Revenue and Taxation Code — Part 14 | RTC — United States — California law | Esheria

Revenue and Taxation Code

Part 14 of 36 · provisions 2,601–2,800

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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. 24349.2.

    ## 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. )

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    Section 280G of the Internal Revenue Code applies here, except where 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. ) ## 24349.2. Section 280G of the Internal Revenue Code, relating to golden parachute payments, shall apply, except as otherwise provided. (Added by Stats. 2010, Ch. 14, Sec. 67. (SB 401) Effective January 1, 2011.)
  2. 24350.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 limits when certain corporate tax deduction rules apply to qualifying 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. ) ## 24350. Paragraphs (2), (3), and (4) of Section 24349(b) shall apply only in the case of property (other than intangible property) described in Section 24349(a) with a useful life of three years or more— (a) The construction, reconstruction, or erection of which is completed after December 31, 1958, and then only to that portion of the basis which is properly attributable to such construction, reconstruction, or erection after December 31, 1958; or (b) Acquired after December 31, 1958, if the original use of such property commences with the taxpayer and commences after such date. (Amended by Stats. 1959, Ch. 1127.)
  3. 24351.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    A written depreciation agreement made under Franchise Tax Board regulations binds both the taxpayer and the Franchise Tax Board unless there were unconsidered facts or circumstances.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24351. Where, under regulations prescribed by the Franchise Tax Board, the taxpayer and the Franchise Tax Board have, after the date of enactment of this section, entered into an agreement in writing specifically dealing with the useful life and rate of depreciation of any property, the rate so agreed upon shall be binding on both the taxpayer and the Franchise Tax Board in the absence of facts or circumstances not taken into consideration in the adoption of such agreement. The responsibility of establishing the existence of such facts and circumstances shall rest with the party initiating the modification. Any change in the agreed rate and useful life specified in the agreement shall not be effective for taxable years before the taxable year in which notice in writing by certified mail or registered mail is served by the party to the agreement initiating such change. (Amended by Stats. 2000, Ch. 862, Sec. 134. Effective January 1, 2001.)
  4. 24352.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    A taxpayer may elect to change depreciation methods if there is no contrary agreement under Section 24351 and the election follows Franchise Tax Board 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 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. ) ## 24352. In the absence of an agreement under Section 24351 containing a provision to the contrary, a taxpayer may at any time elect in accordance with regulations prescribed by the Franchise Tax Board to change from the method of depreciation described in Section 24349(b)(2) to the method described in Section 24349(b)(1). (Added by Stats. 1959, Ch. 1127.)
  5. 24352.5.

    ## 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. )

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    A taxpayer may, under Franchise Tax Board regulations, reduce salvage value for certain personal property by up to 10% of basis when computing the Section 24349 allowance.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24352.5. (a) Under regulations prescribed by the Franchise Tax Board, a taxpayer may, for purposes of computing the allowance under Section 24349 with respect to personal property, reduce the amount taken into account as salvage value by an amount which does not exceed 10 percent of the basis of such property (as determined under Section 24353 as of the time as of which such salvage value is required to be determined). (b) For purposes of this section, the term “personal property” means depreciable personal property (other than livestock) with a useful life of three years or more. (Added by Stats. 1971, 1st Ex. Sess., Ch. 1.)
  6. 24353.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    For depreciation and related deductions, property generally uses the adjusted basis from Section 24911; if property is bought subject to a lease, no part of that adjusted basis is allocated to the leasehold 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 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. ) ## 24353. (a) The basis on which exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the adjusted basis provided in Section 24911 for the purpose of determining the gain on the sale or other disposition of the property. (b) If any property is acquired subject to a lease, each of the following shall apply: (1) No portion of the adjusted basis shall be allocated to the leasehold interest. (2) The entire adjusted basis shall be taken into account in determining the depreciation deduction, if any, with respect to the property subject to lease. (Amended by Stats. 1994, Ch. 861, Sec. 8. Effective September 27, 1994.)
  7. 24354.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 tells how a deduction is calculated for property held for life with a remainder interest, and how a deduction for trust property is divided.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24354. In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust, the allowable deduction shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions on the basis of the trust income allocable to each. (Added by Stats. 1959, Ch. 1127.)
  8. 24354.1.

    ## 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 limits how depreciation can be computed for certain property and sets special rules and exceptions for residential rental property, foreign property, and public utility 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. ) ## 24354.1. (a) Except as provided in subdivisions (b) and (c) of this section, in the case of property of the type defined in Section 1250(c) of the Internal Revenue Code, subdivision (b) of Section 24349 shall not apply and the term “reasonable allowance” as used in subdivision (a) of Section 24349 shall include 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 150 percent of the rate which would have been used had the annual allowance been computed under the method described in paragraph (1), or (3) Any other consistent method productive of an annual allowance which, 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 such allowances which would have been used had such 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) of Section 24349 except where allowable solely by reason of paragraph (2), (3), or (4) of subdivision (b) of Section 24349. (b) (1) Subdivision (a) of this section shall not apply, and subdivision (b) of Section 24349 shall apply in any taxable year, to a building or structure— (A) Which is residential rental property located within the United States or any of its possessions, or located within a foreign country if a method of depreciation for such property comparable to the method provided in paragraph (2) or (3) of subdivision (b) of Section 24349 is provided by the laws of such country and (B) The original use of which commences with the taxpayer. In the case of residential rental property located within a foreign country, the original use of which commences with the taxpayer, if the allowance for depreciation provided under the laws of such country for such property is greater than that provided under subdivision (a) of this section, but less than that provided under subdivision (b) of Section 24349, the allowance for depreciation under subdivision (b) of Section 24349 shall be limited to the amount provided under the laws of such country. (2) For purposes of paragraph (1), a building or structure shall be considered to be residential rental property for any taxable year only if 80 percent or more of the gross rental income from such building or structure for such year is rental income from dwelling units (within the meaning of paragraph (3) of subdivision (c) of Section 24354.2. For purposes of the preceding sentence, if any portion of such building or structure is occupied by the taxpayer, the gross rental income from such building or structure shall include the rental value of the portion so occupied. (3) Any change in the computation of the allowance for depreciation for any taxable year, permitted or required by reason of the application of paragraph (1), shall not be considered a change in a method of accounting. (c) Subdivision (a) of this section shall not apply, and subdivision (b) of Section 24349 shall apply, in the case of property— (1) The construction, reconstruction, or erection of which was begun before January 1, 1971, or (2) For which a written contract entered into before January 1, 1971, with respect to any part of the construction, reconstruction, or erection or for the permanent financing thereof, was on January 1, 1971, and at all times thereafter, binding on the taxpayer. (d) Except as provided in subdivision (e), in the case of property of the type defined in Section 1250(c) of the Internal Revenue Code acquired after December 31, 1970, the original use of which does not commence with the taxpayer, the allowance for depreciation under Sections 24349 to 24354.2, inclusive, shall be limited to an amount computed under— (1) The straight line method, or (2) Any other method determined by the Franchise Tax Board to result in a reasonable allowance under subdivision (a) of Section 24349, not including— (A) Any declining balance method, (B) The sum of the years-digits method, or (C) Any other method allowable solely by reason of the application of paragraph (4) of subdivision (b) of Section 24349 or paragraph (3) of subdivision (a) of this section. (e) In the case of property of the type defined in Section 1250(c) of the Internal Revenue Code which is residential rental property (as defined in paragraph (2) of subdivision (b)) acquired after December 31, 1970, having a useful life of 20 years or more, the original use of which does not commence with the taxpayer, the allowance for depreciation under Sections 24349 to 24354.2, inclusive, shall be limited to an amount computed under— (1) The straight line method, (2) The declining balance method, using a rate not exceeding 125 percent of the rate which would have been used had the annual allowance been computed under the method described in paragraph (1), or (3) Any other method determined by the Franchise Tax Board to result in a reasonable allowance under subdivision (a) of Section 24349, not including— (A) The sum of the years-digits method, (B) Any declining balance method using a rate in excess of the rate permitted under paragraph (2), or (C) Any other method allowable solely by reason of the application of paragraph (4) of subdivision (b) of Section 24349 or paragraph (3) of subdivision (a) of this section. (f) (1) For purposes of subdivisions (b), (d), and (e), if property of the type defined in Section 1250(c) of the Internal Revenue Code which is not property described in subdivision (a) of Section 24349 when its original use commences, becomes property described in subdivision (a) of Section 24349 after December 31, 1970, such property shall not be treated as property the original use of which commences with the taxpayer. (2) Subdivisions (d) and (e) shall not apply in the case of property of the type defined in Section 1250(c) of the Internal Revenue Code, acquired after December 31, 1970, pursuant to a written contract for the acquisition of such property or for the permanent financing thereof, which was, on December 31, 1970, and at all times thereafter, binding on the taxpayer. (g) This section shall not apply to public utility property which means property used predominantly in the trade or business of the furnishing or sale of— (1) Electrical energy, water, or sewage disposal services, (2) Gas or steam through a local distribution system, (3) Telephone services, or other communication services if furnished or sold by the Communications Satellite Corporation for purposes authorized by the Communications Satellite Act of 1962 (47 U.S.C. 701), or (4) Transportation of gas or steam by pipeline, if the rates for such furnishing or sale, as the case may be, have been established or approved by a state or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any state or political subdivision thereof. (Amended by Stats. 2000, Ch. 862, Sec. 135. Effective January 1, 2001.)
  9. 24355.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    Section 167(f) of the Internal Revenue Code applies here, unless another rule in this provision 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 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. ) ## 24355. Section 167(f) of the Internal Revenue Code, relating to treatment of property excluded from Section 197, shall apply, except as otherwise provided. (Amended by Stats. 1997, Ch. 611, Sec. 83. Effective October 3, 1997.)
  10. 24355.3.

