal tax rules apply, with one express exception, and says an interest in a participation agreement is not debt.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23735. (a) Section 514 of the Internal Revenue Code, relating to unrelated debt-financed income, shall apply, except as otherwise provided. (b) Section 10214 of Public Law 100-203, relating to the treatment of certain partnership allocations, shall apply to taxable years beginning on or after January 1, 1990, for property acquired by the partnership after October 13, 1987, and partnership interests acquired after October 13, 1987. (c) An interest in a participation agreement, as defined in subdivision (i) of Section 69980 of the Education Code, shall not be treated as debt. (Amended by Stats. 2000, Ch. 862, Sec. 97. Effective January 1, 2001.)
  91. 23736.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    Sections 23736.1 to 23736.4 apply to certain organizations described in Section 23701d or 23701n, but several types of organizations are excluded.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23736. Sections 23736.1 to 23736.4, inclusive, shall apply to any organization described in Section 23701d or Section 23701n except— (a) A religious organization (other than a trust); (b) An educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on; (c) An organization which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under Section 23701d) from the United States or any state or political subdivision thereof or from direct or indirect contributions from the general public; (d) An organization which is operated, supervised, controlled, or principally supported by a religious organization (other than a trust) which is itself not subject to the provisions of this article; and (e) An organization the principal purposes or functions of which are the providing of medical or hospital care or medical education or medical research. (Amended by Stats. 1961, Ch. 857.)
  92. 23736.1.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    This section defines “prohibited transaction” for certain organizations and sets conditions under which some trust loans and obligation purchases are not treated as prohibited.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23736.1. (a) For the purposes of this article, the term “prohibited transaction” means any transaction in which an organization subject to this article— (1) Lends any part of its income or corpus, without the receipt of adequate security and a reasonable rate of interest, to; (2) Pays any compensation, in excess of a reasonable allowance for salaries or other compensation for personal services actually rendered, to; (3) Makes any part of its services available on a preferential basis to; (4) Makes any substantial purchase of securities or any other property, for more than adequate consideration in money or money’s worth, from; (5) Sells any substantial part of its securities or other property, for less than an adequate consideration in money or money’s worth, to; or (6) Engages in any other transaction that results in a substantial diversion of its income or corpus to; the creator of the organization (if a trust); a person who has made a substantial contribution to the organization; a member of the family (as defined in Section 267(c)(4) of the Internal Revenue Code) of an individual who is the creator of that trust or who has made a substantial contribution to that organization; or a corporation controlled by that creator or person through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. (b) For purposes of subdivision (a), a bond, debenture, note, or certificate or other evidence of indebtedness (hereinafter in this section referred to as “obligation”) acquired by a trust described in Section 23701n shall not be treated as a loan made without the receipt of adequate security if— (1) The obligation is acquired— (A) On the market, either (i) at the price of the obligation prevailing on a national securities exchange that is registered with the Securities and Exchange Commission, or (ii) if the obligation is not traded on a national securities exchange, at a price not less favorable to the trust than the offering price for the obligation as established by current bid and asked prices quoted by persons independent of the issuer; (B) From an underwriter, at a price (i) not in excess of the public offering price for the obligation as set forth in a prospectus or offering circular filed with the Securities and Exchange Commission, and (ii) at which a substantial portion of the same issue is acquired by persons independent of the issuer; or (C) Directly from the issuer, at a price not less favorable to the trust than the price paid currently for a substantial portion of the same issue by persons independent of the issuer; (2) Immediately following acquisition of that obligation— (A) Not more than 25 percent of the aggregate amount of obligations issued in that issue and outstanding at the time of acquisition is held by the trust, and (B) At least 50 percent of the aggregate amount referred to in subparagraph (A) is held by persons independent of the issuer; and (3) Immediately following acquisition of the obligation, not more than 25 percent of the assets of the trust is invested in obligations of persons described in subdivision (a). (4) (A) In the case of a trust described in Section 23701n, or in the case of a corporation described in Section 23701h, all of the stock of which was acquired before January 1, 1961, by a trust described in Section 23701n, any indebtedness incurred by that trust or that corporation before January 1, 1961, in connection with real property that is leased before January 1, 1961, and any indebtedness incurred by that trust or that corporation on or after that date necessary to carry out the terms of that lease, shall not be considered as an indebtedness with respect to that trust or that corporation for purposes of this section. (B) In the application of paragraph (1) of subdivision (a), if a trust described in Section 23701n forming part of a supplemental unemployment compensation benefit plan lends any money to another trust described in Section 23701n forming part of the same plan, that loan shall not be treated as an indebtedness of the borrowing trust, except to the extent that the loaning trust— (i) Incurs any indebtedness in order to make that loan, (ii) Incurred indebtedness before the making of that loan which would not have been incurred but for the making of that loan, or (iii) Incurred indebtedness after the making of that loan which would not have been incurred but for the making of that loan and that was reasonably foreseeable at the time of making that loan. (c) Subdivision (a) shall not apply to a loan made by a trust described in Section 23701n to the employer (or to a renewal of that loan or, if the loan is repayable upon demand, to a continuation of that loan) if the loan bears a reasonable rate of interest, and if (in the case of a making or renewal)— (1) The employer is prohibited (at the time of that making or renewal) by any law of the United States or regulation thereunder from directly or indirectly pledging, as security for the loan, a particular class or classes of his or her assets the value of which (at that time) represents more than one-half of the value of all his or her assets; (2) The making or renewal, as the case may be, is approved in writing as an investment that is consistent with the exempt purposes of the trust by a trustee who is independent of the employer, and no other independent trustee had previously refused to give that written approval; and (3) Immediately following the making or renewal, as the case may be, the aggregate amount loaned by the trust to the employer, without the receipt of adequate security, does not exceed 25 percent of the value of all the assets of the trust. (4) For purposes of paragraph (2) the term “trustee” means, with respect to any trust for which there is more than one trustee who is independent of the employer, a majority of those independent trustees. For purposes of paragraph (3), the determination as to whether any amount loaned by the trust to the employer is loaned without the receipt of adequate security shall be made without regard to subdivision (b). (Amended by Stats. 2004, Ch. 183, Sec. 333. Effective January 1, 2005.)
  93. 23736.2.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

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    Certain organizations lose an exemption from taxation if they engaged in a prohibited transaction after the stated cutoff dates.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23736.2. An organization described in Section 23701d which is subject to the provisions of this article, except those specified in Sections 23736, shall not be exempt from taxation under Article 1 of this chapter if it has engaged in a prohibited transaction after January 1, 1951; and an organization described in Section 23701n which is subject to the provisions of this article shall not be exempt from taxation under Article 1 of this chapter if it has engaged in a prohibited transaction after December 31, 1960. (Amended by Stats. 1961, Ch. 857.)
  94. 23736.3.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

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    Certain exempt organizations can lose Section 23736.2 exemption after the Franchise Tax Board notifies them of a prohibited transaction, with an exception for specified transactions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23736.3. An organization described in Section 23701n or Section 23701d, except as specified in Section 23736, shall be denied exemption under Section 23736.2 only for taxable years subsequent to the taxable years during which it is notified by the Franchise Tax Board that it has engaged in a prohibited transaction, unless such organization entered into such prohibited transaction with the purpose of diverting corpus or income of the organization from its exempt purposes, and such transaction involved a substantial part of the corpus or income of such organization. (Amended by Stats. 2000, Ch. 862, Sec. 98. Effective January 1, 2001.)
  95. 23736.4.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

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    An organization denied exemption may file a claim for exemption under Franchise Tax Board regulations, and it will be exempt for later taxable years if the Franchise Tax Board is satisfied it will not knowingly engage in another prohibited transaction.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23736.4. Any organization denied exemption under Section 23701d or Section 23701n by reason of the provisions of Section 23736.2 with respect to any taxable year following the taxable year in which notice of denial of exemption was received, may, under regulations prescribed by the Franchise Tax Board, file claim for exemption, and if the Franchise Tax Board pursuant to such regulations, is satisfied that such organizations will not knowingly again engage in a prohibited transaction, such organization shall be exempt with respect to taxable years subsequent to the year in which such claim is filed. (Amended by Stats. 2000, Ch. 862, Sec. 99. Effective January 1, 2001.)
  96. 23737.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

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    For certain organizations described in Section 23701d, exemption under Article 1 is denied for the taxable year if accumulated income is unreasonable, used mostly for other purposes, or invested in a way that jeopardizes the organization’s exempt purpose.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23737. In the case of any organization described in Section 23701d to which this article is applicable, exemption under Article 1 (commencing with Section 23701) shall be denied for the taxable year if the amounts accumulated out of income during the taxable year or any prior taxable year and not actually paid out by the end of the taxable year— (a) Are unreasonable in amount or duration in order to carry out the charitable, educational, or other purpose or function constituting the basis for such organization’s exemption under Section 23701d; or (b) Are used to a substantial degree for purposes or functions other than those constituting the basis for such organization’s exemption under Section 23701d, or (c) Are invested in such a manner as to jeopardize the carrying out of the charitable, educational, or other purpose or function constituting the basis for such organization’s exemption under Section 23701d. (Amended by Stats. 2000, Ch. 862, Sec. 100. Effective January 1, 2001.)
  97. 23740.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    This section applies IRC Section 4911 on tax for excess spending to influence legislation, with stated exceptions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23740. Section 4911 of the Internal Revenue Code, relating to tax on excess expenditures to influence legislation, shall apply, except as otherwise provided. (a) Section 4911(a)(1) of the Internal Revenue Code shall not apply. (b) Section 4911(f)(4)(A) of the Internal Revenue Code shall include efforts to influence legislation with respect to acts, bills, resolutions, or similar items by the State Legislature. (Repealed and added by Stats. 2000, Ch. 252, Sec. 34. Effective January 1, 2001.)
  98. 23741.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. )

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    A qualifying church does not pay tax on rental income received from another qualifying church for renting exempt function church property.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 2. Taxation of Business Income of Certain Article 1 Organizations [23731 - 23741] ( Article 2 added by Stats. 1951, Ch. 344. ) ## 23741. Notwithstanding any other provision in this part, in the case of a church exempt from taxes imposed under this part pursuant to Article 1 (commencing with Section 23701) of Chapter 4, any rental income received, directly or indirectly, from another church exempt from taxes imposed under this part pursuant to Article 1 (commencing with Section 23701) of Chapter 4 for rental of exempt function church property is exempt from any tax imposed by this part. (Added by Stats. 1981, Ch. 341, Sec. 1. Effective September 9, 1981. Applicable to income years beginning on or after January 1, 1981, by Sec. 2 of Ch. 341.)
  99. 23771.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    Certain exempt organizations with unrelated business income must file a return and pay the tax due; education IRAs have an earlier filing deadline.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23771. (a) Except as provided in subdivision (b), every organization, otherwise exempt under Article 1 (commencing with Section 23701), but having income of the character described in Article 2 (commencing with Section 23731), shall file a return, verified by an executive officer under penalty of perjury in the form prescribed by the Franchise Tax Board, on or before the 15th day of the fifth month following the close of the taxable year, reporting its income from those activities and shall pay a tax as required by Section 23731 on its unrelated business taxable income as defined in Section 23732. (b) An education IRA described in Section 23712 shall file a return described in subdivision (a) on or before the 15th day of the fourth month following the close of the taxable year. (Amended by Stats. 2000, Ch. 862, Sec. 101. Effective January 1, 2001.)
  100. 23772.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    Most exempt organizations and certain private-foundation trusts must file an annual return and give prescribed information to the Franchise Tax Board by the stated deadline, unless a listed exception applies.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23772. (a) For the purposes of this part— (1) Except as provided in paragraph (2), every organization exempt from taxation under Section 23701 and every trust treated as a private foundation because of Section 4947(a)(1) of the Internal Revenue Code shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and any other information for the purpose of carrying out the laws under this part as the Franchise Tax Board may by rules or regulations prescribe, and shall keep any records, render under oath any statements, make any other returns, and comply with any rules and regulations as the Franchise Tax Board may from time to time prescribe. The return shall be filed on or before the 15th day of the fifth full calendar month following the close of the taxable year. (2) Exceptions from filing— (A) Mandatory exceptions—Paragraph (1) shall not apply to— (i) Churches, their integrated auxiliaries, and conventions or association of churches, (ii) An organization (other than a private foundation as defined in Section 23709), the gross receipts of which in each taxable year are normally not more than fifty thousand dollars ($50,000), or (iii) The exclusively religious activities of any religious order. (B) Discretionary exceptions—The Franchise Tax Board may permit the filing of a simplified return for organizations based on either gross receipts or total assets or both gross receipts and total assets, or may permit the filing of an information statement (without fee), or may permit the filing of a group return for incorporated or unincorporated branches of a state or national organization where it determines that an information return is not necessary to the efficient administration of this part. (b) Every organization described in Section 23701d that is subject to the requirements of subdivision (a) is required to furnish annually information, at the time and in the manner as the Franchise Tax Board may by rules or regulations prescribe, setting forth all of the following: (1) Its gross income for the year. (2) Its expenses attributable to gross income and incurred within the year. (3) Its disbursements within the year for the purposes for which it is exempt. (4) A balance sheet showing its assets, liabilities, and net worth as of the beginning of that year. (5) The total of the contributions and gifts received by it during the year, and the names and addresses of all substantial contributors. (6) The names and addresses of its foundation manager (within the meaning of Section 4946 of the Internal Revenue Code) and highly compensated employees. (7) The compensation and other payments made during the year to each individual described in paragraph (6). (8) In the case of an organization with respect to which an election under Section 23704.5 is effective for the taxable year, the following amounts for that organization for that taxable year: (A) The lobbying expenditures (as defined in Section 4911(c)(1) of the Internal Revenue Code). (B) The lobbying nontaxable amount (as defined in Section 4911(c)(2) of the Internal Revenue Code). (C) The grassroots expenditures (as defined in Section 4911(c)(3) of the Internal Revenue Code). (D) The grassroots nontaxable amount (as defined in Section 4911(c)(4) of the Internal Revenue Code). For purposes of this paragraph, if Section 23740 applies to the organization for the taxable year, the organization shall furnish the amounts with respect to the affiliated group as well as with respect to the organization. (9) Other information with respect to direct or indirect transfers to, and other direct or indirect transactions and relationships with, other organizations described in Sections 23701a to 23701w, inclusive (other than Sections 23701d, 23701k, and 23701t), as the Franchise Tax Board may require to prevent either of the following: (A) Diversion of funds from the organization’s exempt purpose. (B) Misallocation of revenue or expense. (10) Information with respect to qualified disaster relief activities. (11) Any other relevant information as the Franchise Tax Board may prescribe. (12) Each controlling organization, within the meaning of Section 512(b)(13) of the Internal Revenue Code, which is subject to the requirements of subdivision (a), shall include on the return required under subdivision (a) all of the following information: (A) Any interest, royalties, annuities, or rents received from each controlled entity, within the meaning of Section 512(b)(13) of the Internal Revenue Code. (B) Any loans made to each controlled entity. (C) Any transfers of funds between such controlling organization and each such controlled entity. (13) (A) Any organization, the gross receipts of which in any taxable year result in the organization being referred to in clause (ii) of subparagraph (A) of paragraph (2) of subdivision (a), or subparagraph (B) of paragraph (2) of subdivision (a), shall do both of the following: (i) Furnish annually, in electronic form, and at the time and in the manner as may be prescribed by the Franchise Tax Board, the legal name of the organization, any name under which the organization operates or does business, the organization’s mailing address and the internet website address, if any, the organization’s taxpayer identification number, the name and address of a principal officer, and evidence of the continuing basis for the organization’s exemption from the filing requirements under paragraph (1) of subdivision (a). (ii) Upon termination of the existence of the organization, shall furnish notice of the termination. (B) This paragraph shall apply to notices and returns with respect to annual periods beginning on or after January 1, 2010. (14) (A) If an organization described in paragraph (1) of subdivision (a) or paragraph (13) of this subdivision fails to file an annual return or notice required under either paragraph (1) of subdivision (a) or paragraph (13) of this subdivision for three consecutive years, that organization’s status as an organization exempt from tax under Section 23701 shall be considered revoked on and after the date set by the Franchise Tax Board for the filing of the third annual return or notice. The Franchise Tax Board shall publish and maintain a list of any organization for which the tax-exempt status is revoked. (B) Any organization for which the tax-exempt status is revoked under subparagraph (A) must apply for reinstatement of that status regardless of whether that organization was originally required to make an application for tax-exempt status. (C) If, upon application for reinstatement of status as an organization exempt from tax under Section 23701, an organization described in subparagraph (A) can show to the satisfaction of the Franchise Tax Board evidence of reasonable cause for the failure described in that subparagraph, the organization’s exempt status may, in the discretion of the Franchise Tax Board, be reinstated effective from the date of the revocation under that subparagraph. (D) This paragraph shall apply to notices and returns with respect to annual periods beginning on or after January 1, 2010. (c) For the purposes of this part— (1) In the case of a failure to file a return required under this section on the date and in the manner prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that the failure is due to reasonable cause, there shall be paid (on notice and demand by the Franchise Tax Board and in the same manner as tax) by the exempt organization or trust failing so to file, five dollars ($5) for each month or part thereof during which the failure continues, but the total amount imposed hereunder on any organization for failure to file any return may not exceed forty dollars ($40). (2) The Franchise Tax Board may make written demand upon a private foundation failing to file under paragraph (1) of this subdivision specifying therein a reasonable future date by which the filing shall be made, and if the filing is not made on or before that date, and unless it is shown that failure so to file is due to reasonable cause, there shall be paid (on notice and demand by the Franchise Tax Board and in the same manner as tax) by the person failing so to file, in addition to the penalty prescribed in paragraph (1), a penalty of five dollars ($5) each month or part thereof after the expiration of the time specified in the written demand during which the failure continues, but the total amount imposed hereunder on all persons for the failure to file shall not exceed twenty-five dollars ($25). If more than one person is liable under this paragraph for a failure to file, all of those persons shall be jointly and severally liable with respect to the failure. The term “person” as used herein means any officer, director, trustee, employee, member, or other individual who is under a duty to perform the act in respect of which the violation occurs. (3) This subdivision shall not apply with respect to any notice required under paragraph (13) of subdivision (b). (d) The amendments made to this section by Chapter 858 of the Statutes of 2012 shall apply to taxable years beginning on or after January 1, 2012. (e) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2021. (Amended by Stats. 2020, Ch. 59, Sec. 4. (SB 934) Effective January 1, 2021.)
  101. 23774.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    The Franchise Tax Board may require exempt organizations to file an annual statement, and qualifying religious organizations may submit a notarized substitute statement instead.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23774. (a) Except as provided in subdivision (b), every organization exempt from filing an annual information return by reason of subdivision (a) of Section 23772, may be required to file an annual statement on or before the 15th day of the fifth calendar month following the close of the taxable year setting forth in the manner as may be required by the Franchise Tax Board the following information: the name and address of the organization, its major activities, its sources of income, and the section of the Internal Revenue Code under which it is exempt. Organizations other than those described in clause (i) and (iii) of subparagraph (A) of paragraph (2) of subdivision (a) of Section 23772 may also be required by the Franchise Tax Board to furnish information with respect to their gross receipts and their assets. (b) Every religious organization exempt from filing an annual information return by reason of subdivision (a) of Section 23772, which because of sincerely held religious convictions refuses to file an annual statement as prescribed in subdivision (a), may submit in lieu thereof a notarized statement on its organizational letterhead containing the following information: the name and address of the organization, its major activities, its sources of income, and the section of the Internal Revenue Code under which it is exempt. That information shall be for the sole purpose of verifying the absence of unrelated business income of the organization. The statement shall be submitted on or before the 15th day of the fifth calendar month following the close of the taxable year. (Amended by Stats. 2000, Ch. 862, Sec. 103. Effective January 1, 2001.)
  102. 23775.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    An exempt domestic corporation may have its corporate powers, rights, and privileges suspended, and a foreign exempt corporation may forfeit them in this state, if required filings or payments are not made on time; this does not apply when amending articles to set a new name.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23775. Except for purposes of amending the articles of incorporation to set forth a new name, under regulations prescribed by the Franchise Tax Board, the corporate powers, rights and privileges of an exempt domestic corporation may be suspended and the exercise of the corporate powers, rights and privileges of a foreign exempt corporation in this state may be forfeited if the organization fails to file the annual return or statement required under Section 23772 or 23774, or pay any amount due under Section 23703 or 23772 on or before the last day of the 12th month following the close of the taxable year. (Amended by Stats. 2000, Ch. 862, Sec. 104. Effective January 1, 2001.)
  103. 23776.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    An organization that has been suspended or forfeited may regain relief by filing specified revivor and tax compliance documents, and the Franchise Tax Board can require a new exemption application in some cases.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23776. (a) Any organization which has suffered the suspension or forfeiture provided for in Section 23775 may, in accordance with Section 23305a, be relieved therefrom upon the filing of all of the following: (1) An application for revivor. (2) When required by the Franchise Tax Board, a new application for exemption under Section 23701. (3) Any returns, statements, notifications, or amounts due under Sections 23772, 23774, or 23775 which were not previously submitted or paid and which resulted in the suspension or forfeiture. (4) An information return or statement and the amounts specified under Section 23772 for each year, or part thereof, during the period of suspension or forfeiture in which the organization conducted any activities or received income, grants, gifts or any other asset. (b) Any organization exempt from tax under Section 23701 which has suffered the suspension or forfeiture provided for in Section 23301 or 23301.5 may be required by the Franchise Tax Board to file a new application for exemption in connection with an application for revivor under Section 23305. (Amended by Stats. 1999, Ch. 987, Sec. 92. Effective October 10, 1999.)
  104. 23777.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