    ## 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. )

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    For computing the depreciation deduction under Section 24349, the useful life of an Alaska natural gas pipeline is seven 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 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. ) ## 24355.3. For purposes of computing the depreciation deduction pursuant to Section 24349, the useful life of any Alaska natural gas pipeline, as defined in Section 168(i)(16) of the Internal Revenue Code, shall be seven years. (Added by renumbering Section 24355.5 (as renumbered by Stats. 2015, Ch. 303, Sec. 493) by Stats. 2016, Ch. 86, Sec. 293. (SB 1171) Effective January 1, 2017.)
  11. 24355.4.

    ## 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. )

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    For depreciation deductions under Section 24349, qualified rent-to-own property must use a four-year class life.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24355.4. For purposes of computing the depreciation deduction under Section 24349, a class life of four years shall be used for any qualified rent-to-own property as defined in Section 168(i)(14) of the Internal Revenue Code. (Added by Stats. 1998, Ch. 322, Sec. 80. Effective August 20, 1998.)
  12. 24355.5.

    ## 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. )

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    This section applies specified federal amortization rules to goodwill and certain intangibles, but limits deductions and elections 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. ) ## 24355.5. (a) Section 197 of the Internal Revenue Code, relating to amortization of goodwill and certain other intangibles, shall apply, except as otherwise provided. (b) (1) Section 13261(g) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to effective dates, shall apply, except as otherwise provided. (2) (A) If a taxpayer has, at any time, made an election for federal purposes under Section 13261(g)(2) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to election to have amendments apply to property acquired after July 25, 1991, or Section 13261(g)(3) of that act, relating to elective binding contract exception, a separate election for state purposes 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. (B) If a taxpayer has not made an election for federal purposes under Section 13261(g)(2) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to election to have amendments apply to property acquired after July 25, 1991, or Section 13261(g)(3) of that act, relating to elective binding contract exception, with respect to property acquired before August 11, 1993, then the taxpayer shall not be allowed to make an election under Section 13261(g) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), for purposes of this part, with respect to that property. (c) Notwithstanding any other provision of this section, each of the following shall apply: (1) No deduction shall be allowed under this section for any taxable year beginning prior to January 1, 1994. (2) No inference is intended with respect to the allowance or denial of any deduction for amortization in any taxable year beginning before January 1, 1994. (3) In the case of an intangible that was acquired in an taxable year beginning before January 1, 1994, the amount to be amortized shall not exceed the adjusted basis of that intangible as of the first day of the first taxable year beginning on or after January 1, 1994, and that amount shall be amortized ratably over the period beginning with the first month of the first taxable year beginning on or after January 1, 1994, and ending 15 years after the month in which the intangible was acquired. (Amended by Stats. 2000, Ch. 862, Sec. 136. Effective January 1, 2001.)
  13. 24356.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 a taxpayer elect a first-year deduction allowance for qualifying property and sets related Section 179 limits and 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. ) ## 24356. (a) (1) In the case of Section 24356 property, the term “reasonable allowance” as used in subdivision (a) of Section 24349, may, at the election of the taxpayer, include an allowance, for the first taxable year for which a deduction is allowable under Sections 24349 through 24354 to the taxpayer with respect to such property, of 20 percent of the cost of that property. (2) If in any one taxable year the cost of Section 24349 property with respect to which the taxpayer may elect an allowance under paragraph (1) for that taxable year exceeds ten thousand dollars ($10,000), then paragraph (1) applies with respect to those items selected by the taxpayer, but only to the extent of an aggregate cost of ten thousand dollars ($10,000). (b) (1) In lieu of subdivision (a), Section 179 of the Internal Revenue Code, relating to election to expense certain depreciable business assets, applies, except as otherwise provided. (2) Section 179(b)(1) of the Internal Revenue Code, relating to dollar limitation, does not apply and in lieu thereof, the aggregate cost that may be taken into account under Section 179(a) of the Internal Revenue Code, for any taxable year, shall not exceed twenty-five thousand dollars ($25,000). (3) Section 179(b)(2) of the Internal Revenue Code, relating to reduction in limitation, does not apply and in lieu thereof, the limitation under paragraph (2), for any taxable year, shall be reduced, but not below zero, by the amount by which the cost of Section 179 property, as defined in Section 179(d)(1) of the Internal Revenue Code, except as otherwise provided, that is placed in service during the taxable year, exceeds two hundred thousand dollars ($200,000). (4) Section 179 of the Internal Revenue Code is modified to provide that the “aggregate amount disallowed” referred to in Section 179(b)(3)(B) of the Internal Revenue Code shall be computed under this part as that section read on the date the property generating the amount disallowed was placed in service. (5) Section 179(c)(2) of the Internal Revenue Code, relating to elections, shall not apply. (6) Section 179(d)(1)(A)(ii) of the Internal Revenue Code, relating to computer software, shall not apply. (7) Section 179(e) of the Internal Revenue Code, relating to special rules for qualified disaster assistance property, shall not apply. (c) (1) The election under this section for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for such taxable year. The election shall be made in such manner as the Franchise Tax Board may by regulations prescribe. (2) Any election made under this section shall not be revoked except with the consent of the Franchise Tax Board. (d) (1) For purposes of this section, the term “Section 24356 property” means tangible personal property: (A) Of a character subject to the allowance for depreciation under Sections 24349 through 24354; (B) Acquired by purchase after December 31, 1958, for use in a trade or business, and (C) With a useful life (determined at the time of such acquisition) of six years or more. (2) For purposes of paragraph (1), the term “purchase” means any acquisition of property, but only if: (A) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under Section 24427 (but, in applying Section 267 of the Internal Revenue Code, relating to losses, expenses, and interest with respect to transactions between related taxpayers, for purposes of this section, Section 267(c)(4) of the Internal Revenue Code shall be treated as providing that the family of an individual shall include only the individual’s spouse, ancestors, and lineal descendants); (B) The property is not acquired by one member of an affiliated group from another member of the same affiliated group, and (C) The basis of the property in the hands of the person acquiring it is not determined in whole or in part by reference to the adjusted basis of that property in the hands of the person from whom acquired. (3) For purposes of this section, the cost of property does not include so much of the basis of such property as is determined by reference to the basis of other property held at any time by the person acquiring that property. (4) For purposes of subdivision (a) and subdivision (b) of this section: (A) All members of an affiliated group shall be treated as one taxpayer, and (B) The Franchise Tax Board shall apportion the dollar limitation contained in subdivision (a) or subdivision (b) among the members of the affiliated group in the manner as it shall by regulations prescribe. (5) For purposes of paragraphs (2) and (4), the term “affiliated group” has the meaning assigned to it by Section 1504 of the Internal Revenue Code, except that, for those purposes, the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears in Section 1504(a) of the Internal Revenue Code. (6) In applying Section 24353, the adjustment under paragraph (1) of subdivision (b) of Section 24916, resulting by reason of an election made under this section with respect to any Section 24356 property, shall be made before any other deduction allowed by subdivision (a) of Section 24349 is computed. (e) The Franchise Tax Board shall prescribe those regulations as may be necessary to carry out the purposes of this section. (Amended by Stats. 2025, Ch. 231, Sec. 93. (SB 711) Effective October 1, 2025.)
  14. 24356.1.