    Verify source ↗

    An exempt organization can lose its exemption if it misses required filings, fails to pay amounts due on time, does not follow Section 19504, or exceeds the activities allowed by its exemption.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23777. The exemption granted to any organization under the provisions of Article 1 (commencing with Section 23701) of this chapter may be revoked by the Franchise Tax Board if the organization fails to— (a) File any return required under this chapter or pay any amount due under this part or Part 10.2 (commencing with Section 18401) on or before the last day of the 12th month following the close of the taxable year; (b) Comply with Section 19504 (relating to powers of the Franchise Tax Board to examine records and subpoena witnesses); or (c) Confine its activities to those permitted by the section under which the exemption was granted. (Amended by Stats. 2000, Ch. 862, Sec. 105. Effective January 1, 2001.)
  105. 23778.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. )

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    An organization whose exemption was revoked may be reestablished as exempt if it files a new exemption application and satisfies unpaid filing, statement, return, or payment obligations tied to the revocation.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4. Exempt Corporations [23701 - 23778] ( Chapter 4 added by Stats. 1949, Ch. 557. ) ## ARTICLE 3. Returns of Exempt Organizations [23771 - 23778] ( Article 3 added by Stats. 1951, Ch. 344. ) ## 23778. An organization whose exemption was revoked under Section 23703 or 23777 may be reestablished as an exempt organization upon: (a) The filing or payment of both of the following: (1) A new application for exemption. (2) Any returns, statements, or payment of any amounts due under this part or Part 10.2 (commencing with Section 18401) that were not previously submitted or paid and that resulted in the revocation. (b) When revocation occurred under subdivision (c) of Section 23777, satisfactory proof that all of the following have occurred: (1) The organization has corrected its nonexempt activities. (2) That it will operate in an exempt manner in the future. (3) The payment of any tax for periods the organization was not qualified for exemption. (Repealed and added by Stats. 2020, Ch. 59, Sec. 6. (SB 934) Effective January 1, 2021.)
  106. 23800.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

    Verify source ↗

    Subchapter S of the Internal Revenue Code applies here, unless another provision says otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23800. Subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to the tax treatment of “S corporations” and their shareholders, shall apply, except as otherwise provided. (Amended by Stats. 2003, Ch. 268, Sec. 4. Effective January 1, 2004.)
  107. 23800.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section imposes an annual tax on certain qualified Subchapter S subsidiaries and sets conditions for related S corporation and trust elections.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23800.5. (a) Section 1361(b)(3) of the Internal Revenue Code, relating to treatment of certain wholly owned subsidiaries, is modified as follows: (1) For purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part: (A) Section 1361(b)(3)(A)(i) of the Internal Revenue Code shall apply, except as provided in subparagraph (B). (B) There is hereby imposed a tax annually in an amount equal to the applicable amount specified in paragraph (1) of subdivision (d) of Section 23153 on a qualified Subchapter S subsidiary that is incorporated under the laws of this state, qualified to transact intrastate business in this state pursuant to Chapter 21 (commencing with Section 2100) of Division 1 of Title 1 of the Corporations Code, or doing business in this state. (C) Every qualified Subchapter S subsidiary described in subparagraph (B) shall be subject to the tax imposed under subparagraph (B) from the earlier of the date of incorporation, qualification, or commencement of business in this state, until the effective date of dissolution or withdrawal as provided in Section 23331, or, if later, the date the corporation ceases to do business in this state. (2) For purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part: (A) Section 1361(b)(3)(A)(ii) of the Internal Revenue Code does not apply and, in lieu thereof, subparagraph (B) shall apply and all references to Section 1361(b)(3)(A)(ii) of the Internal Revenue Code shall be treated as a reference to subparagraph (B). (B) All activities, assets, liabilities, including liability for the tax imposed under this subdivision, and items of income, deduction, and credit of a qualified Subchapter S subsidiary shall be treated as activities (including activities for purposes of Section 23101), assets, liabilities, and those items, as the case may be, of the “S corporation.” (3) Section 1361(b)(3)(B) of the Internal Revenue Code is modified to include the following requirements in addition to the requirements contained therein: (A) The “S corporation” has in effect a valid election to treat the corporation as a qualified Subchapter S subsidiary for federal income tax purposes. (B) An election made by the “S corporation” under Section 1361(b)(3)(B)(ii) of the Internal Revenue Code to treat the corporation as a qualified Subchapter S subsidiary for federal income tax purposes shall be treated for purposes of this part as an election made by the “S corporation” under this subdivision and a separate election under paragraph (3) of subdivision (e) of Section 23051.5 may not be allowed. (C) No election under this subdivision shall be allowed unless the “S corporation” has made the election under Section 1361(b)(3)(B)(ii) of the Internal Revenue Code to treat the corporation as a qualified Subchapter S subsidiary for federal income tax purposes. (b) Section 1361(c)(6) of the Internal Revenue Code, relating to certain exempt organizations permitted as shareholders, is modified by substituting a reference to Section 17631 or Section 23701d in lieu of the reference to Section 501(c)(3) of the Internal Revenue Code and by substituting a reference to Section 17631 or Section 23701 in lieu of the reference to Section 501(a) of the Internal Revenue Code. (c) Section 1361(e)(1)(B)(ii) of the Internal Revenue Code, relating to certain trusts not eligible, is modified by substituting “under Part 10 (commencing with Section 17001) or this part” in lieu of “under this subtitle.” (d) Section 1361(e)(3) of the Internal Revenue Code, relating to election, is modified to include the following provisions: (1) An election made by the trustee under Section 1361(e) of the Internal Revenue Code to be an electing small business trust for federal income tax purposes shall be treated for purposes of this part as an election made by the trustee under this subdivision and a separate election under paragraph (3) of subdivision (e) of Section 23051.5 may not be allowed. Any election made shall apply to the taxable year of the trust for which that election is made and to all subsequent taxable years of that trust, unless revoked with the consent of the Franchise Tax Board. (2) No election under this subdivision shall be allowed unless the trustee has made the election under Section 1361(e) of the Internal Revenue Code to be an electing small business trust for federal income tax purposes. (Amended by Stats. 2003, Ch. 268, Sec. 5. Effective January 1, 2004.)
  108. 23801.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section treats certain corporations as S corporations, limits their inclusion in combined reports, and gives the Franchise Tax Board power to use unitary combination methods in some cases.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23801. (a) A corporation that has in effect for federal income tax purposes a valid election under Section 1362(a) of the Internal Revenue Code shall be an “S” corporation for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part. (b) A corporation that is an “S corporation” for federal income tax purposes, shall be an “S corporation” for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part, and its shareholders shall be shareholders of an “S corporation” without regard to whether the corporation is qualified to do business or is incorporated in this state. (c) Except as provided in subdivision (d), a corporation that is an “S corporation” for purposes of this part may not be included in a combined report pursuant to Chapter 17 (commencing with Section 25101). (d) (1) In cases where the Franchise Tax Board determines that the reported income or loss of a group of commonly owned or controlled corporations (within the meaning of Section 25105), that includes one or more corporations treated as an “S corporation” under Chapter 4.5 (commencing with Section 23800), does not clearly reflect income (or loss) of a member of that group or represents an evasion of tax by one or more members of that group, and the Franchise Tax Board determines that the comparable uncontrolled price method prescribed by regulations pursuant to Section 482 of the Internal Revenue Code cannot practically be applied, the Franchise Tax Board may, in lieu of other methods prescribed by regulations pursuant to Section 482 of the Internal Revenue Code, apply methods of unitary combination, pursuant to Article 1 (commencing with Section 25101) of Chapter 17, to properly reflect the income or loss of the members of the group. (2) The application of the provisions of this subdivision shall not affect the treatment of any corporation as an “S corporation.” (e) (1) A termination of a federal election pursuant to Section 1362(d) of the Internal Revenue Code, that is not an inadvertent termination pursuant to Section 1362(f) of the Internal Revenue Code, shall simultaneously terminate the “S corporation” election for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part. (2) A federal termination by revocation shall be effective for purposes of this part and shall be reported to the Franchise Tax Board in the form and manner prescribed by the Franchise Tax Board no later than the last date allowed for filing federal termination for that year under Section 1362(d) of the Internal Revenue Code. (f) The tax for a “C corporation” for a short year shall be determined in accordance with Chapter 13 (commencing with Section 24631), in lieu of Section 1362(e)(5) of the Internal Revenue Code. (g) Section 1362(d)(3) of the Internal Revenue Code, relating to circumstances where passive investment income exceeds 25 percent of gross receipts for three consecutive taxable years and the corporation has accumulated earnings and profits, does not apply unless the “S” election is terminated for federal income tax purposes. (h) (1) The provisions of Section 1362(b)(5) of the Internal Revenue Code, relating to authority to treat late elections, etc., as timely, shall apply only for taxable years beginning on or after January 1, 1997, with respect to elections under Section 1362(a) of the Internal Revenue Code for taxable years beginning on or after January 1, 1997. (2) Notwithstanding the provisions of paragraph (1), if for any taxable year beginning on or after January 1, 2003, a corporation fails to qualify as an “S corporation” for federal income tax purposes solely because the federal Form 2553 (Election by a Small Business Corporation) was not filed timely, the corporation shall be treated for purposes of this part as an “S corporation” for the taxable year the “S corporation” election should have been made, and for each subsequent year until terminated, if the corporation and its shareholders have filed with the Internal Revenue Service a federal Form 2553 requesting automatic relief with respect to the late “S corporation” election, in full compliance with the federal Revenue Procedure 1997-48, I.R.B. 1997-43, and have received notification of the acceptance of the untimely filed “S corporation” election from the Internal Revenue Service. A copy of the notification shall be provided to the Franchise Tax Board upon request. (i) The provisions of Section 1362(f) of the Internal Revenue Code, relating to inadvertent invalid elections or terminations, shall apply only for taxable years beginning on or after January 1, 1997, with respect to elections under Section 1362(a) of the Internal Revenue Code for taxable years beginning on or after January 1, 1997. (Amended by Stats. 2003, Ch. 268, Sec. 6. Effective January 1, 2004.)
  109. 23802.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    S corporations stay subject to California corporation taxes, with some specific tax-rate and deduction rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23802. (a) Section 1363(a) of the Internal Revenue Code, relating to the taxability of an “S” corporation does not apply. (b) Corporations that are “S” corporations under this chapter shall continue to be subject to the taxes imposed under Chapter 2 (commencing with Section 23101) and Chapter 3 (commencing with Section 23501), except as follows: (1) The tax imposed under Section 23151 or 23501 shall be imposed at a rate of 11/2 percent rather than the rate specified in those sections. (2) In the case of an “S” corporation that is also a financial corporation, the rate of tax specified in paragraph (1) shall be increased by the excess of the rate imposed under Section 23183 over the rate imposed under Section 23151. (c) An “S” corporation is subject to the minimum franchise tax imposed under Section 23153. (d) (1) For purposes of subdivision (b), an “S” corporation shall be allowed a deduction under Section 24416 or 24416.1 (relating to net operating loss deductions), but only with respect to losses incurred during periods in which the corporation is an “S” corporation for purposes of this part. (2) Section 1371(b) of the Internal Revenue Code, relating to denial of carryovers between “C” years and “S” years, applies for purposes of the tax imposed under subdivision (b), except as provided in paragraph (1). (3) The provisions of this subdivision do not affect the amount of any item of income or loss computed in accordance with the provisions of Section 1366 of the Internal Revenue Code, relating to pass-thru of items to shareholders. (4) For purposes of subdivision (b) of Section 17276, relating to limitations on loss carryovers, losses passed through to shareholders of an “S” corporation, to the extent otherwise allowable without application of that subdivision, shall be fully included in the net operating loss of that shareholder and then that subdivision shall be applied to the entire net operating loss. (e) For purposes of computing the taxes specified in subdivision (b), an “S” corporation shall be allowed a deduction from income for built-in gains and passive investment income for which a tax has been imposed under this part in accordance with the provisions of Section 1374 of the Internal Revenue Code, relating to tax imposed on certain built-in gains, or Section 1375 of the Internal Revenue Code, relating to tax imposed on passive investment income. (f) For purposes of computing taxes imposed under this part, as provided in subdivision (b): (1) An “S” corporation shall compute its deductions for amortization and depreciation in accordance with the provisions of Part 10 (commencing with Section 17001) of Division 2. (2) Section 465 of the Internal Revenue Code, relating to limitation of deductions to the amount at risk, shall be applied in the same manner as in the case of an individual. (3) (A) Section 469 of the Internal Revenue Code, relating to limitations on passive activity losses and credits, shall be applied in the same manner as in the case of an individual. For purposes of the tax imposed under Section 23151 or 23501, as modified by this section, material participation shall be determined in accordance with Section 469(h) of the Internal Revenue Code, relating to certain closely held “C” corporations and personal service corporations. (B) For purposes of this paragraph, the “adjusted gross income” of the “S” corporation shall be equal to its “net income,” as determined under Section 24341 with the modifications required by this subdivision, except that a deduction shall not be allowed for contributions allowed by Section 24357. (4) The deduction for bad debts under paragraph (2) of subdivision (a) of Section 24348 shall not be allowed to an “S” corporation. (g) (1) The provisions of Section 1363(d) of the Internal Revenue Code, relating to recapture of LIFO benefits, shall be modified for purposes of this part to refer to Section 19101 in lieu of Section 6601 of the Internal Revenue Code. (2) For purposes of Section 19023, relating to the definition of “estimated tax,” and Section 19142, relating to an addition to tax for underpayment of estimated tax, the tax imposed pursuant to this subdivision is not a tax imposed by this part. (Amended by Stats. 2018, Ch. 92, Sec. 199. (SB 1289) Effective January 1, 2019.)
  110. 23802.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section changes how several federal S corporation rules apply in California tax law.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23802.5. (a) Section 1366(a)(1) of the Internal Revenue Code, relating to determination of shareholder’s tax liability, is modified to apply to the final taxable year of a trust or estate that terminates before the end of the corporation’s taxable year. (b) Section 1366(d)(1)(A) of the Internal Revenue Code, relating to losses and deductions that cannot exceed shareholder’s basis in stock and debt, is modified to additionally provide that the adjusted basis of a shareholder’s stock in the “S corporation” is to be decreased by distributions by the corporation that were not includable in the income of the shareholder by reason of Section 1368 of the Internal Revenue Code. (c) Section 1366(d)(3) of the Internal Revenue Code, relating to carryover of disallowed losses and deductions to post-termination transition period, is modified to provide that to the extent that any increase in adjusted basis described in Section 1366(d)(3)(B) of the Internal Revenue Code would have increased the shareholder’s amount at risk under Section 465 if the increase had occurred on the day preceding the commencement of the post-termination transition period, rules similar to the rules described in Section 1366(d)(3)(A) to (C), inclusive, of the Internal Revenue Code shall apply to any losses disallowed by reason of Section 465(a) of the Internal Revenue Code. (Amended by Stats. 2003, Ch. 268, Sec. 8. Effective January 1, 2004.)
  111. 23803.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section limits certain tax credits to one-third of the amount otherwise allowable and restricts how the unused and denied portions may be carried forward or passed through.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23803. (a) With respect to credits that are otherwise allowed to reduce the taxes imposed under this part: (1) The amount of any credit to be claimed shall be limited to one-third of the amount otherwise allowable. (2) (A) Any unused portion of the credit allowable under paragraph (1) (one-third of the total credit) shall be allowed to be carried forward and may not be subject to additional reductions under paragraph (1) in later years. (B) No carryforward shall be allowed for the portion of the credit denied under paragraph (1) (two-thirds of the total credit). (C) Credits carried forward from taxable years beginning prior to the first taxable year in which the corporation is treated as an “S corporation” under this part, shall be reduced in accordance with paragraph (1) for that first taxable year and may not be subject to additional reductions under paragraph (1) in later years. (D) The provisions of paragraphs (2) and (3) of subdivision (f) of Section 23802 shall be applied prior to the reduction required by paragraph (1). (E) No portion of any credit to which this subdivision applies shall be passed through to the shareholders of the “S corporation.” (F) The provisions of this subdivision do not affect the amount of any credit computed under Part 10 (commencing with Section 17001) for pass through to shareholders in accordance with the provisions of Section 1366 of the Internal Revenue Code. (b) Section 1366(f) of the Internal Revenue Code, relating to special rules, shall be modified as follows: (1) The amount of tax used to compute the loss allowed by Section 1366(f)(2) shall be the amount of tax imposed on built-in gains under this part. (2) The amount of tax used to compute the reduction allowed by Section 1366(f)(3) shall be the amount of tax imposed on excess net passive income under this part. (Amended by Stats. 2003, Ch. 268, Sec. 9. Effective January 1, 2004.)
  112. 23804.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section says IRC Section 1367(b)(4) applies to decedents dying after December 31, 1996.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23804. Section 1367(b)(4) of the Internal Revenue Code, relating to adjustments in case of inherited stock, shall apply for decedents dying after December 31, 1996. (Amended by Stats. 2003, Ch. 268, Sec. 10. Effective January 1, 2004.)
  113. 23806.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section limits how Section 338 elections work for S corporations and their shareholders, and ties state treatment to a valid federal election.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23806. (a) Section 1371(a) of the Internal Revenue Code, relating to application of Subchapter C rules, is modified to provide that, notwithstanding subdivisions (a) and (e) of Sections 17024.5 and 23051.5, any election by an “S corporation” or its shareholders under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, for federal purposes shall be treated as an election for purposes of this part and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 or 23051.5 shall not be allowed. (b) No election under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, shall be allowed for state purposes unless the “S corporation” or its shareholders made a valid election for federal purposes under Section 338 of the Internal Revenue Code. (c) Section 1371(d) of the Internal Revenue Code shall not apply. (d) (1) Subdivisions (a) and (b) shall apply to any transaction occurring on or after January 1, 1998, in a taxable year beginning on or after January 1, 1997. (2) Subdivision (c) shall apply to taxable years beginning on or after January 1, 1997. (e) Section 1371(f) of the Internal Revenue Code, relating to cash distributions following post-termination transition period, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 86. (SB 711) Effective October 1, 2025.)
  114. 23807.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section changes how Section 1372 of the Internal Revenue Code is read, replacing partnership-treatment references with references to Internal Revenue Code partnership provisions as modified by Part 10.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23807. Section 1372 of the Internal Revenue Code shall be modified so that references to partnership treatment shall be to Internal Revenue Code partnership provisions, as modified by Part 10 (commencing with Section 17001). (Added by Stats. 1987, Ch. 1139, Sec. 55. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)
  115. 23808.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    Sections 1373 and 1379 of the Internal Revenue Code do not apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23808. Sections 1373 and 1379 of the Internal Revenue Code shall not be applicable. (Amended by Stats. 1988, Ch. 11, Sec. 64. Effective February 19, 1988. Applicable to income years beginning on or after January 1, 1988, by Sec. 93 of Ch. 11.)
  116. 23809.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section imposes a tax on built-in gains attributable to California sources and modifies how the tax rate, credits, and related federal rules apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23809. There is hereby imposed a tax on built-in gains attributable to California sources, determined in accordance with the provisions of Section 1374 of the Internal Revenue Code, relating to tax imposed on certain built-in gains, as modified by this section. (a) (1) The rate of tax specified in Section 1374(b)(1) of the Internal Revenue Code shall be equal to the rate of tax imposed under Section 23151 in lieu of the rate of tax specified in Section 11(b) of the Internal Revenue Code. (2) In the case of an “S” corporation that is also a financial corporation, the rate of tax specified in paragraph (1) shall be increased by the excess of the rate imposed under Section 23183 over the rate imposed under Section 23151. (b) The provisions of Section 1374(b)(3) of the Internal Revenue Code, relating to credits, are modified to provide that the tax imposed under subdivision (a) may not be reduced by any credits allowed under this part. (c) The provisions of Section 1374(b)(4) of the Internal Revenue Code, relating to coordination with Section 1201(a), do not apply to taxable years beginning before January 1, 2018, and ending before January 1, 2025. (d) (1) For corporations described in paragraph (2), the provisions of Sections 1374(c)(1) and 1374(d)(7) of the Internal Revenue Code apply, based upon the effective date of the election to be treated as an “S” corporation for federal tax purposes, regardless of the date on which the corporation became an “S” corporation for state tax purposes. (2) This subdivision applies to a corporation that, for its last taxable year beginning before January 1, 2002, was an “S” corporation for federal tax purposes and a “C” corporation for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part, and, as a result of the enactment of Chapter 35 of the Statutes of 2002, is an “S” corporation for the corporation’s taxable years beginning on or after January 1, 2002. (e) Section 1374(d)(7)(A) of the Internal Revenue Code, relating to recognition period, is modified by substituting “10-year” in lieu of “5-year.” (f) The amendments to this section made by Section 1 of Chapter 782 of the Statutes of 2004 shall apply to taxable years beginning on or after January 1, 2002. (Amended by Stats. 2025, Ch. 231, Sec. 87. (SB 711) Effective October 1, 2025.)
  117. 23811.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section imposes a tax on passive investment income from California sources for S corporations, with exceptions and special rules for consent dividends, deductions, stays of collection, and limitation periods.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23811. Except as otherwise provided in this section, there is hereby imposed a tax on passive investment income attributable to California sources, determined in accordance with the provisions of Section 1375 of the Internal Revenue Code, relating to tax imposed on passive investment income, as modified by this section. (a) The tax imposed under this section may not be imposed on an “S corporation” that has no excess net passive income for federal income tax purposes determined in accordance with Section 1375 of the Internal Revenue Code. (b) (1) The rate of tax shall be equal to the rate of tax imposed under Section 23151 in lieu of Section 11(b) of the Internal Revenue Code. (2) In the case of an “S corporation” that is also a financial corporation, the rate of tax specified in paragraph (1) shall be increased by the excess of the rate imposed under Section 23183 over the rate imposed under Section 23151. (c) Section 1375(c)(1) of the Internal Revenue Code, relating to credits, is modified to provide that the tax imposed under subdivision (a) may not be reduced by any credits allowed under this part. (d) The term “subchapter C earnings and profits” or “accumulated earnings and profits” as used in Section 1375 of the Internal Revenue Code shall mean the “subchapter C earnings and profits” of the corporation attributable to California sources determined under this part, modified as provided in subdivision (e). (e) (1) In the case of a corporation that is an “S corporation” for purposes of this part for its first taxable year for which it has in effect a valid federal S election, there shall be allowed as a deduction in determining that corporation’s “subchapter C earnings and profits” at the close of any taxable year the amount of any consent dividend (as provided in paragraph (2)) paid after the close of that taxable year. (2) In the event there is a determination that a corporation described in paragraph (1) has “subchapter C earnings and profits” at the close of any taxable year, that corporation shall be entitled to distribute a consent dividend to its shareholders. The amount of the consent dividend may not exceed the difference between the corporation’s “subchapter C earnings and profits” determined under subdivision (d) at the close of the taxable year with respect to which the determination is made and the corporation’s “subchapter C earnings and profits” for federal income tax purposes at the same date. A consent dividend must be paid within 90 days of the date of the determination that the corporation has “subchapter C earnings and profits.” For this purpose, the date of a determination means the effective date of a closing agreement pursuant to Section 19441, the date an assessment of tax imposed by this section becomes final, or the date of execution by the corporation of an agreement with the Franchise Tax Board relating to liability for the tax imposed by this section. For purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part, a corporation must make the election provided in Section 1368(e)(3) of the Internal Revenue Code. (3) If a corporation distributes a consent dividend, it shall claim the deduction provided in paragraph (1) by filing a claim therefor with the Franchise Tax Board within 120 days of the date of the determination specified in paragraph (2). (4) The collection of tax imposed by this section from a corporation described in paragraph (2) shall be stayed for 120 days after the date of the determination specified in paragraph (2). If a claim is filed pursuant to paragraph (3), collection of that tax shall be further stayed until the date the claim is acted upon by the Franchise Tax Board. (5) If a claim is filed pursuant to paragraph (3), the running of the statute of limitations on the making of assessments and actions for collection of the tax imposed by this section shall be suspended for a period of two years after the date of the determination specified in paragraph (2). (Amended by Stats. 2003, Ch. 268, Sec. 13. Effective January 1, 2004.)
  118. 23813.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. )