    ## 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 says two specified federal amendments to Internal Revenue Code Section 179 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 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. ) ## 24356.1. (a) The amendments made by Section 124 of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to Section 179 of the Internal Revenue Code, relating to elections to expense certain depreciable business assets, shall not apply. (b) The amendments made by Section 13101 of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 179 of the Internal Revenue Code, relating to elections to expense certain depreciable business assets, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 94. (SB 711) Effective October 1, 2025.)
  15. 24357.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 charitable contributions if they are made within the taxable year and properly verified, and it limits or conditions some special election and timing 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. ) ## 24357. (a) There shall be allowed as a deduction any charitable contribution, as defined in Section 24359, the payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Franchise Tax Board. (b) (1) In the case of a corporation reporting its income on the accrual basis, the corporation may elect to treat the contribution as paid during that taxable year if both of the following occur: (A) The board of directors authorizes a charitable contribution during the taxable year. (B) Payment of the contribution is made after the close of that taxable year and on or before the 15th day of the fourth month following the close of the taxable year. (2) The election allowed by paragraph (1) may be made only at the time of the filing of the return for the taxable year, and shall be signified in the manner as the Franchise Tax Board shall by regulations prescribe. (c) For purposes of this section, payment of a charitable contribution that consists of a future interest in tangible personal property shall be treated as made only when all intervening interests in, and rights to the actual possession or enjoyment of, the property have expired or are held by persons other than the taxpayer or those standing in a relationship to the taxpayer described in Section 24428. For purposes of the preceding sentence, a fixture which is intended to be severed from the real property shall be treated as tangible personal property. (d) No deduction shall be allowed under this section for traveling expenses (including amounts expended for meals and lodging) while away from home, whether paid directly or by reimbursement, unless there is no significant element of personal pleasure, recreation, or vacation in that travel. (e) (1) Section 170(f)(8) of the Internal Revenue Code, relating to substantiation requirement for certain contributions, shall apply, except as otherwise provided. (2) No deduction shall be denied under Section 170(f)(8) of the Internal Revenue Code, relating to substantiation requirement for certain contributions, upon a showing that the requirements in Section 170(f)(8) of the Internal Revenue Code have been met with respect to that contribution for federal purposes. (f) Section 170(f)(9) of the Internal Revenue Code, relating to denial of deduction where contribution for lobbying activities, shall apply, except as otherwise provided. (g) (1) Notwithstanding any other provision of law to the contrary, for purposes of this section and Section 24341, Section 170 of the Internal Revenue Code, relating to charitable, etc., contributions and gifts, shall be applied to allow a taxpayer to elect to treat any contribution described in paragraph (2) made in January 2005, as if that contribution was made on December 31, 2004, and not in January 2005. (2) A contribution is described in this paragraph if that contribution is a cash contribution made for the relief of victims in areas affected by the December 26, 2004, Indian Ocean tsunami for which a charitable contribution deduction is allowable under this section. (h) (1) Section 170(f)(11)(E) of the Internal Revenue Code, relating to qualified appraisal and appraiser, shall apply, except as otherwise provided. (2) This subdivision shall apply to appraisals prepared with respect to returns or submissions filed on or after January 1, 2010. (i) (1) Section 170(f)(16) of the Internal Revenue Code, relating to contributions of clothing and household items, shall apply, except as otherwise provided. (2) This subdivision shall apply to contributions made on or after January 1, 2010. (j) (1) Section 170(f)(17) of the Internal Revenue Code, relating to recordkeeping, shall apply, except as otherwise provided. (2) This subdivision shall apply to contributions made on or after January 1, 2010. (k) (1) Section 170(o) of the Internal Revenue Code, relating to special rules for fractional gifts, shall apply, except as otherwise provided. (2) This subdivision shall apply to contributions made on or after January 1, 2010. (l) (1) (A) The amendments made by Section 605(a)(1) of Public Law 117-328 adding paragraph (7) to Section 170(h) of the Internal Revenue Code, relating to limitation on deduction for qualified conservation contributions made by passthrough entities, shall apply, except as otherwise provided. (B) Section 170(h)(7)(G) of the Internal Revenue Code, relating to regulations, as added by Section 605(a)(1) of Public Law 117-328, shall not apply. (C) Section 605(a)(3) of Public Law 117-328, relating to extension of statute of limitations for listed transactions, shall apply and is modified by substituting “Section 19755” for “sections 6501(c)(10) and 6235(c)(6) of such Code.” (2) The amendments made by Section 605(b) of Public Law 117-328 adding paragraph (19) to Section 170(f) of the Internal Revenue Code, relating to certain qualified conservation contributions, shall apply. (3) This subdivision shall apply to contributions made on or after January 1, 2024. (m) Section 605(d)(2) of Public Law 117-328, relating to opportunity to correct, shall apply. (Amended by Stats. 2025, Ch. 231, Sec. 95. (SB 711) Effective October 1, 2025.)
  16. 24357.1.

    ## 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 reduces certain charitable contribution deductions by the gain that would have been realized if the property had been sold at fair market value, and it requires related basis allocation and income inclusion rules 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. ) ## 24357.1. (a) The amount of any charitable contribution of property otherwise taken into account under Section 24357 shall be reduced by the amount of gain that would have been realized if the property contributed had been sold by the taxpayer at its fair market value (determined at the time of that contribution). (b) For purposes of subdivision (a), in the case of a charitable contribution of less than the taxpayer’s entire interest in the property contributed, the taxpayer’s adjusted basis in that property shall be allocated between the interest contributed and any interest not contributed in accordance with regulations prescribed by the Franchise Tax Board. (c) The provisions of subdivision (a) shall apply in the case of a charitable contribution of tangible personal property if either of the following conditions is satisfied: (1) The use by the donee is unrelated to the purpose or function constituting the basis for its exemption under Section 501 of the Internal Revenue Code or Section 23701, or, in the case of a governmental unit, to any purpose or function described in Section 24359. (2) The tangible personal property is applicable property that is sold, exchanged, or otherwise disposed of by the donee before the last day of the taxable year in which the contribution was made and with respect to which the donee has not made a certification in accordance with paragraph (3) of subdivision (d). (d) (1) In the case of an applicable disposition of applicable property, there shall be included in the income of the donor of that property for the taxable year of the donor in which the applicable disposition occurs an amount equal to the excess, if any, of the following amount: (A) The amount of the deduction allowed to the donor under Section 24357 with respect to that property, over (B) The donor’s basis in that property at the time that property was contributed. (2) For purposes of this section: (A) “Applicable disposition” means any sale, exchange, or other disposition by the donee of applicable property after the last day of the taxable year of the donor in which that property was contributed, and before the last day of the three-year period beginning on the date of the contribution of that property, unless the donee makes a certification in accordance with paragraph (3). (B) “Applicable property” means charitable deduction property, as defined in Section 6050L(a)(2)(A) of the Internal Revenue Code, that is tangible personal property, the use of which is identified by the donee as related to the purpose or function constituting the basis of the donee’s exemption under Section 501 of the Internal Revenue Code or Section 23701, and for which a deduction in excess of the donor’s basis is allowed. (3) A certification meets the requirements of this paragraph if it is a written statement, which is signed under penalty of perjury by an officer of the donee organization, that meets either of the following conditions: (A) Certifies that the use of the property by the donee was related to the purpose or function constituting the basis for the donee’s exemption under Section 501 of the Internal Revenue Code or Section 23701 and describes how the property was used and how that use furthered that purpose or function. (B) States the intended use of the property by the donee at the time of the contribution and certifies that the intended use has become impossible or infeasible to implement. (e) (1) For purposes of Section 24357 and subdivision (a), and notwithstanding Section 24912, in the case of a charitable contribution of taxidermy property that is made by the person who prepared, stuffed, or mounted the property, or by any person who paid or incurred the cost of such preparation, stuffing, or mounting, only the cost of the preparing, stuffing, or mounting shall be included in the basis of that property. (2) For purposes of this section, “taxidermy property” means any work of art that satisfies all of the following requirements: (A) Is the reproduction or preservation of an animal, in whole or in part. (B) Is prepared, stuffed, or mounted for purposes of recreating one or more characteristics of the animal. (C) Contains a part of the body of the dead animal. (f) The amendments made to this section by the act adding this subdivision shall apply to contributions made on or after January 1, 2010, without regard to taxable year. (Amended by Stats. 2010, Ch. 14, Sec. 71. (SB 401) Effective January 1, 2011.)
  17. 24357.10.

    ## 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. )

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    This section treats 80% of certain taxpayer payments to qualifying educational organizations as a charitable contribution.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.10. (a) For purposes of Section 24357, 80 percent of any amount described in subdivision (b) shall be treated as a charitable contribution. (b) For purposes of subdivision (a), an amount is described in this subdivision if each of the following applies: (1) The amount is paid by the taxpayer to or for the benefit of an educational organization which is: (A) Described in Section 170 (b)(1)(A)(ii) of the Internal Revenue Code. (B) An institution of higher education as defined in Section 3304(f) of the Internal Revenue Code. (2) The amount would be allowable as a deduction under this section but for the fact that the taxpayer receives (directly or indirectly) as a result of paying the amount the right to purchase tickets for seating at an athletic event in an athletic stadium of the institution. (c) If any portion of a payment is for the purchase of the tickets, the portion and the remaining portion (if any) of the payment shall be treated as separate amounts for purposes of this section. (Added by Stats. 1989, Ch. 1352, Sec. 102. Effective October 2, 1989. Applicable to income years beginning on or after January 1, 1989, by Sec. 172 of Ch. 1352.)
  18. 24357.2.

    ## 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. )

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    A taxpayer may claim a Section 24357 deduction for a partial property-interest contribution only up to the amount that would be deductible if the interest had been transferred in trust.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.2. (a) In the case of a contribution (not made by a transfer in trust) of an interest in property which consists of less than the taxpayer’s entire interest in such property, a deduction shall be allowed under Section 24357 only to the extent that the value of the interest contributed would be allowable as a deduction under Section 24357 if such interest had been transferred in trust. For purposes of this subdivision, a contribution by a taxpayer of the right to use property shall be treated as a contribution of less than the taxpayer’s entire interest in such property. (b) Subdivision (a) shall not apply to a contribution of— (1) A remainder interest in a personal residence or farm, (2) An undivided portion of the taxpayer’s entire interest in property, (3) A qualified conservation contribution (as defined in Section 24357.7). (c) The amendments made to this section by the 1977–78 Legislature shall apply with respect to contributions of transfers made after December 31, 1976, and before June 14, 1977. (d) The amendments made to this section by the 1981–82 Regular Session of the Legislature shall apply with respect to contributions or transfers made in taxable years beginning on and after January 1, 1982. (Amended by Stats. 2000, Ch. 862, Sec. 143. Effective January 1, 2001.)
  19. 24357.3.

    ## 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. )

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    For Section 24357 valuations, the value of a remainder interest in real property must be discounted at 6% per year, unless the Franchise Tax Board prescribes a different rate.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.3. For purposes of Section 24357, in determining the value of a remainder interest in real property, depreciation (computed on the straight line method) and depletion of such property shall be taken into account, and such value shall be discounted at a rate of 6 percent per annum, except that the Franchise Tax Board may prescribe a different rate. (Added by Stats. 1971, 1st Ex. Sess., Ch. 1.)
  20. 24357.4.