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    This section modifies a tax-code definition to add three specified items.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 4.5. Tax Treatment of S Corporations and Their Shareholders [23800 - 23813] ( Chapter 4.5 added by Stats. 1987, Ch. 1139, Sec. 55. ) ## 23813. Section 1377(b)(2) of the Internal Revenue Code, relating to determination defined, is modified to include, in addition to the items specified therein, the following: (a) A decision by the State Board of Equalization that has become final. (b) A closing agreement made under Article 6 (commencing with Section 19441) of Chapter 6 of Part 10.2. (c) A final disposition by the Franchise Tax Board of a claim for refund. (Added by Stats. 1997, Ch. 611, Sec. 76. Effective October 3, 1997.)
  119. 24.

    ## Revenue and Taxation Code - RTC ## GENERAL PROVISIONS ( General Provisions enacted by Stats. 1939, Ch. 154. )

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    Acts in revenue-taxation proceedings are not illegal just because of informality or because they were not completed on time.

    ## Revenue and Taxation Code - RTC ## GENERAL PROVISIONS ( General Provisions enacted by Stats. 1939, Ch. 154. ) ## 24. No act in all the proceedings for raising revenue by taxation is illegal on account of informality or because not completed within the required time. (Enacted by Stats. 1939, Ch. 154.)
  120. 241.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    Qualifying employee hand tools, up to $50,000 of value, are exempt from taxation.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 241. (a) The first fifty thousand dollars ($50,000) of personal property that consists of hand tools owned and supplied by an employee that are required as a condition of that employee’s employment are exempt from taxation. (b) For purposes of this section: (1) “Hand tools” means hand-held implements and equipment, including hand-held power tools, of which any one may be transported to and from the workplace and which are necessary for the ordinary and regular performance of the employee’s work, and also means the appropriate storage containers used to store those implements and that equipment. (2) “Hand tools owned and supplied by an employee” means only those hand tools that are either owned by the employee prior to the employment or acquired and paid for by the employee during the employment, that the employee will continue to own after termination of the employment. (3) “Employee” means any individual who is employed by an employer that directly or indirectly supervises that person and exercises control over the wages and working conditions of individual workers. “Employee” does not include a self-employed individual or an independent contractor. (Amended by Stats. 2001, Ch. 161, Sec. 1. Effective August 9, 2001.)
  121. 242.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. )

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    Qualified property used in space flight is exempt from the taxes in this part, but taxpayers may need to prove eligibility when the assessor asks.

    ## Revenue and Taxation Code - RTC ## DIVISION 1. PROPERTY TAXATION [50 - 5911] ( Division 1 enacted by Stats. 1939, Ch. 154. ) ## PART 2. ASSESSMENT [201 - 1367] ( Part 2 enacted by Stats. 1939, Ch. 154. ) ## CHAPTER 1. Taxation Base [201 - 287] ( Chapter 1 enacted by Stats. 1939, Ch. 154. ) ## ARTICLE 1. Taxable and Exempt Property [201 - 242] ( Article 1 enacted by Stats. 1939, Ch. 154. ) ## 242. (a) There is exempted from the taxes imposed by this part qualified property for use in space flight. (b) For purposes of this section: (1) “Qualified property” means any of the following: (A) Tangible personal property, whether raw materials, work in process or finished goods, that has, or upon manufacture, assembly, or installation has, space flight capacity, including, but not limited to, an orbital space facility, space propulsion system, space vehicle, launch vehicle, satellite, or space station of any kind, and any component thereof, regardless of whether that property is to be ultimately returned to this state. (B) Fuel of a quality that is not adaptable for use in ordinary motor vehicles, but is produced, sold, and used exclusively for space flight. (2) “Space flight” means any flight designed for suborbital, orbital, or interplanetary travel by a space vehicle, satellite, space facility, or space station of any kind. (c) The exemption established by this section shall not be denied by reason of failure, postponement, or cancellation of a launch of a space vehicle, satellite, space facility, or space station of any kind, or the destruction of any launch vehicle or any component thereof, but the exemption shall not apply to any material that is not intended to be launched into space. (d) This section shall be operative from the January 1, 2014, lien date to, and including, the January 1, 2029, lien date, and is inoperative for any lien date thereafter. (e) A taxpayer shall provide, upon request of the assessor, evidence that the qualified property exempted from the taxes imposed by this part pursuant to this section has been or will be used as described in subparagraph (A) of paragraph (1) of subdivision (b). (f) The exemption provided by this section from the taxes imposed by this part shall be limited to taxpayers that have a primary business purpose in space flight activities. (g) For purposes of complying with Section 41, with respect to the exemption set forth in this section, as amended by the act adding this subdivision (hereafter “the exemption”), the Legislature finds and declares all of the following: (1) The specific goal, purpose, and objective that the exemption will achieve includes increasing employment and investment in the space flight industry in California relative to other states with comparable infrastructure and capacity to support this industry. (2) The detailed performance indicators for the Legislature to use in determining whether the exemption meets the goal, purpose, and objective specified in paragraph (1) are: (A) The change in the number of employees in the space flight industry in California resulting from the exemption. (B) The change in the compensation amounts of employees in the space flight industry in California resulting from the exemption. (C) The change in the amount of investment made in space flight facilities in California resulting from the exemption. (3) (A) By January 1, 2028, the Legislative Analyst’s Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Governance and Finance, and the public a report that summarizes its findings regarding the performance indicators described in paragraph (2). The findings in the report shall be provided in an aggregated data format that anonymizes all information in the report. In researching the report, the Legislative Analyst’s Office may request and receive information from county assessors, the State Board of Equalization, taxpayers benefiting from the exemption, trade associations, or other individuals or entities. The Legislative Analyst’s Office may also request and receive information from the Employment Development Department in a nonconfidential form, as described in subdivision (c) of Section 1094 of the Unemployment Insurance Code. (B) County assessors, the State Board of Equalization, the Employment Development Department, and taxpayers claiming the exemption shall provide information specified by the Legislative Analyst’s Office as needed to research the report required by this paragraph. (C) Notwithstanding any law, records received by and in the custody of the Legislative Analyst’s Office in accordance with this subdivision shall be deemed confidential and shall not be subject to disclosure under the Legislative Open Records Act (Article 3.5 (commencing with Section 9070) of Chapter 1.5 of Part 1 of Division 2 of Title 2 of the Government Code). (h) This section shall remain in effect only until July 1, 2030, and as of that date is repealed. (Amended by Stats. 2024, Ch. 80, Sec. 119. (SB 1525) Effective January 1, 2025. Inoperative after the January 1, 2029, lien date, as provided in subd. (d). Repealed as of July 1, 2030, by its own provisions.)
  122. 24251.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 5. Computation of Tax When Law Changed [24251- 24251.] ( Chapter 5 repealed and added by Stats. 1955, Ch. 938. )

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    A taxpayer whose period spans two calendar years must have tax computed by splitting the period between the two years' laws and rates, unless another rule applies.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 5. Computation of Tax When Law Changed [24251- 24251.] ( Chapter 5 repealed and added by Stats. 1955, Ch. 938. ) ## 24251. The tax on any taxpayer for a period beginning in one calendar year (called “first calendar year”) and ending in the following calendar year (called “second calendar year”) where the law applicable to the computation of taxes for calendar year taxpayers for the second calendar year is different from the law applicable to computation of taxes for calendar year taxpayers for the first calendar year, shall, except as otherwise provided, be the sum of: (a) The same proportion of a tax for the entire period, determined under the law and rates applicable to the first calendar year which the portion of the period falling within the first year is of the entire period; and (b) The same proportion of a tax for the entire period, determined under the law and rates applicable to the second calendar year which the portion of the period falling within the second calendar year is of the entire period. Any tax that has been paid under the law applicable to the first calendar year if in excess of the tax imposed by this section shall be refunded or credited to the taxpayer as provided in Chapter 22. Any tax in addition to that paid under the law applicable to the first calendar year made necessary by this article shall be immediately due and payable upon notice and demand from the Franchise Tax Board. (Added by Stats. 1955, Ch. 938.)
  123. 24271.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section says California uses Internal Revenue Code Section 61 for gross income, unless another rule in this code says otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24271. (a) Section 61 of the Internal Revenue Code, relating to gross income defined, shall apply, except as otherwise provided. (b) A distributive share of partnership gross income shall be determined in accordance with Part 10 (commencing with Section 17001). (c) Income from an interest in an estate or trust shall be determined in accordance with Part 10 (commencing with Section 17001). (Amended by Stats. 1993, Ch. 877, Sec. 41. Effective October 6, 1993.)
  124. 24272.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

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    For Chapter 2 tax purposes, gross income includes interest received from federal, state, municipal, or other bonds.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24272. For the purposes of the tax imposed under Chapter 2 (commencing with Section 23101), “gross income” includes all interest received from federal, state, municipal or other bonds. (Amended by Stats. 1984, Ch. 193, Sec. 126.)
  125. 24272.2.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

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    Section 72(u) of the Internal Revenue Code, dealing with annuity contracts not held by natural persons, applies here.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24272.2. The provisions of Section 72(u) of the Internal Revenue Code, relating to the treatment of annuity contracts not held by natural persons, shall be applicable. (Added by Stats. 1987, Ch. 1139, Sec. 58. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)
  126. 24272.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section makes Internal Revenue Code Section 7518 apply in California, with specific substitutions and exceptions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24272.5. (a) Section 7518 of the Internal Revenue Code, relating to tax incentives relating to merchant marine capital construction funds, shall apply, except as otherwise provided. (b) Section 7518(d)(2)(C) of the Internal Revenue Code is modified as follows: (1) By substituting “70 percent” in lieu of the reference to “the percentage applicable under Section 243(a)(1).” (2) To refer to Section 24402 in lieu of Section 243 of the Internal Revenue Code. (c) Section 7518(d)(2)(D) of the Internal Revenue Code is modified to refer to “interest income exempt from taxation” under this part in lieu of “interest income exempt from taxation under Section 103.” (d) Section 7518(g)(3) of the Internal Revenue Code is modified as follows: (1) To refer to Article 6 (commencing with Section 19101) of Chapter 4 of Part 10.2 in lieu of Section 6601 of the Internal Revenue Code. (2) To refer to Article 7 (commencing with Section 19131) of Chapter 4 of Part 10.2 in lieu of Section 6651 of the Internal Revenue Code. (e) Section 7518(g)(6) of the Internal Revenue Code is modified as follows: (1) By substituting a reference to “this part” in lieu of “Chapter 1” in each place in which it appears. (2) To refer to Section 23151 in lieu of Section 11 of the Internal Revenue Code. (3) The last sentence in Section 7518(g)(6)(A) of the Internal Revenue Code shall not apply. (Added by Stats. 1997, Ch. 611, Sec. 77. Effective October 3, 1997.)
  127. 24273.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

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    Taxpayers may elect to treat Commodity Credit Corporation loan amounts as income; if they do, they must keep using that income-computation method in later years unless the Franchise Tax Board approves a change.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24273. (a) Amounts received as loans from the Commodity Credit Corporation shall, at the election of the taxpayer, be considered as income and shall be included in gross income for the taxable year in which received. (b) If a taxpayer exercises the election provided for in subsection (a) for any taxable year, then the method of computing income so adopted shall be adhered to with respect to all subsequent taxable years unless with the approval of the Franchise Tax Board a change to a different method is authorized. (Amended by Stats. 2000, Ch. 862, Sec. 113. Effective January 1, 2001.)
  128. 24273.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