    ## 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. )

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    Charitable contribution amounts must be reduced for certain interest-related amounts when liabilities are assumed or the donated property is subject to a liability.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.4. If, in connection with any charitable contribution, a liability is assumed by the recipient or by any other person, or if a charitable contribution is of property which is subject to a liability, then, to the extent necessary to avoid the duplication of amounts, the amount taken into account for purposes of Section 24357 as the amount of the charitable contribution— (a) Shall be reduced for interest (1) which has been paid (or is to be paid) by the taxpayer, (2) which is attributable to the liability, and (3) which is attributable to any period after the making of the contribution, and (b) In the case of a bond, shall be further reduced for interest (1) which has been paid (or is to be paid) by the taxpayer on indebtedness incurred or continued to purchase or carry such bond, and (2) which is attributable to any period before the making of the contribution. The reduction pursuant to subdivision (b) shall not exceed the interest (including interest equivalent) on the bond which is attributable to any period before the making of the contribution and which is not (under the taxpayer’s method of accounting) includable in the gross income of the taxpayer for any taxable year. For purposes of this section, the term “bond” means any bond, debenture, note, or certificate or other evidence of indebtedness. (Added by Stats. 1971, 1st Ex. Sess., Ch. 1.)
  21. 24357.5.

    ## 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. )

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    No deduction is allowed under Section 24357 for a contribution to, or for the use of, an organization or trust described in IRC Section 4948(c)(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. ) ## 24357.5. No deduction shall be allowed under Section 24357 for a contribution to or for the use of an organization or trust described in Section 4948(c)(4) of the Internal Revenue Code. (Amended by Stats. 1984, Ch. 938, Sec. 29. Effective September 7, 1984.)
  22. 24357.6.

    ## 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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    A deduction is not allowed for certain out-of-pocket expenditures made on behalf of specified organizations when the spending is for influencing legislation.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.6. No deduction shall be allowed under this part for an out-of-pocket expenditure made on behalf of an organization described in Section 24359 (other than an organization described in subdivision (e) of Section 23704.5 (relating to churches, etc.)) if the expenditure is made for the purpose of influencing legislation (within the meaning of Section 23701d). (Amended by Stats. 1999, Ch. 987, Sec. 96. Effective October 10, 1999.)
  23. 24357.7.

    ## 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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    This section defines when a contribution qualifies as a conservation contribution and sets conditions for certain building exterior restrictions, including a written agreement and tax return documentation.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.7. (a) (1) For purposes of paragraph (3) of subdivision (b) of Section 24357.2, the term “qualified conservation contribution” means a contribution— (A) Of a qualified real property interest, (B) To a qualified organization, (C) Exclusively for conservation purposes. (2) For purposes of this subdivision, the term “qualified real property interest” means any of the following interests in real property: (i) The entire interest of the donor other than a qualified mineral interest. (ii) A remainder interest. (iii) A restriction (granted in perpetuity) on the use which may be made of the real property. (b) For purposes of subdivision (a), the term “qualified organization” means an organization which: (1) Is described in subdivision (a) or (b) of Section 24359, or (2) Is described in Section 23701(d), and— (A) Meets the requirements of Section 509(a)(2) of the Internal Revenue Code, or (B) Meets the requirements of Section 509(a)(3) of the Internal Revenue Code and is controlled by an organization described in paragraph (1) or in subparagraph (A). (c) For purposes of this section, the term “conservation purpose” means any of the following: (1) The preservation of land areas for outdoor recreation by, or the education of, the general public. (2) The protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem. (3) The preservation of open space (including farm land and forest land) where that preservation is for any of the following: (A) For the scenic enjoyment of the general public. (B) Pursuant to a clearly delineated federal, state, or local governmental conservation policy, and will yield a significant public benefit. (C) The preservation of a historically important land area or a certified historic structure. (d) In the case of any contribution of a qualified real property interest, which is a restriction with respect to the exterior of a building described in paragraph (2) of subdivision (e), that contribution shall not be considered to be exclusively for conservation purposes unless all of the following conditions are met: (1) That interest includes a restriction that preserves the entire exterior of the building, including the front, sides, rear, and height of the building, and prohibits any change in the exterior of the building that is inconsistent with the historical character of that exterior. (2) The donor and donee enter into a written agreement certifying, under penalty of perjury, that the donee is a qualified organization, as defined in subdivision (b), with a purpose of environmental protection, land conservation, and open-space preservation, and has the resources to manage and enforce the restriction and a commitment to do so. (3) In the case of any contribution made in a taxable year beginning on or after January 1, 2010, the taxpayer includes with the taxpayer’s return for the taxable year of the contribution all of the following information: (A) A qualified appraisal, within the meaning of Section 170(f)(11)(E) of the Internal Revenue Code, of the qualified property interest. (B) Photographs of the entire exterior of the building. (C) A description of all restrictions on the development of the building. (e) The term “certified historic structure” means either of the following: (1) Any building, structure, or land area that is listed in the National Register. (2) (A) Any building that is located in a registered historic district (as defined in Section 47(c)(3)(B) of the Internal Revenue Code) and is certified by the Secretary of the Interior to the secretary as being of historic significance to the district. (B) A building, structure, or land area satisfies the requirements of subparagraph (A) if it satisfies those requirements either at the time of the transfer or on the due date (including extensions) for filing the transferor’s return under this part for the taxable year in which the transfer is made. (f) For purposes of this section: (1) A contribution shall not be treated as exclusively for conservation purposes unless the conservation purpose is protected in perpetuity. (2) (A) Except as provided in subparagraph (B), in the case of a contribution of any interest where there is a retention of a qualified mineral interest, this subdivision shall not be treated as met if at any time there may be extraction or removal of minerals by any surface mining method. (B) With respect to any contribution of property in which the ownership of the surface estate and mineral interests has been and remains separated, paragraph (1) shall be treated as met if the probability of surface mining occurring on that property is so remote as to be negligible. (g) For purposes of this section, the term “qualified mineral interest” means either of the following: (1) Subsurface oil, gas, or other minerals. (2) The right to access to those minerals. (h) The amendments made to this section by the act adding this subdivision shall apply to contributions made on or after January 1, 2010. (Amended by Stats. 2010, Ch. 14, Sec. 72. (SB 401) Effective January 1, 2011.)
  24. 24357.8.

    ## 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. )

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    This section limits a deduction for certain qualified research contributions and requires the taxpayer to report the contribution and send copies of prescribed forms and statements to specified education authorities.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.8. (a) In the case of a qualified research contribution, the amount otherwise allowed as a deduction under Section 24357, shall be reduced by that amount of the reduction provided by Section 24357.1 which is no greater than the sum of the following: (1) One-half of the amount computed pursuant to Section 24357.1 (computed without regard to this paragraph). (2) The amount (if any) by which the charitable contribution deduction under this section for any qualified research contribution (computed by taking into account the amount determined by paragraph (1), but without regard to this paragraph) exceeds twice the basis of the property. (b) For purposes of this section, “qualified research contribution” means a charitable contribution by a taxpayer of tangible personal property described in paragraph (1) of Section 1221 of the Internal Revenue Code, but only if all of the following conditions are met: (1) The contribution is to an educational organization which is described in subsection (b)(1)(A)(ii) of Section 170 of the Internal Revenue Code and which is an institution of higher education (as defined in Section 3304(f) of the Internal Revenue Code of 1954) in California. (2) The contribution is made not later than two years after the date the construction of the property is substantially completed. (3) The original use of the property is by the donee. (4) The property is scientific equipment or apparatus substantially all of the use of which by the donee is for research or experimentation (within the meaning of Section 24365), or for research training, in physical, applied, or biological sciences, or for instructional purposes. (5) The property is not transferred by the donee in exchange for money, other property, or services. (6) The taxpayer receives from the donee a written statement representing that its use and disposition of the property will be in accordance with this section, and with respect to property substantially all of the use of which is for instructional purposes, the taxpayer receives from the donee a written statement representing that the property will be used as an integral part of the instructional program. In the case of a computer, the statement shall also represent that the donee has acquired or will acquire, necessary basic operational software and the means to provide trained staff to utilize the property. (7) The contribution is made on or after July 1, 1983, and on or before December 31, 1993. (8) The taxpayer shall report to the Franchise Tax Board, on forms prescribed by the board, the name and address of the recipient educational organization, a description of the qualified charitable contribution, the fair market value of the contribution, and the date the contribution was made. The taxpayer shall forward a copy of the forms, along with the written statements prescribed in paragraph (6), to the following: (A) The President of the University of California, in the case of contributions to institutions within the University of California system. (B) California Postsecondary Education Commission, in the case of contributions to private institutions. (C) The Chancellor of the California State University, in the case of contributions to institutions within the California State University system. (D) The Chancellor of the California Community Colleges, in the case of contributions to institutions within the California Community College system. (c) For purposes of this section, the term “taxpayer” shall not include a service organization (as defined in Section 414(m)(3) of the Internal Revenue Code ). (Amended by Stats. 1998, Ch. 322, Sec. 82. Effective August 20, 1998.)
  25. 24357.9.

    ## 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. )

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    This section reduces a corporation’s deduction for a qualified computer contribution and defines when a donation of computer technology or equipment qualifies.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24357.9. (a) In the case of a qualified computer contribution, the amount otherwise allowed as a deduction under Section 24357 shall be reduced by that amount of the reduction provided by Section 24357.1 that is no greater than the sum of the following: (1) One-half of the amount computed pursuant to Section 24357.1 (computed without regard to this paragraph). (2) The amount (if any) by which the charitable contribution deduction under this section for any qualified computer contribution (computed by taking into account the amount determined by paragraph (1), but without regard to this paragraph) exceeds twice the basis of the property. (b) For purposes of this section, the term “qualified computer contribution” means a charitable contribution by a corporation of any computer technology or equipment, but only if all of the following apply: (1) The contribution is to either of the following: (A) An educational organization described in Section 170(b)(1)(A)(ii) of the Internal Revenue Code. (B) An entity described in Section 23701d and exempt from tax under Section 23701 (other than an entity described in subparagraph (A)) that is organized primarily for purposes of supporting elementary and secondary education in California. (C) A public library (as described in Section 170(e)(6)(B)(i)(III) of the Internal Revenue Code). (2) The contribution is made not later than three years after the date the taxpayer acquired the property (or in the case of property constructed by the taxpayer, the date the construction of the property is substantially completed). (3) The original use of the property is by the donor or the donee. (4) Substantially all of the use of the property by the donee is for use within California for educational purposes in any of the grades K through 12 that are related to the purpose or function of the organization or entity. (5) The property is not transferred by the donee in exchange for money, other property, or services, except for shipping, installation, and transfer of costs. (6) The property will fit productively into the entity’s educational plan. (7) The entity’s use and disposition of the property will be in accordance with paragraphs (4) and (5). (8) The property meets the standards, if any, as the Secretary of the Treasury may have prescribed by regulation under Section 170(e)(6) of the Internal Revenue Code to assure that the property meets minimum functionality and suitability standards for educational purposes. (c) A contribution by a corporation of any computer technology or equipment to a private foundation (as defined in Section 509 of the Internal Revenue Code) shall be treated as a qualified computer contribution for purposes of this section if both of the following apply: (1) The contribution to the private foundation satisfies the requirements of paragraphs (2) and (5) of subdivision (b). (2) Within 30 days after that contribution, the private foundation does both of the following: (A) Contributes the property to an entity described in paragraph (1) of subdivision (b) that satisfies the requirements of paragraphs (4) to (7), inclusive, of subdivision (b). (B) Notifies the donor of that contribution. (d) In the case of property that is reacquired by the person who constructed the property, both of the following shall apply: (1) Paragraph (2) of subdivision (b) shall be applied to a contribution of that property by that person by taking into account the date that the original construction of the property was substantially completed. (2) Paragraph (3) of subdivision (b) shall not apply to that contribution. (e) For purposes of this section, property shall be treated as constructed by the taxpayer only if the cost of the parts used in the construction of that property (other than parts manufactured by the taxpayer or a related person) do not exceed 50 percent of the taxpayer’s basis in that property. (f) For purposes of this section: (1) “Computer technology or equipment” means computer software (as defined by Section 197(e)(3)(B) of the Internal Revenue Code), computer or peripheral equipment (as defined by Section 168(i)(2)(B) of the Internal Revenue Code), and fiber-optic cable related to computer use. (2) “Corporation” shall not include any of the following: (A) An “S corporation.” (B) A personal holding company (as defined in Section 542 of the Internal Revenue Code). (C) A service organization (as defined in Section 414(m)(3) of the Internal Revenue Code). (g) (1) This section shall not apply to any contribution made during any taxable year beginning on or after January 1, 2000, and before December 31, 2001. (2) This section shall not apply to any contributions made during any taxable year beginning after December 31, 2003. (Amended by Stats. 2002, Ch. 35, Sec. 50. Effective May 8, 2002. Applicable as prescribed by Sec. 74 of Ch. 35.)
  26. 24358.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    A corporation’s total deductions under Section 24357 for a taxable year generally cannot exceed 10% of net income, except for contributions covered by subdivision (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 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. ) ## 24358. (a) In the case of a corporation, the total deductions under Section 24357 for any taxable year, other than for contributions to which subdivision (b) applies, shall not exceed 10 percent of the taxpayer’s net income computed without regard to any of the following: (1) Subdivision (e) of Section 23802. (2) Sections 24357 to 24359, inclusive. (3) Article 2 (commencing with Section 24401) of Chapter 7 (except Sections 24407 to 24409, inclusive). (b) (1) Section 170(b)(2)(B) of the Internal Revenue Code, relating to qualified conservation contributions by certain corporate farmers and ranchers, shall apply, except as otherwise provided. (2) The phrase “made on or after January 1, 2010,” shall be substituted for “made after the date of the enactment of this subparagraph” in Section 170(b)(2)(B)(i)(II) of the Internal Revenue Code. (3) Section 170(b)(2)(B)(iii) of the Internal Revenue Code, as it read on January 1, 2015, shall apply. (c) Section 170(b)(2)(C) of the Internal Revenue Code, relating to qualified conservation contributions by certain Native Corporations, shall not apply, except as otherwise provided. (d) Section 170(d)(2) of the Internal Revenue Code, relating to corporations, shall apply with respect to excess contributions made during taxable years beginning on or after January 1, 1996. (Amended by Stats. 2025, Ch. 231, Sec. 96. (SB 711) Effective October 1, 2025.)
  27. 24359.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 defines “charitable contribution” for specified 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 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. ) ## 24359. For purposes of Sections 24357 to 24359, inclusive, the term “charitable contribution” means a contribution or gift to or for the use of— (a) A state, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes. (b) A corporation, trust, or community chest, fund, or foundation— (1) Created or organized in the United States or in any possession thereof, or under the law of the United States, any state, the District of Columbia, or any possession of the United States; (2) Organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals; (3) No part of the net earnings of which inures to the benefit of any private shareholder or individual; and (4) Which is not disqualified for tax exemption under Section 23701d by reason of attempting to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. A contribution or gift by a corporation to a trust, chest, fund, or foundation shall be deductible by reason of this section only if it is to be used within the United States or any of its possessions exclusively for purposes specified in paragraph (2). Rules similar to the rules of subdivision (b) of Section 23701d shall apply for purposes of this section. (c) A post or organization of war veterans, or an auxiliary unit or society of, or trust or foundation for, any post or organization of war veterans— (1) Organized in the United States or any of its possessions, and (2) No part of the net earnings of which inures to the benefit of any private shareholder or individual. (d) A cemetery company owned and operated exclusively for the benefit of its members, or any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, if the company or corporation is not operated for profit and no part of the net earnings of the company or corporation inures to the benefit of any private shareholder or individual. (Amended by Stats. 1997, Ch. 605, Sec. 89. Effective January 1, 1998.)
  28. 24359.1.