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    A taxpayer may choose how to treat noncash patronage allocations as income, but if excluded at first, they must be reported later when redeemed or realized.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24273.5. (a) Noncash patronage allocations from farmers’ cooperative and mutual associations (whether paid in capital stock, revolving fund certificates, retain certificates, certificates of indebtedness, letters of advice or in some other manner that discloses the dollar amount of such noncash patronage allocations) may, at the election of the taxpayer, be considered as income and included in gross income for the taxable year in which received. (b) If a taxpayer exercises the election provided for in subdivision (a), the amount included in gross income shall be the face amount of such allocations. (c) If a taxpayer elects to exclude noncash patronage allocations from gross income for the taxable year in which received, such allocations shall be included in gross income in the year that they are redeemed or realized upon. (d) If a taxpayer exercises the election provided for in subdivision (c), the face amount of such noncash patronage allocations shall be disclosed in the return made for the taxable year in which such noncash patronage allocations were received. (e) If a taxpayer exercises the election provided for in subdivision (a) or (c) for any taxable year, then the method of computing income so adopted shall be adhered to with respect to all subsequent taxable years unless with the approval of the Franchise Tax Board a change to a different method is authorized. (f) If a taxpayer has made the election provided for in subdivision (c), then (1) the statutory period for the assessment of a deficiency for any taxable year in which the amount of any noncash patronage allocations are realized shall not expire prior to the expiration of four years from the date the Franchise Tax Board is notified by the taxpayer (in any manner as the Franchise Tax Board may by regulation prescribe) of the realization of gain on such allocations; and (2) that deficiency may be assessed prior to the expiration of the four-year period, notwithstanding the provisions of Section 19057 or the provisions of any other law or rule of law which would otherwise prevent such assessment. (Amended by Stats. 2000, Ch. 862, Sec. 114. Effective January 1, 2001.)
  129. 24275.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A taxpayer who must include nuclear decommissioning costs in ratemaking cost of service must also include that same amount in gross income for the taxable year.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24275. In the case of any taxpayer who is required to include the amount of any nuclear decommissioning costs in the taxpayer’s cost of service for ratemaking purposes, there shall be includable in the gross income of that taxpayer the amount so included for any taxable year. (Amended by Stats. 2000, Ch. 862, Sec. 115. Effective January 1, 2001.)
  130. 24276.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section says IRC Section 90 applies to water delivered to the taxpayer on or after January 1, 1988, for taxable years beginning on or after January 1, 1989, unless another rule says otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Definitions [24271 - 24276] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24276. Section 90 of the Internal Revenue Code, relating to illegal federal irrigation subsidies, shall apply to water delivered to the taxpayer on or after January 1, 1988, in taxable years beginning on or after January 1, 1989, except as otherwise provided. (Amended by Stats. 2000, Ch. 862, Sec. 116. Effective January 1, 2001.)
  131. 24301.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    When computing tax under this part, gross income excludes the items listed in this article.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24301. In computing the tax imposed under this part, “gross income” does not include any of the items specified in this article. (Repealed and added by Stats. 1955, Ch. 938.)
  132. 24302.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain amounts received under life insurance, endowment, or annuity contracts are excluded from gross income, including amounts tied to premiums paid and, in some transfer cases, only limited consideration and later-paid sums.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24302. Amounts received other than amounts paid by reason of the death of the insured under life insurance, endowment or annuity contracts, either during the term or at maturity or upon surrender of the contract, equal to the total amount of premiums paid thereon. In the case of a transfer for a valuable consideration by assignment or otherwise, of a life insurance, endowment or annuity contract or any interest therein, only the actual value of such consideration and the amount of the premiums and other sums subsequently paid by the transferee shall be excluded from gross income under Section 24305 or this section. The preceding sentence shall not apply in the case of such a transfer if such contract or interest therein has a basis for determining gain or loss in the hands of a transferee determined in whole or in part by reference to such basis of such contract or interest therein in the hands of the transferor or to a corporation in which the insured is a shareholder or officer. (Amended by Stats. 1963, Ch. 1028.)
  133. 24303.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A qualifying federal grant is excluded from gross income and alternative minimum taxable income, but it must be counted when calculating the property’s basis, subject to basis reduction and adjustment rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24303. Any grant made in any taxable year by the Secretary of the Treasury under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5) to a person that places in service specified energy property shall not be includable in the gross income or the alternative minimum taxable income of the taxpayer, but shall be taken into account in determining the basis of the property to which that grant relates, except that the basis of that property shall be reduced using rules prescribed under Section 50(c) of the Internal Revenue Code in the same manner as a credit allowed under Section 48(a) of the Internal Revenue Code, and adjusted in accordance with rules applied by the Secretary of the Treasury under Section 1603(f) of the American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5). (Added by Stats. 2010, Ch. 14, Sec. 64. (SB 401) Effective January 1, 2011.)
  134. 24305.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section generally excludes death benefits from life insurance from gross income, but requires interest payments kept by the insurer to be included, and imposes special rules for flexible premium contracts and employer-owned life insurance contracts.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24305. (a) Except as provided in subdivisions (b) and (c), amounts received under life insurance policies and contracts paid by reason of the death of the insured but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income. (b) Proceeds of flexible premium contracts payable by reason of death shall be excluded from gross income only in accordance with the provisions of Section 101(f) of the Internal Revenue Code. (c) (1) In the case of an employer-owned life insurance contract, any amount received by reason of death of an insured shall be excluded from gross income only in accordance with the provisions of Section 101(j) of the Internal Revenue Code. (2) Section 101(j) of the Internal Revenue Code, relating to treatment of certain employer-owned life insurance contracts, shall apply in accordance with the provisions of Section 863(d) of the Pension Protection Act of 2006 (Public Law 109-280), relating to effective dates, except that the phrase “January 1, 2010,” shall be substituted for “the date of the enactment of this Act” contained therein. (Amended by Stats. 2010, Ch. 14, Sec. 65. (SB 401) Effective January 1, 2011.)
  135. 24306.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section defines terms and sets rules for when Scholarshare trust earnings, contributions, and distributions are included in or excluded from gross income for certain taxable years.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24306. (a) For purposes of this section, the following terms have the following meanings, as provided in the Golden State Scholarshare Trust Act (Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code): (1) “Beneficiary” has the meaning set forth in subdivision (c) of Section 69980 of the Education Code. (2) “Benefit” has the meaning set forth in subdivision (d) of Section 69980 of the Education Code. (3) “Participant” has the meaning set forth in subdivision (h) of Section 69980 of the Education Code. (4) “Participation agreement” has the meaning set forth in subdivision (i) of Section 69980 of the Education Code. (5) “Scholarshare trust” has the meaning set forth in subdivision (f) of Section 69980 of the Education Code. (b) For taxable years beginning on or after January 1, 1998, and before January 1, 2002, except as otherwise provided in subdivision (c), gross income of a participant shall not include any of the following: (1) Any earnings under a Scholarshare trust, or a participation agreement, as provided in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code. (2) Contributions to the Scholarshare trust on behalf of a beneficiary shall not be includable as gross income of that beneficiary. (c) For taxable years beginning on or after January 1, 1998, and before January 1, 2002: (1) Any distribution under a Scholarshare trust participation agreement shall be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code, as modified by Section 24272.2, to the extent not excluded from gross income under any other provision of this part. For purposes of applying Section 72 of the Internal Revenue Code, the following apply: (A) All Scholarshare trust accounts of which an individual is a beneficiary shall be treated as one account, except as otherwise provided. (B) All distributions during a taxable year shall be treated as one distribution. (C) The value of the participation agreement, income on the participation agreement, and investment in the participation agreement shall be computed as of the close of the calendar year in which the taxable year begins. (2) A contribution by a for-profit or nonprofit entity, or by a state or local government agency, for the benefit of an owner or employee of that entity or a beneficiary whom the owner or employee has the power to designate, including the owner or employee’s minor children, shall be included in the gross income of that owner or employee in the year the contribution is made. (3) For purposes of this subdivision, “distribution” includes any benefit furnished to a beneficiary under a participation agreement, as provided in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code. (4) (A) Paragraph (1) shall not apply to that portion of any distribution that, within 60 days of distribution, is transferred to the credit of another beneficiary under the Scholarshare trust who is a “member of the family,” as that term is used in Section 529(e)(2) of the Internal Revenue Code, as amended by Section 211 of the Taxpayer Relief Act of 1997 (Public Law 105-34), of the former beneficiary of that Scholarshare trust. (B) Any change in the beneficiary of an interest in the Scholarshare trust shall not be treated as a distribution for purposes of paragraph (1) if the new beneficiary is a “member of the family,” as that term is used in Section 2032A(e)(2) of the Internal Revenue Code, of the former beneficiary of that Scholarshare trust. (d) For taxable years beginning on or after January 1, 2002, Sections 529(c) and 529(e) of the Internal Revenue Code shall apply except as otherwise provided in Part 10 (commencing with Section 17001) and this part. (Amended by Stats. 2005, Ch. 691, Sec. 59. Effective October 7, 2005.)
  136. 24307.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies and modifies certain Internal Revenue Code Section 108 rules for California corporation tax, and limits some elections and applications.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24307. (a) Section 108 of the Internal Revenue Code, relating to income from discharge of indebtedness, shall apply, except as otherwise provided. (b) Section 108(b)(2)(B) of the Internal Revenue Code, relating to general business credit, is modified by substituting “this part” in lieu of “Section 38 (relating to general business credit).” (c) Section 108(b)(2)(G) of the Internal Revenue Code, relating to foreign tax credit carryovers, shall not apply. (d) Section 108(b)(3)(B) of the Internal Revenue Code, relating to credit carryover reduction, is modified by substituting “11.1 cents” in lieu of “331/3 cents” in each place in which it appears. In the case where more than one credit is allowable under this part, the credits shall be reduced on a pro rata basis. (e) Section 108(g)(3)(B) of the Internal Revenue Code, relating to adjusted tax attributes, is modified by substituting “$9” in lieu of “$3.” (f) (1) The amendments to Section 108 of the Internal Revenue Code made by Section 13150 of the Revenue Reconciliation Act of 1993 (Public Law 103-66), relating to exclusion from gross income for income from discharge of qualified real property business indebtedness, shall apply to discharges occurring on or after January 1, 1996, in taxable years beginning on or after January 1, 1996. (2) If a taxpayer makes an election for federal income tax purposes under Section 108(c) of the Internal Revenue Code, relating to treatment of discharge of qualified real property business indebtedness, a separate election shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5 and the federal election shall be binding for purposes of this part. (3) If a taxpayer has not made an election for federal income tax purposes under Section 108(c) of the Internal Revenue Code, relating to treatment of discharge of qualified real property business indebtedness, then the taxpayer shall not be allowed to make that election for purposes of this part. (g) The amendments to Section 108 of the Internal Revenue Code made by Section 13226 of the Revenue Reconciliation Act of 1993 (Public Law 103-66), relating to modifications of discharge of indebtedness provisions, shall apply to discharges occurring on or after January 1, 1996, in taxable years beginning on or after January 1, 1996. (h) The amendments made to Section 108(d)(7)(A) of the Internal Revenue Code, relating to certain provisions to be applied at the corporate level by Section 402 of the Job Creation and Worker Assistance Act of 2002 (Public Law 107-147), shall apply to discharges of indebtedness after December 31, 2001, in taxable years ending after that date. This subdivision shall not apply to any discharge of indebtedness made before March 1, 2002, pursuant to a plan of reorganization filed with a bankruptcy court on or before October 11, 2001. (i) Section 108(i) of the Internal Revenue Code, relating to deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument, shall not apply. (Amended by Stats. 2015, Ch. 359, Sec. 30. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)
  137. 24308.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies Section 1078 of Public Law 98-369 to certain payments from the U.S. Forest Service, with one listed exception, and only for payments in taxable years beginning on or after January 1, 1985.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308. Section 1078 of Public Law 98-369 (Tax Reform Act of 1984), relating to exclusions from gross income of payments from the United States Forest Service as a result of restricting motorized traffic in the Boundary Waters Canoe Area, shall apply, with the following exceptions: (a) Section 1078(f)(2) of that act shall not be applicable. (b) This section shall be effective only for payments made in taxable years beginning on or after January 1, 1985. (Amended by Stats. 2000, Ch. 862, Sec. 119. Effective January 1, 2001.)
  138. 24308.1.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain rebates, vouchers, or other financial incentives for qualifying energy device purchases or installations are excluded from gross income.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.1. Gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by the California Energy Commission, the Public Utility Commission, or a local publicly owned electric utility, as defined in subdivision (d) of Section 9604 of the Public Utilities Code, for any expenses paid or incurred by a taxpayer for the purchase or installation of any of the following devices: (a) A thermal system as defined in Section 25600 of the Public Resources Code. (b) A solar system as defined in Section 25600 of the Public Resources Code. (c) A wind energy system device that produces electricity. (d) A fuel cell generating system, as described in the California Energy Commission’s Emerging Renewable Resources Account Guidebook, that produces electricity. (Added by Stats. 2002, Ch. 843, Sec. 2. Effective September 24, 2002.)
  139. 24308.10.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For taxable years from January 1, 2024 through January 1, 2029, certain wildfire loss mitigation payments are excluded from gross income.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.10. (a) For taxable years beginning on or after January 1, 2024, and before January 1, 2029, gross income shall not include any amount received by a qualified taxpayer as a California qualified wildfire loss mitigation payment. (b) For purposes of this section, the following definitions apply: (1) “California qualified wildfire loss mitigation payment” means any amount which is received through the California Wildfire Mitigation Financial Assistance Program under Article 16.5 (commencing with Section 8654.2) of Chapter 7 of Division 1 of Title 2 of the Government Code for the benefit of a residential property owner or occupant with expenses paid, or obligations incurred, for wildfire loss mitigation. (2) “Qualified taxpayer” means a taxpayer that owns the structure for which a California qualified wildfire loss mitigation payment was received. (3) “Wildfire loss mitigation” means an activity that reduces wildfire risks to a residential structure or its contents, or both. (c) This section shall remain in effect only until December 1, 2029, and as of that date is repealed. (Added by Stats. 2024, Ch. 987, Sec. 2. (SB 946) Effective September 29, 2024. Repealed as of December 1, 2029, by its own provisions.)
  140. 24308.2.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section excludes restaurant revitalization grants from gross income for taxable years beginning on or after January 1, 2020, and makes certain Franchise Tax Board guidance exempt from the Administrative Procedure Act.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.2. (a) For taxable years beginning on or after January 1, 2020, gross income does not include any amount awarded as a restaurant revitalization grant pursuant to Section 9009c of Title 15 of the United States Code. (b) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2020, paragraph (2) of Section 9673 of the American Rescue Plan Act of 2021 (Public Law 117-2) shall apply, except as provided. (2) Paragraph (2) of Section 9673 of the American Rescue Plan Act of 2021 (Public Law 117-2) is modified by substituting the phrase “provided by paragraph (1)” with “provided by this section.” (c) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section. (d) This section shall be operative for taxable years beginning on or after January 1, 2020. (Added by Stats. 2022, Ch. 3, Sec. 17. (SB 113) Effective February 9, 2022.)
  141. 24308.3.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section excludes certain shuttered venue operator grants from gross income for qualifying taxable years and limits how related federal rules apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.3. (a) For taxable years beginning on or after January 1, 2019, gross income does not include any amount awarded as a shuttered venue operator grant pursuant to Section 9009a of Title 15 of the United States Code. (b) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (d) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (2) Subsection (d) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”. (3) Paragraphs (2) and (3) of subsection (d) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity. (c) For purposes of this section: (1) “Ineligible entity” means a taxpayer that either: (A) Is a publicly-traded company. (B) Does not meet the reduction from the gross receipts requirements of Section 636(a)(37)(A)(iv)(bb) of Title 15 of the United States Code, as added by Section 311 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (2) “Publicly-traded company” means a publicly-traded entity as described in Section 342 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (d) This section shall be operative for taxable years beginning on or after January 1, 2019. (Added by Stats. 2022, Ch. 3, Sec. 18. (SB 113) Effective February 9, 2022.)
  142. 24308.4.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Bill credits received by a customer from a community water system or wastewater treatment provider are excluded from gross income for taxable years starting on or after January 1, 2021 and before January 1, 2026.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.4. (a) For taxable years beginning on or after January 1, 2021, and before January 1, 2026, gross income does not include a bill credit or credits received by a customer from a community water system or wastewater treatment provider pursuant to the Water and Wastewater System Payments Under the American Rescue Plan Act of 2021 (Chapter 4.7 (commencing with Section 116773) of Part 12 of Division 104 of the Health and Safety Code). (b) This section shall remain in effect only until December 1, 2026, and as of that date is repealed. (Added by Stats. 2022, Ch. 3, Sec. 19. (SB 113) Effective February 9, 2022. Repealed as of December 1, 2026, by its own provisions.)
  143. 24308.6.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For taxable years beginning on or after January 1, 2019, certain forgiven PPP-related loans and certain advance grant amounts are excluded from gross income.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.6. (a) For taxable years beginning on or after January 1, 2019, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), pursuant to the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139), pursuant to the Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142), pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260), or pursuant to the PPP Extension Act of 2021 (Public Law 117-6). (b) For taxable years beginning on or after January 1, 2019, gross income does not include any advance grant amount issued pursuant to Section 1110(e) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or pursuant to Section 331 of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (c) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (2) Paragraph (1) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.” (3) The provisions of paragraph (1) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260), relating to paragraphs (2) and (3) of subsection (i) of Section 7A of the Small Business Act, shall not apply to an ineligible entity. (4) Paragraph (2) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply. (d) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (2) Subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986, in the case of any taxable year ending after the date of the enactment of this Act” with “For purposes of this part.” (3) Paragraphs (2) and (3) of subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity. (e) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (2) Subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.” (3) Paragraphs (2) and (3) of subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity. (f) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (b) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (2) Subsection (b) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.” (g) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 304 of Title III of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (h) For purposes of this section, all of the following definitions shall apply: (1) “Covered loan” has the same meaning as in Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260). (2) “Advance grant amount” means an emergency Economic Injury Disaster Loan grant pursuant to Section 1110(e) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or a targeted Economic Injury Disaster Loan advance pursuant to Section 331 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (3) “Ineligible entity” means a taxpayer that either: (A) Is a publicly traded company. (B) Does not meet the reduction from the gross receipts requirements of Section 636(a)(37)(A)(iv)(bb) of Title 15 of the United States Code, as added by Section 311 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (4) “Publicly traded company” means a publicly traded entity as described in Section 342 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (i) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section. (j) The amendments made by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2019. (k) The amendments made to this section by Chapter 55 of the Statutes of 2022 shall be operative for taxable years beginning on or after January 1, 2019. (Amended by Stats. 2025, Ch. 231, Sec. 88. (SB 711) Effective October 1, 2025. Operative in taxable years beginning on or after January 1, 2019, by Stats. 2022, Ch. 55.)
  144. 24308.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain earthquake-mitigation incentives are excluded from gross income for taxable years beginning on or after July 1, 2015.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.7. (a) For each taxable year beginning on or after July 1, 2015, gross income does not include an amount received as a loan forgiveness, grant, credit, rebate, voucher, or other financial incentive issued by the California Residential Mitigation Program or the California Earthquake Authority to assist a residential property owner or occupant with expenses paid, or obligations incurred, for earthquake loss mitigation. (b) For the purposes of this section, “earthquake loss mitigation” means an activity that reduces seismic risks to a residential structure or its contents, or both. For purposes of structural seismic risk mitigation, a residential structure is either of the following: (1) A structure described in subdivision (a) of Section 10087 of the Insurance Code. (2) A residential building of not fewer than 2, but not more than 10, dwelling units. (Amended by Stats. 2015, Ch. 323, Sec. 11. (SB 102) Effective September 22, 2015.)
  145. 24308.8.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain qualified amounts received by a qualified taxpayer are excluded from gross income, and certain payors must give the Franchise Tax Board an annual list of payments on request.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.8. (a) Gross income does not include any qualified amount received by a qualified taxpayer. (b) For purposes of this section: (1) The term “qualified amount” includes any of the following: (A) Amounts received by a qualified taxpayer during the remediation of the Carousel Housing Tract, located in Carson, California, from the Shell Oil Company for costs associated with temporary accommodations and relocation pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046. These costs include all amounts paid under the Temporary Living Assistance section of the Revised Remedial Action Plan, Relocation Plan, developed by URS Corporation for Shell Oil Products U.S., dated September 19, 2014. (B) Amounts received by a qualified taxpayer paid under the Optional Real Estate Program of the Revised Remedial Action Plan, Relocation Plan, developed by URS Corporation for Shell Oil Products U.S., dated September 19, 2014. (C) Any amounts received by a qualified taxpayer from a settlement arising out of the investigation, cleanup, or abatement of the waste discharged at the former Kast Property Tank Farm facility pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046. (2) The term “qualified amount” does not include any reimbursed amounts representing any expenses related to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046 that were deducted under this part. (c) For purposes of this section, “qualified taxpayer” means any taxpayer that currently owns or previously owned real property located within the Carousel Housing Tract, located in Carson, California, who received amounts, incurred expenses, or received amounts from a settlement arising out of or pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046. (d) The payor under the Revised Remedial Action Plan, Relocation Plan, developed by URS Corporation for Shell Oil Products U.S., dated September 19, 2014, and the payor or payors of the settlement proceeds arising out of or pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046, shall provide, upon request by the Franchise Tax Board, an annual list of names, addresses, payment dates, and amounts paid to qualified taxpayers. (e) (1) This section shall apply to taxable years beginning before, on, or after the effective date of the act adding this section. (2) If the credit or refund of any overpayment of tax resulting from the application of this section to a period before the effective date of this section is prevented as of such date by the operation of any law or rule of law, including res judicata, such credit or refund may nevertheless be allowed or made if the claim therefor is filed before the close of the one-year period beginning on the effective date of the act adding this section. (Added by Stats. 2018, Ch. 887, Sec. 3. (SB 343) Effective September 28, 2018.)
  146. 24308.9.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain rebates, vouchers, and other financial incentives tied to turf replacement water conservation programs are excluded from gross income for specified taxable years.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24308.9. (a) For taxable years beginning on or after January 1, 2022, and before January 1, 2027, gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by a public water system, local government, or state agency for participation in a turf replacement water conservation program. (b) For the purposes of this section, “public water system” shall have the same meaning as in Section 116275 of the Health and Safety Code. (c) This section shall remain in effect only until December 1, 2027, and as of that date is repealed. (Added by Stats. 2022, Ch. 674, Sec. 2. (AB 2142) Effective September 28, 2022. Repealed as of December 1, 2027, by its own provisions.)
  147. 24309.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Gross income excludes certain lease-end value received by a real-property lessor, except rent.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309. Gross income does not include income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee. (Added by Stats. 1955, Ch. 938.)
  148. 24309.1.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain wildfire settlement payments, qualified amounts are excluded from gross income before January 1, 2027.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.1. (a) For taxable years beginning before January 1, 2027, gross income does not include any qualified amount received by a qualified taxpayer. (b) For purposes of this section: (1) “Qualified amount” means any amount received in settlement by a qualified taxpayer from Southern California Edison in settlement for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire. (2) “Qualified taxpayer” means either of the following: (A) Any taxpayer that owned real property located in the County of Ventura or Santa Barbara during the 2017 Thomas Fire who paid and incurred expenses and received amounts from a settlement arising out of or pursuant to the 2017 Thomas Fire. (B) Any taxpayer that had a place of business within the County of Ventura or Santa Barbara during the 2017 Thomas Fire who paid and incurred expenses and received amounts from a settlement arising out of or pursuant to the 2017 Thomas Fire. (C) Any taxpayer that owned real property located in the County of Ventura or Los Angeles during the 2018 Woolsey Fire who paid and incurred expenses and received amounts from a settlement arising out of or pursuant to the 2018 Woolsey Fire. (D) Any taxpayer that had a place of business within the County of Ventura or Los Angeles during the 2018 Woolsey Fire who paid and incurred expenses and received amounts from a settlement arising out of or pursuant to the 2018 Woolsey Fire. (3) “Settlement entity” means the entity making the settlement payment to a qualified taxpayer as described in subparagraphs (A) and (B) of paragraph (2). (c) The settlement entity shall provide, upon request by the Franchise Tax Board, documentation of the settlement payments in the form and manner requested by the Franchise Tax Board. (d) (1) This section shall apply to taxable years beginning before, on, or after the effective date of the act adding this section. (2) If the credit or refund of any overpayment of tax resulting from the application of this section to a period before the effective date of this section is prevented as of that date by the operation of any law or rule of law, including res judicata, that credit or refund may nevertheless be allowed or made if the claim therefor is filed before the close of the one-year period beginning on the effective date of the act adding this section. (e) This section shall remain in effect only until December 1, 2027, and as of that date is repealed. (Added by Stats. 2022, Ch. 841, Sec. 3. (SB 1246) Effective September 29, 2022. Repealed as of December 1, 2027, by its own provisions.)
  149. 24309.2.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Gross income does not include qualified amounts received by a qualified taxpayer for certain taxable years, and settlement entities and qualified taxpayers must provide requested documentation or information to the Franchise Tax Board.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.2. (a) For taxable years beginning on or after January 1, 2021, and before January 1, 2030, gross income shall not include any qualified amount received by a qualified taxpayer in the taxable year. (b) For purposes of this section the following definitions apply: (1) “Qualified amount” means any amount received from a settlement entity by a qualified taxpayer in connection with a qualified wildfire disaster in California. (2) “Qualified taxpayer” means any of the following: (A) Any taxpayer that owns real property located in an area damaged by a qualified wildfire disaster that paid or incurred expenses, and received qualified amounts from a settlement entity, arising out of or pursuant to the qualified wildfire disaster. (B) Any taxpayer that has a place of business within an area damaged by a qualified wildfire disaster that paid or incurred expenses, and received qualified amounts from a settlement entity, arising out of or pursuant to the qualified wildfire disaster. (3) “Qualified wildfire disaster” means any disaster arising from a wildfire for which either the Governor has declared a state of emergency or the President of the United States has declared an emergency or major disaster as defined under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. Sec. 5121 et seq.). (4) “Settlement entity” means an entity making a settlement payment of a qualified amount to a qualified taxpayer. (c) The settlement entity shall provide, upon request by the Franchise Tax Board or qualified taxpayer, documentation of the settlement payments in the form and manner requested by the Franchise Tax Board or the qualified taxpayer. (d) The qualified taxpayer shall provide, upon request, all necessary information in the form and manner prescribed by the Franchise Tax Board. (e) This section shall remain in effect only until December 1, 2030, and as of that date is repealed. (Amended by Stats. 2025, Ch. 112, Sec. 2. (SB 159) Effective September 17, 2025. Repealed as of December 1, 2030, by its own provisions.)
  150. 24309.3.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain settlement amounts received by a qualified taxpayer are excluded from gross income, and the Fire Victims Trust must provide an annual list to the Franchise Tax Board on request.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.3. (a) Gross income does not include any qualified amount received by a qualified taxpayer. (b) For purposes of this section: (1) “Qualified amount” means any amount received in settlement by a qualified taxpayer from the Fire Victims Trust, established pursuant to the order of the United States Bankruptcy Court for the Northern District of California dated June 20, 2020, case number 19-30088, docket number 8053. (2) “Qualified taxpayer” means any of the following: (A) Any taxpayer that owned real property located in the County of Amador or Calaveras during the 2015 Butte Fire who incurred and paid expenses and received amounts from a settlement arising out of or pursuant to the 2015 Butte Fire. (B) Any taxpayer that owned real property located in the County of Napa, Sonoma, Lake, Butte, Mendocino, or Solano during the 2017 North Bay Fires who incurred and paid expenses and received amounts from a settlement arising out of or pursuant to one or more of the 2017 North Bay Fires. (C) Any taxpayer that owned real property located in the County of Butte during the 2018 Camp Fire who incurred and paid expenses and received amounts from a settlement arising out of or pursuant to the 2018 Camp Fire. (c) The Fire Victims Trust, shall provide, upon request by the Franchise Tax Board, an annual list of names, addresses, payment dates, and qualified amounts paid to qualified taxpayers. (d) (1) This section shall apply to taxable years beginning before, on, or after the effective date of the act adding this section. (2) If the credit or refund of any overpayment of tax resulting from the application of this section to a period before the effective date of this section is prevented as of that date by the operation of any law or rule of law, including res judicata, that credit or refund may nevertheless be allowed or made if the claim therefor is filed before the close of the one-year period beginning on the effective date of the act adding this section. (e) This section shall remain in effect only until January 1, 2028, and as of that date is repealed. (Added by Stats. 2022, Ch. 749, Sec. 3. (AB 1249) Effective September 29, 2022. Repealed as of January 1, 2028, by its own provisions.)
  151. 24309.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 110 of the Internal Revenue Code applies, subject to the modifications stated in this section.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.5. Section 110 of the Internal Revenue Code, relating to qualified lessee construction allowances for short-term leases, shall apply, except as otherwise provided. (a) Section 110(b) of the Internal Revenue Code is modified by substituting the phrase “(including for purposes of paragraph (2) of subdivision (e) of Section 24349)” for the phrase “(including for purposes of Section 168(i)(8)(B).” (b) Section 110(c)(2) of the Internal Revenue Code is modified by substituting the phrase “(as determined under the rules of paragraph (3) of subdivision (e) of Section 24349)” for the phrase “(as determined under the rules of Section 168(i)(3)).” (Added by Stats. 1998, Ch. 322, Sec. 78. Effective August 20, 1998.)
  152. 24309.6.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Qualified Kincade Fire settlement amounts are excluded from gross income for eligible taxpayers during the stated tax years, and the settlement entity must provide payment documentation to the Franchise Tax Board on request.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.6. (a) For taxable years beginning on or after January 1, 2020, and before January 1, 2028, gross income does not include any qualified amount received by a qualified taxpayer. (b) For purposes of this section: (1) “Qualified amount” means any amount received in settlement by a qualified taxpayer from a settlement entity in connection with the 2019 Kincade Fire. (2) “Qualified taxpayer” means either of the following: (A) Any taxpayer that owned real property located in the County of Sonoma during the 2019 Kincade Fire that paid or incurred expenses and received amounts from a settlement arising out of or pursuant to the 2019 Kincade Fire. (B) Any taxpayer that had a place of business within the County of Sonoma during the 2019 Kincade Fire that paid or incurred expenses and received amounts from a settlement arising out of or pursuant to the 2019 Kincade Fire. (3) “Settlement entity” means Pacific Gas and Electric Company or its subsidiary that is making the settlement payment to a qualified taxpayer. (c) The settlement entity shall provide, upon request by the Franchise Tax Board, documentation of the settlement payments in the form and manner requested by the Franchise Tax Board. (d) This section shall remain in effect only until December 1, 2028, and as of that date is repealed. (Added by Stats. 2023, Ch. 55, Sec. 13. (SB 131) Effective July 10, 2023. Repealed as of December 1, 2028, by its own provisions.)
  153. 24309.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain years, qualified Zogg Fire settlement amounts are excluded from gross income, and settlement entities must give the Franchise Tax Board documentation on request.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.7. (a) For taxable years beginning on or after January 1, 2020, and before January 1, 2028, gross income does not include any qualified amount received by a qualified taxpayer. (b) For purposes of this section: (1) “Qualified amount” means any amount received in settlement by a qualified taxpayer from a settlement entity in connection with the 2020 Zogg Fire. (2) “Qualified taxpayer” means either of the following: (A) Any taxpayer that owned real property located in the County of Shasta or the County of Tehama during the 2020 Zogg Fire that paid or incurred expenses and received amounts from a settlement arising out of or pursuant to the 2020 Zogg Fire. (B) Any taxpayer that had a place of business within the County of Shasta or the County of Tehama during the 2020 Zogg Fire that paid or incurred expenses and received amounts from a settlement arising out of or pursuant to the 2020 Zogg Fire. (3) “Settlement entity” means Pacific Gas and Electric Company or its subsidiary that is making the settlement payment to a qualified taxpayer. (c) The settlement entity shall provide, upon request by the Franchise Tax Board, documentation of the settlement payments in the form and manner requested by the Franchise Tax Board. (d) This section shall remain in effect only until December 1, 2028, and as of that date is repealed. (Added by Stats. 2023, Ch. 55, Sec. 14. (SB 131) Effective July 10, 2023. Repealed as of December 1, 2028, by its own provisions.)
  154. 24309.9.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain taxable years, taxpayers can exclude specified Chiquita Canyon landfill event payment amounts from gross income.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24309.9. (a) For taxable years beginning on or after January 1, 2024, and before January 1, 2029, gross income does not include any Chiquita Canyon elevated temperature landfill event payment amount received by a taxpayer. (b) For purposes of this section: (1) “Chiquita Canyon elevated temperature landfill event” means the elevated temperature landfill event, beginning on May 1, 2022, that occurred beneath the Chiquita Canyon Landfill in the County of Los Angeles, California. (2) “Chiquita Canyon elevated temperature landfill event payment” means any amount received by a taxpayer on or after March 1, 2024, as compensation for loss, damages, expenses, relocation, suffering, loss in real property value, closing costs with respect to real property, including realtor commissions, or inconvenience, including access to real property, resulting from the Chiquita Canyon elevated temperature landfill event, if the amount was provided by either of the following: (A) A federal, state, or local governmental agency. (B) Waste Connections, Inc., any subsidiary, insurer, or agent of Waste Connections, Inc., or any person related to Waste Connections, Inc. (c) The payor shall provide, upon request by the Franchise Tax Board, documentation of the Chiquita Canyon elevated temperature landfill event payment amount in the form and manner requested by the Franchise Tax Board. (d) This section shall remain operative only until December 1, 2029, and is repealed as of that date. (Added by Stats. 2025, Ch. 17, Sec. 21. (SB 132) Effective June 27, 2025. Repealed as of December 1, 2029, by its own provisions.)
  155. 24310.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes Internal Revenue Code section 111 apply, and also applies subsections (b) and (c) for credits allowed under this part, unless another rule in this provision says otherwise.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24310. (a) Section 111 of the Internal Revenue Code, relating to recovery of tax benefit items, shall apply, except as otherwise provided. (b) Sections 111(b) and 111(c) of the Internal Revenue Code, relating to credits and treatment of credit carryovers, shall be applicable with respect to credits allowable under this part. (Amended by Stats. 1991, Ch. 117, Sec. 58. Effective July 16, 1991.)
  156. 24310.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For taxable years beginning from 2026 through 2030, certain federal credit-related payments are excluded from gross income, and no deduction is allowed for amounts paid for a Section 6418 transfer.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24310.5. (a) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, gross income does not include any payment made pursuant to Section 6417 of the Internal Revenue Code, as added by Public Law 117-169, relating to elective payment of applicable credits. Sections 6417(c)(1)(C) and 6417(c)(1)(D) of the Internal Revenue Code, as added by Public Law 117-169, shall apply. (b) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, gross income does not include any payment made pursuant to Section 6418 of the Internal Revenue Code, as added by Public Law 117-169, relating to transfer of certain credits. (1) Sections 6418(c)(1)(A) and 6418(c)(1)(B) of the Internal Revenue Code, as added by Public Law 117-169, shall apply. (2) No deduction shall be allowed for any amount paid in consideration of a transfer made as described in Section 6418 of the Internal Revenue Code, as added by Public Law 117-169. (c) For purposes of this section, “payment made pursuant to Section 6418 of the Internal Revenue Code” includes the value of a credit received by a transferee pursuant to Section 6418 of the Internal Revenue Code, as added by Public Law 117-169. (d) This section shall remain in effect only until December 1, 2031, and as of that date is repealed. (Added by Stats. 2025, Ch. 215, Sec. 3. (SB 302) Effective October 1, 2025. Repealed as of December 1, 2031, by its own provisions.)
  157. 24311.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain grant allocations are excluded from gross income for specified taxable years.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24311. (a) For taxable years beginning on or after September 1, 2020, and before January 1, 2025, gross income does not include grant allocations received by a taxpayer pursuant to the California Microbusiness COVID-19 Relief Program that is administered by the Office of Small Business Advocate pursuant to Article 9 (commencing with Section 12100.90) of Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code. (b) Section 41 shall not apply to the exclusion allowed by this section. (Amended by Stats. 2023, Ch. 196, Sec. 23. (SB 143) Effective September 13, 2023.)
  158. 24312.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain COVID-related grant allocations are excluded from gross income, and the Franchise Tax Board may audit the grants and adopt implementing regulations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24312. (a) Gross income does not include any of the following grant allocations: (1) For taxable years beginning on or after January 1, 2020, and before January 1, 2030, grant allocations received by a taxpayer pursuant to the COVID-19 Relief Grant that is administered by the Office of Small Business Advocate, is funded by Executive Order No. E 20/21-182, and is described in a letter from the Department of Finance to the Joint Legislative Budget Committee, dated December 17, 2020, entitled, “Disaster Response-Emergency Operations Account Request—Increased Funding for the California Rebuilding Fund and Funding to Support a New COVID-19 Relief Grant for Small Businesses.” (2) For taxable years beginning on or after January 1, 2020, and before January 1, 2030, grant allocations received by a taxpayer pursuant to the California Small Business COVID-19 Relief Grant Program established by Section 12100.83 of the Government Code. (3) For taxable years beginning on or after September 1, 2020, and before January 1, 2030, grant allocations received by a taxpayer pursuant to the California Venues Grant Program established by Section 12100.83.5 of the Government Code. (4) For taxable years beginning on or after January 1, 2021, and before January 1, 2030, grant allocations received by a taxpayer pursuant to the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program established by Section 12100.975 of the Government Code. (b) Section 41 shall not apply to the exclusion allowed by this section. (c) Notwithstanding any other law, the Franchise Tax Board may include in audits the grants referenced in this section. (d) The Franchise Tax Board may adopt regulations that are necessary and appropriate to implement this section. (e) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any regulation, standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section. (f) This section shall remain in effect only until December 1, 2030, and as of that date is repealed. (Amended by Stats. 2022, Ch. 736, Sec. 6. (AB 152) Effective September 29, 2022. Repealed as of December 1, 2030, by its own provisions.)
  159. 24314.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A stated exemption phrase in other laws does not exempt gain or loss from the sale or transfer of bonds from this part.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24314. The following phrase (or its substantial equivalent) in other codes or statutes does not exempt the gain or loss from the sale or transfer of bonds from the provisions of this part: “The issuance, transfer and interest income earned on any bonds issued by an agency (state or local) under this article (chapter, section, etc.) is exempt from taxation of every kind by any state or local entity.” (Added by Stats. 1986, Ch. 317, Sec. 2. Effective July 15, 1986.)
  160. 24315.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A consumer’s payment for empty beverage containers from a recycling center or recycling location is excluded from gross income when it is the recycling value.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Exclusions [24301 - 24315] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24315. Gross income does not include any amount received for empty beverage containers by a consumer from a recycling center or recycling location as the recycling value, as defined in Chapter 2 (commencing with Section 14502) of Division 12.1 of the Public Resources Code. (Added by Stats. 1986, Ch. 1290, Sec. 5. Effective September 29, 1986.)
  161. 24320.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

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    Foreign corporations may exclude income from operating aircraft or ships from gross income and may be exempt from the taxes imposed by this part if the stated registration, treaty, and reciprocity conditions are met.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24320. Income derived from the operation of aircraft or a ship or ships by a corporation organized under the laws of a foreign country shall not be included in gross income, and shall be exempt from the taxes imposed by this part if: (a) The aircraft are registered or the ships are documented under the laws of the foreign country; (b) The income of the corporation is exempt from national income taxes by reason of a treaty or agreement between such foreign country and the United States which provides for an equivalent exemption to corporations organized in the United States; and (c) Units of government (other than at the national level) within such foreign country do not impose a tax upon corporations organized in the United States with respect to income derived from the operation of aircraft registered or ships documented under the laws of the United States. (Added by Stats. 1969, Ch. 1191.)
  162. 24321.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    Local government entities may not levy or collect taxes on income that is excluded from gross income and exempt from state taxes.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24321. Notwithstanding any statute, ordinance, regulation, rule or decision to the contrary, no city, county, city and county, governmental subdivision, district, public and quasi-public corporation, municipal corporation, whether incorporated or not or whether chartered or not, shall levy or collect or cause to be levied or collected any tax upon income which is excludable from gross income and exempt from state taxes pursuant to Section 24320. This section shall not be construed to authorize any such entity to levy a tax on, according to, or measured by, income or profits paid or accrued. (Added by Stats. 1969, Ch. 1191.)
  163. 24322.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    A domestic building and loan association may exclude certain FSLIC payments from gross income, and the section also limits basis reductions, deduction denials, and later application of the exclusion after December 31, 1988 except in a specified acquisition-or-merger case.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24322. (a) Gross income of a domestic building and loan association, as defined in Section 7701(a)(19) of the Internal Revenue Code, does not include any amount of money or other property received from the Federal Savings and Loan Insurance Corporation pursuant to Section 406(f) of the National Housing Act (12 U.S.C. Section 1729(f)), regardless of whether any note or other instrument is issued in exchange therefor. (b) No reduction in the basis of assets of a domestic building and loan association shall be made on account of money or other property received under the circumstances referred to in subdivision (a). (c) Section 24425 shall not deny any deductions by reason of the deductions being allocable to amounts excluded from gross income under this section. (d) This section shall not apply with respect to any amounts excludable under subdivision (a) received after December 31, 1988, in taxable years ending after that date, unless the payments are made by the Federal Savings and Loan Insurance Corporation pursuant to an acquisition or merger which occurred on or before December 31, 1988. (Amended by Stats. 2000, Ch. 862, Sec. 120. Effective January 1, 2001.)
  164. 24323.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    A rebate from a local water agency or supplier for qualifying water-conservation toilet expenses must be treated as a refund or price adjustment.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24323. Any amount received as a rebate from a local water agency or supplier for any expenses the taxpayer paid or incurred for the purchase or installation of each water conservation water closet that meets the performance standards of the American National Standards Institute Standard A112.19.2 and uses no more than 1.6 gallons per flush, shall be treated as a refund or price adjustment of amounts payable to that water agency or supplier. (Added by Stats. 1990, Ch. 809, Sec. 2. Effective September 14, 1990.)
  165. 24324.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    Gross income does not include a taxpayer’s capital contributions, and special rules apply to certain regulated public utility contributions in aid of construction.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24324. (a) Gross income does not include any contribution to the capital of the taxpayer. (b) (1) For purposes of this section, “contribution to the capital of the taxpayer” includes any amount of money or other property received from any person (whether or not a shareholder) by a regulated public utility that provides electric energy, gas (through a local distribution system or transportation by pipeline), water, or sewerage disposal services if all of the following apply: (A) The amount is contribution in aid of construction. (B) Where the contribution is in property that is other than electric energy, gas steam, water, or sewerage disposal facilities, the amount meets the requirements of the expenditure rule of paragraph (2). (C) The amounts (or any property acquired or constructed with those amounts) are not included in the taxpayer’s rate base for ratemaking purposes. (2) An amount meets the requirements of this paragraph if all of the following apply: (A) An amount equal to that amount is expended for the acquisition or construction of tangible property described in Section 1231(b) of the Internal Revenue Code and both of the following apply: (i) The expenditure was the purpose motivating the contribution. (ii) The property is used predominantly in the trade or business of furnishing electric energy, gas, steam, water, or sewerage disposal services. (B) The expenditure referred to in subparagraph (A) occurs before the end of the second taxable year after the taxable year in which that amount was received. (C) Accurate records are kept of the amount contributed and expenditures made on the basis of the project for which the contribution was made and on the basis of the year of contribution or expenditure. (3) For purposes of this section: (A) “Contribution in aid of construction” does not include amounts paid as customer connection fees (including amounts paid to connect the customer’s line to an electric line, a gas main, a steam line, or a main water or sewer line) and amounts paid as service charges for starting or stopping services. (B) “Contribution in aid of construction” includes amounts received by a regulated public utility from a contributor to recover the federal tax imposed upon contributions in aid of construction, provided that the method used to recover the tax is authorized by Public Utilities Commission Decision 87-09-026. (C) “Predominantly” means 80 percent or more. (D) “Regulated public utility” means a regulated public utility as defined by Section 7701(a)(33) of the Internal Revenue Code, except that it does not include any utility which is not required to provide electric energy, gas, water, or sewerage disposal services to members of the general public (including, in the case of a gas transmission utility, the provision of gas services by sale for resale to the general public) in its service area. (4) Notwithstanding any other provision of this part, no deduction or credit shall be allowed for, or by reason of, the expenditure which constitutes a contribution in aid of construction to which this section applies. The adjusted basis of any property acquired with contributions in aid of construction to which this section applies shall be zero. (c) This section shall apply to contributions in aid of construction made on or after January 1, 1977, and before January 1, 1992. (Amended by Stats. 2000, Ch. 862, Sec. 121. Effective January 1, 2001.)
  166. 24325.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    Section 118 of the Internal Revenue Code applies to corporate capital contributions made on or after January 1, 1992.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24325. Section 118 of the Internal Revenue Code, relating to contributions to the capital of a corporation, shall apply to contributions made on or after January 1, 1992. (Added by Stats. 1992, Ch. 698, Sec. 20. Effective September 15, 1992.)
  167. 24326.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    Section 136 of the Internal Revenue Code applies here to energy conservation subsidies provided by public utilities, with an exception for other provisions and a temporal application to amounts received on or after January 1, 1997.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24326. (a) Section 136 of the Internal Revenue Code, relating to energy conservation subsidies provided by public utilities, shall apply, except as otherwise provided. (b) Section 136 of the Internal Revenue Code, relating to energy conservation subsidies provided by public utilities, shall apply to amounts received on or after January 1, 1997. (Amended by Stats. 1997, Ch. 611, Sec. 79. Effective October 3, 1997.)
  168. 24327.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    Section 892 of the Internal Revenue Code applies here.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24327. Section 892 of the Internal Revenue Code, relating to the tax treatment of foreign governments and international organizations, shall apply. (Added by Stats. 1996, Ch. 952, Sec. 48. Effective January 1, 1997.)
  169. 24329.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. )