    ## 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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    A credit or deduction allowed by Sections 23606 or 24357.8 cannot be denied just because the contribution also benefits the donor in the listed ways.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24359.1. Notwithstanding any other provision of law, any credit or deduction allowed by Section 23606 or 24357.8 shall not be disallowed on the basis that the contribution is made for the primary or incidental purpose of benefiting the donor in any of the following ways: (a) Encouraging institutions to interest and train students to use a computer, scientific equipment, or apparatus, thereby enlarging the future potential market by developing prospective purchases. (b) Developing and maintaining a favorable public image. (Amended by Stats. 1991, Ch. 472, Sec. 29. Effective October 2, 1991.)
  29. 24360.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    For certain bonds, the amortizable bond premium for the taxable year is allowed as a deduction; if the bond’s interest is excludable from gross income under Chapter 3, no deduction is allowed.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24360. In the case of any bond, as defined in Section 24363, the following rules shall apply to the amortizable bond premium (determined under Section 24361 on the bond): (a) In the case of a bond, the amount of the amortizable bond premium for the taxable year shall be allowed as a deduction. (b) In the case of any bond the interest on which is excludable from gross income under Chapter 3 (commencing with Section 23501), no deduction shall be allowed for the amortizable bond premium for the taxable year. (Amended by Stats. 2000, Ch. 862, Sec. 147. Effective January 1, 2001.)
  30. 24361.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 sets rules for calculating bond premium and amortizable bond premium for tax purposes, including special treatment for certain callable bonds and an exclusion for conversion features on convertible 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 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. ) ## 24361. (a) For purposes of subsection (b), the amount of bond premium, in the case of the holder of any bond, shall be determined— (1) With reference to the amount of the basis (for determining loss on sale or exchange) of such bond; (2) With reference to the amount payable on maturity or on earlier call date; and (3) With adjustments proper to reflect unamortized bond premium, with respect to the bond, for the period before the date as of which Section 24360 becomes applicable with respect to the taxpayer with respect to such bond. In no case shall the amount of bond premium on a convertible bond include any amount attributable to the conversion features of the bond. (b) The amortizable bond premium of the taxable year shall be the amount of the bond premium attributable to such year. In the case of a bond described in Section 24362(a) issued after January 22, 1951, and acquired after January 22, 1954, which has a call date not more than three years after the date of such issue, the amount of bond premium attributable to the taxable year in which the bond is called shall include an amount equal to the excess of the amount of the adjusted basis (for determining loss on sale or exchange) of such bond as of the beginning of the taxable year over the amount received on redemption of the bond or (if greater) the amount payable on maturity. (c) (1) Except as provided in regulations, the determinations required under subdivisions (a) and (b) shall be made on the basis of the taxpayer’s yield to maturity determined by— (A) Using the taxpayer’s basis for purposes of determining loss on sale or exchange of the obligation, and (B) Compounding at the close of each accrual period (as defined in Section 1272(a)(5) of the Internal Revenue Code). (2) For purposes of paragraph (1), if the amount payable on an earlier call date is used under subparagraph (B) of paragraph (1) in determining the amortizable bond premium attributable to the period before the earlier call date, that bond shall be treated as maturing on that date for the amount so payable and then reissued on that date for the amount so payable. (Amended by Stats. 2000, Ch. 862, Sec. 148. Effective January 1, 2001.)
  31. 24362.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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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    A taxpayer may elect to have certain bond-related sections apply, and the election must follow Franchise Tax Board 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 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. ) ## 24362. (a) Sections 24360 to 24363.5, inclusive, shall apply to the bonds only if the taxpayer has elected to have these sections apply; in the case of any taxpayer, bonds the interest on which is not excludable from gross income. (b) The election authorized under this section shall be made in accordance with such regulations as the Franchise Tax Board shall prescribe. If such election is made with respect to any bond (described in subsection (a)) of the taxpayer, it shall also apply to all such bonds held by the taxpayer at the beginning of the first taxable year to which the election applies and to all such bonds thereafter acquired by him and shall be binding for all subsequent taxable years with respect to all such bonds of the taxpayer, unless, on application by the taxpayer, the Franchise Tax Board permits him, subject to such conditions as the Franchise Tax Board deems necessary, to revoke such election. (Amended by Stats. 2000, Ch. 862, Sec. 149. Effective January 1, 2001.)
  32. 24363.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 defines “bond” for certain tax provisions and excludes some taxpayer-held obligations from that definition.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24363. For purposes of Sections 24360 to 24363.5, inclusive, the term “bond” means any bond, debenture, note, or certificate or other evidence of indebtedness, but does not include any such obligation which constitutes stock in trade of the taxpayer or any such obligation of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or any such obligation held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business. (Amended by Stats. 2000, Ch. 862, Sec. 150. Effective January 1, 2001.)
  33. 24363.5.