    Verify source ↗

    Section 139 of the Internal Revenue Code on disaster relief payments applies here, unless otherwise provided.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 6. Gross Income [24271 - 24329] ( Chapter 6 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Other Exclusions [24320 - 24329] ( Article 3 added by Stats. 1969, Ch. 1191. ) ## 24329. Section 139 of the Internal Revenue Code, relating to disaster relief payments, shall apply, except as otherwise provided. (Added by Stats. 2010, Ch. 14, Sec. 66. (SB 401) Effective January 1, 2011.)
  170. 24341.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section defines “net income” as gross income computed under Chapter 6 minus the deductions allowed under this article and Article 2.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24341. “Net income” means the gross income, computed under Chapter 6 (commencing with Section 24271), less the deductions allowed under this article and Article 2 (commencing with Section 24401). (Amended by Stats. 1984, Ch. 193, Sec. 127.)
  171. 24343.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes Internal Revenue Code Section 162 apply, with specified California modifications and exceptions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343. (a) Section 162 of the Internal Revenue Code, relating to trade or business expenses, shall apply, except as otherwise provided. (b) For purposes of applying Section 162 of the Internal Revenue Code, any references to Section 170 of the Internal Revenue Code shall be modified to refer to Sections 24357 to 24359.1, inclusive, of this part. (c) (1) The amendments made by Section 13601(a), (b), (c), and (d) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 162(m) of the Internal Revenue Code, relating to certain excessive employee remuneration, shall apply, except as otherwise provided. (2) The amendments made by Section 13601(e)(2) of the Tax Cuts and Jobs Act (Public Law 115-97), relating to exception for binding contracts, shall apply, and is modified by substituting “March 31, 2019” for “November 2, 2017.” (Amended by Stats. 2019, Ch. 39, Sec. 22. (AB 91) Effective July 1, 2019.)
  172. 24343.1.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section says the federal Tax Cuts and Jobs Act amendment adding IRC Section 162(r) applies here, except as otherwise provided, and Article 9 in Chapter 2 of Part 11 does not apply for this section.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343.1. (a) The amendments made by Section 13531(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to add Section 162(r) to the Internal Revenue Code, relating to the disallowance of FDIC premiums paid by certain large financial institutions, shall apply, except as otherwise provided. (b) For purposes of this section, Article 9 (commencing with Section 23361) of Chapter 2 of Part 11 shall not apply. (Added by Stats. 2019, Ch. 39, Sec. 23. (AB 91) Effective July 1, 2019.)
  173. 24343.2.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Taxpayers cannot deduct certain expenses tied to discriminatory clubs, and covered clubs must print a nondeductibility notice on receipts.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343.2. Whereas, the people of the State of California desire to promote and achieve tax equity and fairness among all the state’s citizens and further desire to conform to the public policy of nondiscrimination, the Legislature hereby enacts the following for these reasons and for no other purpose: (a) No deduction shall be allowed under Section 24343 for expenses incurred by a taxpayer with respect to expenditures made at, or payments made to, a club which restricts membership or the use of its services or facilities on the basis of ancestry or any characteristic listed or defined in Section 11135 of the Government Code, except for genetic information. (b) A club described in subdivision (a) holding an alcoholic beverage license pursuant to Division 9 (commencing with Section 23000) of the Business and Professions Code, except a club holding an alcoholic beverage license pursuant to Section 23425 thereof, shall provide on each receipt furnished to a taxpayer a printed statement as follows: “The expenditures covered by this receipt are nondeductible for state income tax purposes or franchise tax purposes.” (c) For purposes of this section: (1) “Expenses” means those expenses otherwise deductible under Section 24343, except for subdivision (a), and includes, but is not limited to, club membership dues and assessments, food and beverage expenses, expenses for services furnished by the club, and reimbursements or salary adjustments to officers or employees for any of the preceding expenses. (2) “Club” means a club as defined in Division 9 (commencing with Section 23000) of the Business and Professions Code, except a club as defined in Section 23425 thereof. (Amended by Stats. 2011, Ch. 261, Sec. 23. (SB 559) Effective January 1, 2012.)
  174. 24343.3.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A deductible employer contribution to a medical savings account is allowed only in the taxable year when it is paid.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343.3. Any employer contribution to a medical savings account, as defined in Section 220 of the Internal Revenue Code, relating to medical savings accounts, if otherwise deductible under this part, shall be allowed only for the taxable year in which paid. (Amended by Stats. 2000, Ch. 862, Sec. 122. Effective January 1, 2001.)
  175. 24343.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    An employer may claim a tax deduction for certain ridesharing-related expenses, subject to listed conditions and exclusions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343.5. (a) In addition to the deduction allowed by Section 24343, a deduction shall be allowed to an employer as an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business for those expenses involved in any of the following ridesharing arrangements: (1) Subsidizing employees commuting in vanpools. (2) Subsidizing employees commuting in private commuter buses or buspools. (3) Subsidizing monthly transit passes for its employees or for use by the employee’s dependents, except that no deduction shall be allowed for transit passes issued for the use of elementary and secondary school students. (4) Subsidizing employees commuting in subscription taxipools. (5) Subsidizing employees commuting in a carpool. (6) In the case of an employer who offers free parking to its employees, offering a cash equivalent to employees who do not require parking, including a parking cash-out program, as defined by subdivision (f) of Section 65088.1 of the Government Code. (7) Providing free or preferential parking to carpools, vanpools, or any other vehicle used in a ridesharing arrangement. (8) Making facility improvements to encourage employees, for the purpose of commuting from their homes, to participate in ridesharing arrangements, to use bicycles, or to walk. These facility improvements may include, but are not limited to, any of the following: the construction of bus shelters; the installation of bicycle racks and other bicycle-related facilities, such as showers and locker rooms; and parking lot modifications to provide carpools, vanpools, or buspools with preferential treatment. The cost of these facility improvements shall be allowed as a depreciation deduction. Notwithstanding subdivision (c), the depreciation deduction shall be allowable over a 36-month period. (9) Providing company commuter van or bus service to its employees and to others for commuting from their homes, but not for transportation required as part of the employer’s business activities, except as otherwise provided in this section. The capital costs of providing this service shall not be an eligible deduction under this section. (10) Providing to employees transportation services which are required as part of the employer’s business activities to the extent that the transportation would be provided by employees without reimbursement in the absence of an employer-sponsored ridesharing incentive program. The capital costs of providing this service shall not be an eligible deduction under this section. (b) For purposes of this section: (1) “Employer” means either of the following: (A) A taxpayer for whom services are performed by employees, except entities which are not subject to tax under this part. (B) A taxpayer which is a private or public educational institution which enrolls students at higher than the secondary level. (2) “Employee” means either of the following: (A) An individual who performs service for an employer for more than eight hours per week for remuneration. (B) Any commuting student, as defined in paragraph (3). (3) “Commuting student” means a registered full-time student at a college, university, or other postsecondary educational institution, who lives apart from the property which is designated as the “employment site” for the purpose of this section, and who travels between his or her residence and the designated employment site on a regular, though not necessarily daily, basis. (4) “Employer-sponsored ridesharing incentive program” means a program undertaken by an employer either alone or in cooperation with other employers to encourage or provide, or both, fiscal other incentives to employees to make the home-to-work commute trip by any mode other than the single-occupant motor vehicle. (5) “Company commuter bus or van” means a highway vehicle which meets all of the following criteria: (A) Has at least seven or more persons commuting on a daily basis to and from work. (B) At least 50 percent of the mileage of which can be reasonably expected to be used for the purpose of transporting employees to and from work. (C) Is acquired by the taxpayer on or after the date of enactment of this legislation. (6) “Vanpool” means seven or more persons commuting on a daily basis to and from work by means of a vehicle with a seating arrangement designed to carry 7 to 15 adult persons. (7) “Monthly transit pass” means any bulk purchase of transit rides that entitles the purchaser to 40 or more rides per month, whether at a discount rate or the base fare rate. (8) “Transit” means transportation service for use by the general public that utilizes buses, railcars, or ferries with a seating capacity of 16 or more persons. (9) “Subscription taxipool” means a type of service in which employers or groups of employees contract with a public or private taxi operator to provide daily commuter service for a group of preassembled subscribers on a prepaid or daily-fare basis, following a relatively fixed route and schedule tailored to meet the needs of the subscribers. (10) “Ridesharing arrangement” means the transportation of persons in a motor vehicle where that transportation is incidental to another purpose of the driver. The term includes ridesharing arrangements known as carpools, vanpools, and buspools. (11) “Carpool” means two or more persons commuting on a daily basis to and from work by means of a vehicle with a seating arrangement designed to carry less than seven adults, including the driver. (12) “Buspool” means 16 or more persons commuting on a daily basis to and from work by means of a vehicle with a seating arrangement designed to carry more than 15 adult passengers. (13) “Private commuter bus” means a highway vehicle which meets all of the following criteria: (A) Has a seating capacity of at least seven adults, including the driver. (B) At least 50 percent of the mileage of which can be reasonably expected to be used for the purpose of transporting employees to and from work. (C) Is acquired by the taxpayer on or after the date of enactment of this section. (D) With respect to which the taxpayer makes an election under this paragraph on its return for the taxable year in which the vehicle is placed in service. (Amended by Stats. 2000, Ch. 862, Sec. 123. Effective January 1, 2001.)
  176. 24343.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 162(k)(2)(A)(ii) of the Internal Revenue Code does not apply here.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343.7. Section 162(k)(2)(A)(ii) of the Internal Revenue Code shall not apply. (Amended by Stats. 2002, Ch. 35, Sec. 48. Effective May 8, 2002.)
  177. 24343.8.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For taxable years beginning on or after January 1, 2014, no deduction is allowed for fines or penalties paid or incurred by an owner of all or part of a professional sports franchise when the league imposes the fine or penalty.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24343.8. For taxable years beginning on or after January 1, 2014, a deduction shall not be allowed for the amount of any fine or penalty paid or incurred by an owner of all or part of a professional sports franchise, where that fine or penalty is assessed or imposed by the professional sports league that includes that franchise. (Added by Stats. 2014, Ch. 792, Sec. 2. (AB 877) Effective September 29, 2014.)
  178. 24344.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section sets how interest deductions are calculated for certain taxpayers, allows a limited offset for foreign-investment interest expense against certain dividends, and says Section 163(j) does not apply.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24344. (a) Section 163 of the Internal Revenue Code, relating to interest, shall apply, except as otherwise provided. (b) If income of the taxpayer which is derived from or attributable to sources within this state is determined pursuant to Section 25101 or 25110, the interest deductible shall be an amount equal to interest income subject to apportionment by formula, plus the amount, if any, by which the balance of interest expense exceeds interest and dividend income (except dividends deductible under Section 24402 and dividends subject to the deductions provided for in Section 24411 to the extent of those deductions) not subject to apportionment by formula. Interest expense not included in the preceding sentence shall be directly offset against interest and dividend income (except dividends deductible under Section 24402 and dividends subject to the deductions provided for in Section 24411 to the extent of those deductions) not subject to apportionment by formula. (c) (1) Notwithstanding subdivision (b) and subject to paragraph (2), interest expense allowable under Section 163 of the Internal Revenue Code that is incurred for purposes of foreign investments may be offset against dividends deductible under Section 24411. (2) For taxable years beginning on or after January 1, 1997, the amount of interest computed pursuant to paragraph (1) shall be multiplied by the same percentage used to determine the dividend deduction under Section 24411 to determine that amount of interest that may be offset as provided in paragraph (1). (d) Section 7210(b) of Public Law 101-239, relating to the effective date for limitation on deduction for certain interest paid to a related person, shall apply. (e) Section 163(j) of the Internal Revenue Code, relating to the limitation on business interest, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 89. (SB 711) Effective October 1, 2025.)
  179. 24344.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    The issuer of an original issue discount bond may claim a deduction determined under Internal Revenue Code Section 163(e).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24344.5. (a) A deduction, determined in accordance with Section 163(e) of the Internal Revenue Code, shall be allowed to the issuer of an original issue discount bond. (b) For taxable years beginning on or after January 1, 1987, and before the taxable year in which the debt obligation matures or is sold, exchanged, or otherwise disposed, the amount deductible under this part shall be the same as the amount deductible on the federal tax return. (c) The difference between the amount deductible on the federal tax return and the amount allowable under this part, with respect to obligations issued after December 31, 1984, for taxable years beginning before January 1, 1987, shall be allowed as a deduction in the taxable year in which the debt obligation matures or is sold, exchanged, or otherwise disposed. (d) The provisions of Section 7202(c) of Public Law 101-239, relating to the effective date for treatment of certain high yield original issue discount obligations, shall apply. (Amended by Stats. 2000, Ch. 862, Sec. 126. Effective January 1, 2001.)
  180. 24344.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    The section says certain federal interest-deduction amendments apply to taxable years beginning on or after January 1, 1996.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24344.7. The amendments to Section 163 of the Internal Revenue Code made by Section 13228 of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to modification to limitation on deduction for certain interest, shall apply to taxable years beginning on or after January 1, 1996. (Amended by Stats. 2000, Ch. 862, Sec. 127. Effective January 1, 2001.)
  181. 24345.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A deduction is allowed for taxes or licenses paid or accrued during the taxable year, but several kinds of taxes are excluded or treated differently.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24345. A deduction shall be allowed for taxes or licenses paid or accrued during the taxable year, except: (a) Taxes paid to the state under this part. (b) Taxes on or according to or measured by income or profits paid or accrued within the taxable year imposed by the authority of any of the following: (1) The Government of the United States or any foreign country. (2) Any state, territory, county, school district, municipality, or other taxing subdivision of any state or territory. (c) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed, but this does not exclude the allowance as a deduction of so much of the taxes assessed against local benefits as is properly allocable to maintenance or interest charges. Nor does this exclude the allowance of any irrigation or other water district taxes or assessments which are levied for the payment of the principal of any improvement or other bonds for which a general assessment on all lands within the district is levied as distinguished from a special assessment levied on part of the area within the district. (d) Federal stamp taxes (not described in subdivision (b) or (c)); but this subdivision shall not prevent such taxes from being deducted under Section 24343 (relating to trade or business expenses). (e) State and local general sales or use taxes. However, there shall be allowed as a deduction, state and local sales or use taxes which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in Section 212 of the Internal Revenue Code (relating to expenses for production of income). Notwithstanding the preceding sentence, any sales or use tax (except where a tax credit is claimed under Section 23612.2) which is paid or accrued by the taxpayer in connection with an acquisition or disposition of property shall be treated as part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition. (f) For purposes of subdivision (b), “taxes on or according to or measure by income” shall include any taxes imposed on a dividend that is eliminated from the income of the recipient under Section 25106. (Amended by Stats. 2000, Ch. 862, Sec. 128. Effective January 1, 2001.)
  182. 24345.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A deduction is not allowed for the fee imposed by ACA section 9008(a).

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24345.5. A deduction shall not be allowed for the fee imposed by subsection (a) of Section 9008 of the Patient Protection and Affordable Care Act (Public Law 111-148). (Added by Stats. 2015, Ch. 359, Sec. 31. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)
  183. 24345.6.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    No deduction is allowed for the excise tax imposed by Section 4501 on repurchases of corporate stock.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24345.6. A deduction shall not be allowed for the excise tax imposed by Section 4501 of the Internal Revenue Code, relating to repurchase of corporate stock. (Added by Stats. 2025, Ch. 231, Sec. 90. (SB 711) Effective October 1, 2025.)
  184. 24345.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    No deduction is allowed for the excise tax imposed by Section 5000D of the Internal Revenue Code for designated drugs during noncompliance periods.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24345.7. A deduction shall not be allowed for the excise tax imposed by Section 5000D of the Internal Revenue Code, relating to designated drugs during noncompliance periods. (Added by Stats. 2025, Ch. 231, Sec. 91. (SB 711) Effective October 1, 2025.)
  185. 24346.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section allocates real property tax between seller and purchaser when real property is sold, and sets rules for when a corporation is treated as having paid or accrued the tax.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24346. (a) For purposes of subdivision (a) of Section 24345, if real property is sold during any real property tax year, then— (1) So much of the real property tax as is properly allocable to that part of the year which ends on the day before the date of the sale shall be treated as a tax imposed on the seller; and (2) So much of that tax as is properly allocable to that part of the year which begins on the date of the sale shall be treated as a tax imposed on the purchaser. (b) (1) In the case of any sale of real property; if— (A) A corporation may not, by reason of its method of accounting, deduct any amount for taxes unless paid; and (B) The other party to the sale is (under the law imposing the real property tax) liable for the real property tax for the real property tax year; then for purposes of subdivision (a) of Section 24345 the corporation shall be treated as having paid, on the date of the sale, so much of the tax as, under subdivision (a), is treated as imposed on the corporation. For purposes of the preceding sentence, if neither party is liable for the tax, then the party holding the property at the time the tax becomes a lien on the property shall be considered liable for the real property tax for the real property tax year. (2) Subdivision (a) shall apply to taxable years beginning after December 31, 1960, but only in the case of sales after December 31, 1960. (3) Subdivision (a) shall not apply to any real property tax, to the extent that the tax was allowable as a deduction under the Bank and Corporation Tax Law of 1954 to the seller for a taxable year which began before January 1, 1961. (4) In the case of any sale of real property, if the corporation’s net income for the taxable year during which the sale occurs is computed under an accrual method of accounting, and if no election under subdivision (b) of Section 24681 (relating to the accrual of real property taxes) applies, then, for purposes of subdivision (a) of Section 24345, that portion of the tax that— (A) Is treated, under subdivision (a), as imposed on the corporation; and (B) May not, by reason of the corporation’s method of accounting, be deducted by the corporation for any taxable year, shall be treated as having accrued on the date of the sale. (Amended by Stats. 2000, Ch. 862, Sec. 129. Effective January 1, 2001.)
  186. 24347.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For taxable years beginning on or after January 1, 1990, this section applies listed Internal Revenue Code provisions on losses, bad debts, and certain securities gains/losses, with specific exceptions for some financial institutions and foreign corporations with a water’s edge election.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347. For taxable years beginning on or after January 1, 1990, all of the following shall apply: (a) Section 165 of the Internal Revenue Code, relating to losses. (b) Section 166 of the Internal Revenue Code, relating to bad debts, except that the deduction of a savings and loan association, bank or financial corporation shall be determined under Section 24348. (c) (1) Section 582 of the Internal Revenue Code, relating to bad debts, losses, and gains with respect to securities held by financial institutions. (2) Section 582(c)(2)(C) of the Internal Revenue Code, relating to limitations on foreign banks, but only to foreign corporations that have in effect for the taxable year a water’s edge election under Section 25110. (Amended by Stats. 2000, Ch. 862, Sec. 130. Effective January 1, 2001.)
  187. 24347.10.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain disaster losses can be carried forward to later taxable years, and they are not used when computing a net operating loss deduction under Section 172.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.10. (a) An excess disaster loss, as defined in subdivision (c), shall be carried to other taxable years as provided in subdivision (b), with respect to losses sustained in the County of San Mateo as a result of the explosion and fire that occurred in September 2010. (b) (1) In the case of any loss allowed under Section 165 of the Internal Revenue Code, relating to losses, any excess disaster loss shall be carried forward to each of the five taxable years following the taxable year for which the loss is claimed. However, if there is any excess disaster loss remaining after the five-year period, then the applicable percentage, as set forth in paragraph (1) of subdivision (b) of Section 24416, of that excess disaster loss shall be carried forward to each of the next 10 taxable years. (2) The entire amount of any excess disaster loss as defined in subdivision (c) shall be carried to the earliest of the taxable years to which, by reason of subdivision (b), the loss may be carried. The portion of the loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of excess disaster loss over the sum of the net income for each of the prior taxable years to which that excess disaster loss is carried. (c) “Excess disaster loss” means a disaster loss computed pursuant to Section 165 of the Internal Revenue Code, which exceeds the net income of the year of loss or, if the election under Section 165(i) of the Internal Revenue Code is made, the net income of the year preceding the loss. (d) This section and Section 165(i) of the Internal Revenue Code apply to any of the losses listed in subdivision (a) sustained in any county or city in this state which was proclaimed by the Governor to be in a state of disaster. (e) A corporation subject to Section 25101 or 25101.15 that has disaster losses pursuant to this section shall determine the excess disaster loss to be carried to other taxable years under the principles specified in Section 25108 relating to net operating losses. (f) Losses allowable under this section shall not be taken into account in computing a net operating loss deduction under Section 172 of the Internal Revenue Code. (g) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return (determined with regard to extension) for the taxable year in which the disaster occurred. (Amended by Stats. 2015, Ch. 303, Sec. 492. (AB 731) Effective January 1, 2016.)
  188. 24347.11.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies Section 165(i) to certain Santa Cruz County losses from the severe March 2011 storms and limits other net operating loss deduction restrictions for those losses.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.11. (a) Section 165(i) of the Internal Revenue Code shall be applicable to any losses sustained in the County of Santa Cruz as a result of the severe storms that occurred in March 2011. (b) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return, determined with regard to extension, for the taxable year in which the disaster occurred. (c) Unless specifically provided otherwise, any law that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss shall not apply to a net operating loss attributable to the loss described in subdivision (a). (Added by Stats. 2012, Ch. 203, Sec. 2. (AB 2332) Effective August 27, 2012.)
  189. 24347.12.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies Internal Revenue Code Section 165(i) to certain losses from the November 2011 severe winds in Los Angeles and San Bernardino Counties, allows the election to be made on a timely return or amended return, and bars laws reducing net operating loss deductions from applying to those losses unless otherwise provided.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.12. (a) Section 165(i) of the Internal Revenue Code shall be applicable to any losses sustained in the Counties of Los Angeles and San Bernardino as a result of the severe winds that occurred in November 2011. (b) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return, determined with regard to extension, for the taxable year in which the disaster occurred. (c) Unless specifically provided otherwise, any law that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss shall not apply to a net operating loss attributable to the loss described in subdivision (a). (Added by Stats. 2012, Ch. 284, Sec. 2. (SB 1544) Effective September 7, 2012.)
  190. 24347.13.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies Internal Revenue Code Section 165(i) to certain San Diego wildfire losses from May 2014 and allows the related election to be filed on a timely return or amended return.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.13. (a) Section 165(i) of the Internal Revenue Code shall be applicable to any losses sustained in the County of San Diego as a result of the wildfires that occurred in May 2014. (b) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return, determined with regard to extension, for the taxable year in which the disaster occurred. (c) Unless specifically provided otherwise, any law that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss shall not apply to a net operating loss attributable to the loss described in subdivision (a). (Added by Stats. 2014, Ch. 352, Sec. 2. (AB 922) Effective September 16, 2014.)
  191. 24347.14.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain disaster losses, the Section 165(i) election can be made on a return or amended return filed by the due date, including extensions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.14. (a) For taxable years beginning on or after January 1, 2014, and before January 1, 2029, Section 165(i) of the Internal Revenue Code, relating to disaster losses, shall be applicable to any loss sustained as a result of any disaster occurring in any city, county, or city and county in this state that is proclaimed by the Governor to be in a state of emergency. (b) (1) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code, relating to disaster losses, may be made on a return or amended return filed on or before the due date of the return, determined with regard to any extension of time for filing the return, for the taxable year in which the disaster occurred. (2) Notwithstanding Section 18572, this subdivision shall apply to any loss described in subdivision (a). (c) Unless specifically provided otherwise, any law, other than Section 24416, that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss shall not apply to a net operating loss attributable to the loss described in subdivision (a). (d) This section shall remain in effect only until December 1, 2029, and as of that date is repealed. (Amended by Stats. 2023, Ch. 285, Sec. 2. (SB 264) Effective September 30, 2023. Repealed as of December 1, 2029, by its own provisions.)
  192. 24347.4.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    An appraisal for a federal disaster-related loan or loan guarantee may be used to establish the amount of certain disaster losses, subject to Treasury guidance.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.4. (a) Section 165(i) of the Internal Revenue Code, relating to disaster losses, is modified to additionally provide that an appraisal for the purpose of obtaining a loan of federal funds or a loan guarantee from the federal government as a result of a presidentially declared disaster (as defined by Section 1033(h)(3) of the Internal Revenue Code) may be used to establish the amount of any loss described in Section 165(i)(1) or (2) of the Internal Revenue Code to the extent provided in regulations or other guidance of the Secretary of the Treasury under Section 165(i)(4) of the Internal Revenue Code (as added by Section 912 of Public Law 105-34). (b) This section shall apply on and after August 5, 1997. (Added by Stats. 1998, Ch. 7, Sec. 32. Effective March 14, 1998.)
  193. 24347.5.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section lets certain disaster losses be carried forward to later taxable years and limits how they are used.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.5. (a) An excess disaster loss, as defined in subdivision (c), shall be carried to other taxable years as provided in subdivision (b), with respect to losses resulting from any of the following disasters: (1) Forest fire or any other related casualty occurring in 1985 in California. (2) Storm, flooding, or any other related casualty occurring in 1986 in California. (3) Any loss sustained during 1987 as a result of a forest fire or any other related casualty. (4) Earthquake, aftershock, or any other related casualty occurring in October 1987 in California. (5) Earthquake, aftershock, or any other related casualty occurring in October 1989 in California. (6) Any loss sustained during 1990 as a result of fire or any other related casualty in California. (7) Any loss sustained as a result of the Oakland/Berkeley Fire of 1991, or any other related casualty. (8) Any loss sustained as a result of storm, flooding, or any other related casualty occurring in February 1992 in California. (9) Earthquake, aftershock, or any other related casualty occurring in April 1992 in the County of Humboldt. (10) Riots, arson, or any other related casualty occurring in April or May 1992 in California. (11) Any loss sustained as a result of the earthquakes or any other related casualty that occurred in the County of San Bernardino in June and July of 1992. (12) Any loss sustained as a result of the Fountain Fire that occurred in the County of Shasta, or as a result of either of the fires in the Counties of Calaveras and Trinity that occurred in August 1992, or any other related casualty. (13) Any loss sustained as a result of storm, flooding, or any other related casualty that occurred in the Counties of Alpine, Contra Costa, Fresno, Humboldt, Imperial, Lassen, Los Angeles, Madera, Mendocino, Modoc, Monterey, Napa, Orange, Plumas, Riverside, San Bernardino, San Diego, Santa Barbara, Sierra, Siskiyou, Sonoma, Tehama, Trinity, and Tulare, and the City of Fillmore in January 1993. (14) Any loss sustained as a result of a fire that occurred in the Counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura, during October or November of 1993, or any other related casualty. (15) Any loss sustained as a result of the earthquake, aftershocks, or any other related casualty that occurred in the Counties of Los Angeles, Orange, and Ventura on or after January 17, 1994. (16) Any loss sustained as a result of a fire that occurred in the County of San Luis Obispo during August of 1994, or any other related casualty. (17) Any loss sustained as a result of the storms or flooding occurring in 1995, or any other related casualty, sustained in any county of this state subject to a disaster declaration with respect to the storms and flooding. (18) Any loss sustained as a result of the storms or flooding occurring in December 1996 or January 1997, or any related casualty, sustained in any county of this state subject to a disaster declaration with respect to the storms or flooding. (19) Any loss sustained as a result of the storms or flooding occurring in February 1998, or any related casualty, sustained in any county of this state subject to a disaster declaration with respect to the storms or flooding. (20) Any loss sustained as a result of a freeze occurring in the winter of 1998–99, or any related casualty, sustained in any county of this state subject to a disaster declaration with respect to the freeze. (21) Any loss sustained as a result of an earthquake occurring in September 2000, that was included in the Governor’s proclamation of a state of emergency for the County of Napa. (22) Any loss sustained as a result of the Middle River levee break in San Joaquin County occurring in June 2004. (23) Any losses sustained as a result of the fires that occurred in the Counties of Los Angeles, Riverside, San Bernardino, San Diego, and Ventura in October and November 2003, or as a result of floods, mudflows, and debris flows, directly related to fires. (24) Any losses sustained in the Counties of Santa Barbara and San Luis Obispo as a result of the San Simeon earthquake, aftershocks, and any other related casualties. (25) Any losses sustained as a result of the wildfires that occurred in Shasta County, commencing August 11, 2004, and any other related casualty. (26) Any loss sustained in the Counties of Kern, Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura as a result of the severe rainstorms, related flooding and slides, and any other related casualties, that occurred in December 2004, January 2005, February 2005, March 2005, or June 2005. (27) Any loss sustained in the Counties of Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El Dorado, Fresno, Humboldt, Kings, Lake, Lassen, Madera, Marin, Mariposa, Mendocino, Merced, Monterey, Napa, Nevada, Placer, Plumas, Sacramento, San Joaquin, San Luis Obispo, San Mateo, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Trinity, Tulare, Tuolumne, Yolo, and Yuba as a result of the severe rainstorms, related flooding and slides, and any other related casualties, that occurred in December 2005, January 2006, March 2006, or April 2006. (28) Any loss sustained in the County of San Bernardino as a result of the wildfires that occurred in July 2006. (29) Any loss sustained in the Counties of Riverside and Ventura as a result of wildfires that occurred during the 2006 calendar year. (30) Any loss sustained in the Counties of El Dorado, Fresno, Imperial, Kern, Kings, Madera, Merced, Monterey, Riverside, San Bernardino, San Diego, San Luis Obispo, Santa Barbara, Santa Clara, Stanislaus, Tulare, Ventura, and Yuba that were the subject of the Governor’s proclamations of a state of emergency for the severe freezing conditions that occurred in January 2007. (31) Any loss sustained in the County of El Dorado as a result of wildfires that occurred in June 2007. (32) Any loss sustained in the Counties of Santa Barbara and Ventura as a result of the Zaca Fire that occurred during the 2007 calendar year. (33) Any loss sustained in the County of Inyo as a result of wildfires that commenced in July 2007. (34) Any loss sustained in the Counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura as a result of wildfires that occurred during the 2007 calendar year that were the subject of the Governor’s disaster proclamations of September 15, 2007, and October 21, 2007. (35) Any loss sustained in the County of Riverside as a result of extremely strong and damaging winds that occurred in October 2007. (36) Any loss sustained in the Counties of Butte, Kern, Mariposa, Mendocino, Monterey, Plumas, Santa Clara, Santa Cruz, Shasta, and Trinity as a result of wildfires that occurred in May or June 2008 that were the subject of the Governor’s proclamations of a state of emergency. (37) Any loss sustained in the County of Santa Barbara as a result of wildfires that occurred in July 2008. (38) Any loss sustained in the County of Inyo as a result of the severe rainstorms, related flooding and landslides, and any other related casualties, that occurred in July 2008. (39) Any loss sustained in the County of Humboldt as a result of wildfires that commenced in May 2008. (40) Any loss sustained in the County of Santa Barbara as a result of wildfires that commenced in November 2008. (41) Any loss sustained in the Counties of Los Angeles and Ventura as a result of wildfires that commenced in October 2008 or November 2008 that were the subject of the Governor’s proclamations of a state of emergency. (42) Any loss sustained in the Counties of Orange, Riverside, and San Bernardino as a result of wildfires that commenced in November 2008. (43) Any loss sustained in the County of Santa Barbara as a result of wildfires that commenced in May 2009. (b) (1) In the case of any loss allowed under Section 165 of the Internal Revenue Code, relating to losses, any excess disaster loss shall be carried forward to each of the five taxable years following the taxable year for which the loss is claimed. However, if there is any excess disaster loss remaining after the five-year period, then the applicable percentage, as set forth in paragraph (1) of subdivision (b) of Section 24416, of that excess disaster loss shall be carried forward to each of the next 10 taxable years. (2) The entire amount of any excess disaster loss as defined in subdivision (c) shall be carried to the earliest of the taxable years to which, by reason of subdivision (b), the loss may be carried. The portion of the loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of excess disaster loss over the sum of the net income for each of the prior taxable years to which that excess disaster loss is carried. (c) “Excess disaster loss” means a disaster loss computed pursuant to Section 165 of the Internal Revenue Code, which exceeds the net income of the year of loss or, if the election under Section 165(i) of the Internal Revenue Code is made, the net income of the year preceding the loss. (d) The provisions of this section and Section 165(i) of the Internal Revenue Code shall be applicable to any of the losses listed in subdivision (a) sustained in any county or city in this state which was proclaimed by the Governor to be in a state of disaster. (e) Any corporation subject to the provisions of Section 25101 or 25101.15 that has disaster losses pursuant to this section, shall determine the excess disaster loss to be carried to other taxable years under the principles specified in Section 25108 relating to net operating losses. (f) Losses allowable under this section may not be taken into account in computing a net operating loss deduction under Section 172 of the Internal Revenue Code. (g) For losses described in paragraphs (15) to (43), inclusive, of subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return (determined with regard to extension) for the taxable year in which the disaster occurred. (Amended by Stats. 2009, Ch. 299, Sec. 3. (AB 1568) Effective January 1, 2010.)
  194. 24347.6.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section lets an excess disaster loss be carried forward over specific taxable years and requires certain corporations with disaster losses to calculate that loss under Section 25108 principles.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.6. (a) An excess disaster loss, as defined in subdivision (c), shall be carried to other taxable years as provided in subdivision (b), with respect to losses sustained in the County of Mendocino as a result of the tsunami that occurred in March 2011. (b) (1) In the case of any loss allowed under Section 165 of the Internal Revenue Code, relating to losses, any excess disaster loss shall be carried forward to each of the five taxable years following the taxable year for which the loss is claimed. However, if there is any excess disaster loss remaining after the five-year period, then the applicable percentage, as set forth in paragraph (1) of subdivision (b) of Section 24416, of that excess disaster loss shall be carried forward to each of the next 10 taxable years. (2) The entire amount of any excess disaster loss as defined in subdivision (c) shall be carried to the earliest of the taxable years to which, by reason of subdivision (b), the loss may be carried. The portion of the loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of excess disaster loss over the sum of the net income for each of the prior taxable years to which that excess disaster loss is carried. (c) “Excess disaster loss” means a disaster loss computed pursuant to Section 165 of the Internal Revenue Code, which exceeds the net income of the year of loss or, if the election under Section 165(i) of the Internal Revenue Code is made, the net income of the year preceding the loss. (d) This section and Section 165(i) of the Internal Revenue Code apply to any of the losses listed in subdivision (a) sustained in any county or city in this state which was proclaimed by the Governor to be in a state of disaster. (e) A corporation subject to Section 25101 or 25101.15 that has disaster losses pursuant to this section shall determine the excess disaster loss to be carried to other taxable years under the principles specified in Section 25108 relating to net operating losses. (f) Losses allowable under this section shall not be taken into account in computing a net operating loss deduction under Section 172 of the Internal Revenue Code. (g) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return (determined with regard to extension) for the taxable year in which the disaster occurred. (Amended by Stats. 2015, Ch. 303, Sec. 491. (AB 731) Effective January 1, 2016.)
  195. 24347.7.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

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    Certain disaster losses from the January 2010 Humboldt County earthquake may be carried to later tax years, and qualifying corporations must compute the carryover under specified net operating loss rules.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.7. (a) An excess disaster loss, as defined in subdivision (c), shall be carried to other taxable years as provided in subdivision (b), with respect to losses sustained in the County of Humboldt as a result of the earthquake that occurred in January 2010. (b) (1) In the case of any loss allowed under Section 165 of the Internal Revenue Code, relating to losses, any excess disaster loss shall be carried forward to each of the five taxable years following the taxable year for which the loss is claimed. However, if there is any excess disaster loss remaining after the five-year period, then the applicable percentage, as set forth in paragraph (1) of subdivision (b) of Section 24416, of that excess disaster loss shall be carried forward to each of the next 10 taxable years. (2) The entire amount of any excess disaster loss as defined in subdivision (c) shall be carried to the earliest of the taxable years to which, by reason of subdivision (b), the loss may be carried. The portion of the loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of excess disaster loss over the sum of the net income for each of the prior taxable years to which that excess disaster loss is carried. (c) “Excess disaster loss” means a disaster loss computed pursuant to Section 165 of the Internal Revenue Code, which exceeds the net income of the year of loss or, if the election under Section 165(i) of the Internal Revenue Code is made, the net income of the year preceding the loss. (d) The provisions of this section and Section 165(i) of the Internal Revenue Code shall be applicable to any of the losses listed in subdivision (a) sustained in any county or city in this state which was proclaimed by the Governor to be in a state of disaster. (e) Any corporation subject to the provisions of Section 25101 or 25101.15 that has disaster losses pursuant to this section, shall determine the excess disaster loss to be carried to other taxable years under the principles specified in Section 25108 relating to net operating losses. (f) Losses allowable under this section may not be taken into account in computing a net operating loss deduction under Section 172 of the Internal Revenue Code. (g) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return (determined with regard to extension) for the taxable year in which the disaster occurred. (Added by Stats. 2010, Ch. 449, Sec. 6. (AB 1690) Effective September 29, 2010.)
  196. 24347.8.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section lets certain disaster losses be carried forward to later taxable years and limits how they can be used in net operating loss deductions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.8. (a) An excess disaster loss, as defined in subdivision (c), shall be carried to other taxable years as provided in subdivision (b), with respect to losses sustained in the County of Imperial as a result of the earthquake that occurred in April 2010. (b) (1) In the case of any loss allowed under Section 165 of the Internal Revenue Code, relating to losses, any excess disaster loss shall be carried forward to each of the five taxable years following the taxable year for which the loss is claimed. However, if there is any excess disaster loss remaining after the five-year period, then the applicable percentage, as set forth in paragraph (1) of subdivision (b) of Section 24416, of that excess disaster loss shall be carried forward to each of the next 10 taxable years. (2) The entire amount of any excess disaster loss as defined in subdivision (c) shall be carried to the earliest of the taxable years to which, by reason of subdivision (b), the loss may be carried. The portion of the loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of excess disaster loss over the sum of the net income for each of the prior taxable years to which that excess disaster loss is carried. (c) “Excess disaster loss” means a disaster loss computed pursuant to Section 165 of the Internal Revenue Code, which exceeds the net income of the year of loss or, if the election under Section 165(i) of the Internal Revenue Code is made, the net income of the year preceding the loss. (d) The provisions of this section and Section 165(i) of the Internal Revenue Code shall be applicable to any of the losses listed in subdivision (a) sustained in any county or city in this state which was proclaimed by the Governor to be in a state of disaster. (e) Any corporation subject to the provisions of Section 25101 or 25101.15 that has disaster losses pursuant to this section, shall determine the excess disaster loss to be carried to other taxable years under the principles specified in Section 25108 relating to net operating losses. (f) Losses allowable under this section may not be taken into account in computing a net operating loss deduction under Section 172 of the Internal Revenue Code. (g) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return (determined with regard to extension) for the taxable year in which the disaster occurred. (Added by Stats. 2010, Ch. 461, Sec. 7. (AB 2136) Effective September 29, 2010.)
  197. 24347.9.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section lets certain disaster losses be carried forward to later taxable years, but sets a special rule for how much can be carried and when a Section 165(i) election may be made.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24347.9. (a) An excess disaster loss, as defined in subdivision (c), shall be carried to other taxable years as provided in subdivision (b), with respect to losses resulting from any of the following disasters: (1) Any loss sustained in the Counties of Los Angeles and Monterey as a result of wildfires that commenced in August 2009. (2) Any loss sustained in the County of Placer as a result of wildfires that commenced in August 2009. (3) Any loss sustained in the Counties of Calaveras, Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Francisco, and Siskiyou as a result of winter storms that commenced in January 2010. (4) Any loss sustained in the County of Kern as a result of the wildfires that commenced in July 2010. (b) (1) In the case of any loss allowed under Section 165 of the Internal Revenue Code, relating to losses, any excess disaster loss shall be carried forward to each of the five taxable years following the taxable year for which the loss is claimed. However, if there is any excess disaster loss remaining after the five-year period, then the applicable percentage, as set forth in paragraph (1) of subdivision (b) of Section 24416, of that excess disaster loss shall be carried forward to each of the next 10 taxable years. (2) The entire amount of any excess disaster loss as defined in subdivision (c) shall be carried to the earliest of the taxable years to which, by reason of subdivision (b), the loss may be carried. The portion of the loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of excess disaster loss over the sum of the net income for each of the prior taxable years to which that excess disaster loss is carried. (c) “Excess disaster loss” means a disaster loss computed pursuant to Section 165 of the Internal Revenue Code, which exceeds the net income of the year of loss or, if the election under Section 165(i) of the Internal Revenue Code is made, the net income of the year preceding the loss. (d) The provisions of this section and Section 165(i) of the Internal Revenue Code shall be applicable to any of the losses listed in subdivision (a) sustained in any county or city in this state which was proclaimed by the Governor to be in a state of disaster. (e) Any corporation subject to the provisions of Section 25101 or 25101.15 that has disaster losses pursuant to this section, shall determine the excess disaster loss to be carried to other taxable years under the principles specified in Section 25108 relating to net operating losses. (f) Losses allowable under this section may not be taken into account in computing a net operating loss deduction under Section 172 of the Internal Revenue Code. (g) For losses described in subdivision (a), the election under Section 165(i) of the Internal Revenue Code may be made on a return or amended return filed on or before the due date of the return (determined with regard to extension) for the taxable year in which the disaster occurred. (Added by Stats. 2010, Ch. 447, Sec. 6. (AB 1662) Effective September 29, 2010.)
  198. 24348.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section allows deductions for certain bad debts and, for banks, a reserve-for-bad-debts deduction instead of the normal rule in some cases.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24348. (a) There shall be allowed as a deduction either of the following: (1) Debts which become worthless within the taxable year in an amount not in excess of the part charged off within that taxable year. (2) In the case of a bank (as defined in Section 581 of the Internal Revenue Code), in lieu of any deduction under paragraph (1), in the discretion of the Franchise Tax Board, a reasonable addition to a reserve for bad debts determined in accordance with Section 585 of the Internal Revenue Code, relating to reserves for losses on loans of banks, except as otherwise provided. (b) When satisfied that a debt is recoverable in part only, the Franchise Tax Board may allow that debt, in an amount not in excess of the part charged off within the taxable year, as a deduction; provided, however, that if a portion of a debt is claimed and allowed as a deduction in any year, no deduction shall be allowed in any subsequent year for any portion of the debt which in any prior year was charged off, regardless of whether claimed as a deduction in that prior year. (c) (1) The amendments to this section made by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2002. (2) In the case of any bank, savings and loan association, or financial corporation (whether a taxpayer or a member of a combined reporting group) that maintained a reserve for bad debts for the last taxable year beginning before January 1, 2002, and that is required by the amendments to this section made by the act adding this subdivision to change its method of computing reserves for bad debts, all of the following shall apply: (A) That change shall be treated as a change in a method of accounting. (B) That change shall be treated as initiated by the bank, savings and loan association, or financial corporation (whether a taxpayer or a member of a combined reporting group). (C) That change shall be treated as made with the consent of the Franchise Tax Board. (D) The net amount of adjustments required by Article 6 (commencing with Section 24721) of Chapter 13 to be taken into account by the bank, savings and loan association, or financial corporation (whether a taxpayer or a member of a combined reporting group): (i) Shall be determined by taking into account only 50 percent of the “applicable excess reserves” (as defined in subdivision (d)), and (ii) As so determined, shall be taken into account on the last day of the first taxable year beginning on or after January 1, 2002. (iii) The amount of “applicable excess reserves” in excess of the amount taken into account under clause (i) of this subparagraph shall be reduced to zero and shall not be taken into account for purposes of this part. (d) (1) In the case of a large bank (as defined in Section 585(c)(2) of the Internal Revenue Code), or a financial corporation that is not allowed to use the reserve for bad debts under Section 585 of the Internal Revenue Code, the term “applicable excess reserves” means the balance of the reserves described in former subparagraph (B) of paragraph (1) of subdivision (a) (prior to the amendments made by the act adding this subdivision) as of the close of the last taxable year beginning before January 1, 2002. (2) In all other cases, the term “applicable excess reserves” shall be zero and shall not be taken into account for purposes of this part. (e) The amount of “applicable excess reserves” not taken into account pursuant to clause (iii) of subparagraph (D) of paragraph (2) of subdivision (c) or paragraph (2) of subdivision (d) shall not affect the amount of the allowable deduction under paragraph (1) of subdivision (a). (Amended by Stats. 2002, Ch. 488, Sec. 9. Effective September 12, 2002.)
  199. 24349.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section allows a depreciation deduction for qualifying property and sets special methods and rules for certain property, including California grapevines and leased property.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24349. (a) There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for obsolescence)— (1) Of property used in the trade or business; or (2) Of property held for the production of income. (b) Except as otherwise provided in subdivision (c), for taxable years ending after December 31, 1958, the term “reasonable allowance” as used in subdivision (a) shall include, but shall not be limited to, an allowance computed in accordance with regulations prescribed by the Franchise Tax Board, under any of the following methods: (1) The straight-line method. (2) The declining balance method, using a rate not exceeding twice the rate that would have been used had the annual allowance been computed under the method described in paragraph (1). (3) The sum of the years-digits method. (4) Any other consistent method productive of an annual allowance that, when added to all allowances for the period commencing with the taxpayer’s use of the property and including the taxable year, does not, during the first two-thirds of the useful life of the property, exceed the total of those allowances that would have been used had those allowances been computed under the method described in paragraph (2). Nothing in this subdivision shall be construed to limit or reduce an allowance otherwise allowable under subdivision (a). (c) Any grapevine replaced in a vineyard in California in a taxable year beginning on or after January 1, 1992, as a direct result of a phylloxera infestation in that vineyard, and any grapevine replaced in a vineyard in California in a taxable year beginning on or after January 1, 1997, as a direct result of Pierce’s disease in that vineyard, shall have a useful life of five years, except that it shall have a class life of 10 years for purposes of depreciation under Section 168(g)(2) of the Internal Revenue Code where the taxpayer has made an election under Section 263A(d)(3) of the Internal Revenue Code not to capitalize costs of the infested vineyard. Every taxpayer claiming a deduction under this section with respect to a grapevine as described in this subdivision shall obtain a written certification from an independent state-certified integrated pest management adviser, or a state agricultural commissioner or adviser, that specifies that the replanting was necessary to restore a vineyard infested with phylloxera or Pierce’s disease. The taxpayer shall retain the certification for future audit purposes. (d) For purposes of this part, the deduction for property leased to governments and other tax-exempt entities, as defined in Section 168(h) of the Internal Revenue Code, shall be limited to the amount determined under Section 168(g) of the Internal Revenue Code, relating to alternative depreciation system for certain property. (e) (1) In the case of any building erected or improvements made on leased property, if the building or improvement is property to which this section applies, the depreciation deduction shall be determined under the provisions of this section. (2) An improvement shall be treated for purposes of determining gain or loss under this part as disposed of by the lessor when so disposed of or abandoned if both of the following occur: (A) The improvement is made by the lessor of leased property for the lessee of that property. (B) The improvement is irrevocably disposed of or abandoned by the lessor at the termination of the lease by the lessee. This subdivision shall not apply to any property to which Section 168 of the Internal Revenue Code does not apply for federal purposes by reason of Section 168(f) of the Internal Revenue Code. Any election made under Section 168(f)(1) of the Internal Revenue Code for federal purposes with respect to that property shall be treated as a binding election for state purposes under this subdivision with respect to that same property and no separate election under subdivision (e) of Section 23051.5 with respect to that property shall be allowed. (3) (A) In determining a lease term, both of the following shall apply: (i) There shall be taken into account options to renew. (ii) Two or more successive leases which are part of the same transaction (or a series of related transactions) with respect to the same or substantially similar property shall be treated as one lease. (B) For purposes of clause (i) of subparagraph (A), in the case of nonresidential real property or residential rental property, there shall not be taken into account any option to renew at fair market value determined at the time of renewal. (f) (1) Section 167(g) of the Internal Revenue Code, relating to depreciation under income forecast method, shall apply except as otherwise provided. (2) Section 167(g)(2)(C) of the Internal Revenue Code is modified by substituting “Section 19521” in lieu of “Section 460(b)(7)” of the Internal Revenue Code. (3) Section 167(g)(5)(D) of the Internal Revenue Code is modified by substituting “Part 10.2 (commencing with Section 18401) (other than Article 2 (commencing with Section 19021) and Sections 19142 to 19150, inclusive)” in lieu of “Subtitle F (other than Sections 6654 and 6655).” (4) Section 167(g)(5)(E) of the Internal Revenue Code, relating to treatment of distribution costs, shall not apply. (5) Section 167(g)(7) of the Internal Revenue Code, relating to treatment of participations and residuals, shall not apply. (Amended by Stats. 2005, Ch. 691, Sec. 60. Effective October 7, 2005.)
  200. 24349.1.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section applies IRC Section 280F to California corporate tax with specified modifications and exceptions.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Deductions [24341 - 24383] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24349.1. (a) Section 280F of the Internal Revenue Code, relating to limitations on depreciation for luxury automobiles and certain property used for personal purposes, shall apply, except as otherwise provided. (b) Except as provided in subdivision (c), Section 280F of the Internal Revenue Code shall be modified as follows: (1) The terms “deduction” or “recovery deduction,” relating to amounts allowable as a deduction under Section 168 of the Internal Revenue Code, mean the amount allowable as a deduction for depreciation under this part. (2) The term “recovery period,” relating to property under Section 168 of the Internal Revenue Code, means the class life asset depreciation range allowable under this part. (3) The provisions of Section 280F of the Internal Revenue Code which relate to the investment tax credit shall not be applicable for purposes of this part. (c) Paragraphs (1) and (2) of subdivision (b) shall not apply to Section 24356.7 property. (d) The amendments made by Section 13202(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 280F of the Internal Revenue Code, relating to limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 92. (SB 711) Effective October 1, 2025.)

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