    ## 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 ↗

    For a taxable bond, bond premium must be allocated across interest payments, and the allocated premium must reduce the interest payment instead of using a deduction under Section 24360, except as provided in 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 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. ) ## 24363.5. (a) Except as provided in regulations, in the case of any taxable bond each of the following shall apply: (1) The amount of any bond premium shall be allocated among the interest payments on the bond under rules similar to the rules of subdivision (c) of Section 24361. (2) In lieu of any deduction under Section 24360, the amount of any premium so allocated to any interest payment shall be applied against (and operate to reduce) the amount of the interest payment. (b) For purposes of this section, the term “taxable bond” means any bond the interest of which is not excludable from gross income. (Added by Stats. 1989, Ch. 1352, Sec. 107. Effective October 2, 1989. Applicable to income years beginning on or after January 1, 1989, by Sec. 172 of Ch. 1352.)
  34. 24364.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 circulation-related expenses for newspapers, magazines, and other periodicals are deductible, except amounts treated as capital account 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 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. ) ## 24364. Notwithstanding Article 3 (commencing with Section 24421), all expenditures (other than expenditures for the purchase of land or depreciable property or for the acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical) to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical shall be allowed as a deduction. However, the deduction shall not be allowed with respect to the portion of such expenditures as, under regulations prescribed by the Franchise Tax Board, is chargeable to capital account if the taxpayer elects, in accordance with those regulations, to treat that portion as so chargeable. The election, if made, shall be for the total amount of that portion of the expenditures which is so chargeable to capital account, and shall be binding for all subsequent taxable years unless, upon application by the taxpayer, the Franchise Tax Board permits a revocation of the election subject to such conditions as it deems necessary. (Amended by Stats. 2000, Ch. 862, Sec. 151. Effective January 1, 2001.)
  35. 24365.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 174 of the Internal Revenue Code applies to research and experimental expenditures, with specific California modifications and an exception for certain federal amendments for taxable years beginning on or after January 1, 2022.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24365. (a) Section 174 of the Internal Revenue Code, relating to research and experimental expenditures, shall apply, except as otherwise provided. (b) Section 174(b) of the Internal Revenue Code is modified to refer to subdivision (a) of Section 24916 in lieu of Section 1016(a)(1) of the Internal Revenue Code. (c) Section 174(c) of the Internal Revenue Code is modified to refer to Sections 24349 to 24356, inclusive, in lieu of Section 167 of the Internal Revenue Code. (d) The amendments made by Section 13206(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to amortization of research and experimental expenditures, for taxable years beginning on or after January 1, 2022, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 97. (SB 711) Effective October 1, 2025.)
  36. 24368.1.

    ## 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 three referenced federal provisions 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. ) ## 24368.1. (a) Section 167(e) of the Internal Revenue Code, relating to certain term interests not depreciable, shall apply. (b) The provisions of Section 7622(b) of Public Law 101-239, relating to the effective date of changes in treatment of transfers of franchises, trademarks, and trade names, shall apply. (c) The provisions of Section 7645(b) of Public Law 101-239, relating to the effective date of disallowance of depreciation for certain term interests, shall apply. (Amended by Stats. 1991, Ch. 117, Sec. 71. Effective July 16, 1991.)
  37. 24369.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 175 of the Internal Revenue Code applies here, except where 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. ) ## 24369. Section 175 of the Internal Revenue Code, relating to soil and water conservation expenditures, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 49. Effective October 6, 1993.)
  38. 24369.4.

    ## 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 ↗

    This section makes federal Section 198 rules apply for state tax purposes in certain cases involving qualified environmental remediation expenditures, and it blocks state elections or application after the federal election conditions are not met or for expenditures after December 31, 2003.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24369.4. (a) Section 198 of the Internal Revenue Code, relating to expensing of environmental remediation costs, shall apply, except as otherwise provided. (b) Section 198(b)(2) is modified to refer to Sections 24349 to 24355, inclusive, in lieu of Section 167 of the Internal Revenue Code. (c) Section 198(f) is modified to refer to Section 24442 in lieu of Section 280B of the Internal Revenue Code. (d) For expenditures paid or incurred before January 1, 2004, each of the following shall apply: (1) If a taxpayer has, at any time, made an election for federal purposes under Section 198(a) of the Internal Revenue Code to have Section 198 of the Internal Revenue Code apply to a qualified environmental remediation expenditure, Section 198 of the Internal Revenue Code shall apply to that qualified environmental remediation expenditure for state purposes, a separate election for state purposes 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. (2) If a taxpayer fails to make an election for federal purposes under Section 198(a) of the Internal Revenue Code to have Section 198 of the Internal Revenue Code apply to a qualified environmental remediation expenditure, an election under Section 198(a) of the Internal Revenue Code shall not be allowed for state purposes, Section 198 of the Internal Revenue Code shall not apply to that qualified environmental remediation expenditure for state purposes, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5. (e) No inference as to the proper treatment for purposes of this part of qualified environmental remediation expenditures for periods before the enactment of this section shall be made. (f) Section 198(h) of the Internal Revenue Code, relating to termination, shall not apply. (g) Section 198 of the Internal Revenue Code, relating to expensing of environmental remediation costs, shall not apply to expenditures paid or incurred after December 31, 2003. (Amended by Stats. 2005, Ch. 691, Sec. 64. Effective October 7, 2005.)
  39. 24370.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 mutual savings bank may deduct certain interest payments, and the Commissioner of Financial Institutions must determine and certify the applicable interest rate to the Franchise Tax Board each 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 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. ) ## 24370. There shall also be allowed as a deduction, under Chapter 2 of this part, in the case of a mutual savings bank, the entire amount of interest paid to depositors possessing no proprietary interest in the institution or in its surplus, and interest on their deposits to members possessing a proprietary interest in the institution or in its surplus at a rate determined by the Commissioner of Financial Institutions to be the going rate of interest upon savings deposits in this state during the calendar year preceding the taxable year, such rate to be certified by the Commissioner of Financial Institutions to the Franchise Tax Board on or before the first day of March of each year. (Amended by Stats. 1996, Ch. 1064, Sec. 806. Effective January 1, 1997. Operative July 1, 1997, by Sec. 814 of Ch. 1064.)
  40. 24372.3.

    ## 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 ↗

    This section applies IRC Section 169 on amortization of pollution control facilities, but only as otherwise provided, and the deduction is available only for facilities located in California.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24372.3. (a) Section 169 of the Internal Revenue Code, relating to amortization of pollution control facilities, shall apply, except as otherwise provided. (b) The deduction allowed by this section shall be available only with respect to facilities located in this state. (c) The “state certifying authority,” as defined in Section 169(d)(2) of the Internal Revenue Code, means the State Air Resources Board, in the case of air pollution, and the State Water Resources Control Board, in the case of water pollution. (Amended by Stats. 1993, Ch. 877, Sec. 51. Effective October 6, 1993.)
  41. 24372.5.

    ## 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 applies Internal Revenue Code section 194 on amortization of reforestation expenditures, with any stated exceptions, and limits the deduction to qualified timber property located in California.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24372.5. (a) Section 194 of the Internal Revenue Code, relating to amortization of reforestation expenditures, shall apply, except as otherwise provided. (b) The deduction allowed by this section shall be available only with respect to qualified timber property located in this state. (Repealed and added by Stats. 1997, Ch. 611, Sec. 88. Effective October 3, 1997.)
  42. 24373.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 178 of the Internal Revenue Code applies to the amortization of the cost of acquiring a lease.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24373. Section 178 of the Internal Revenue Code, relating to the amortization of cost of acquiring a lease, shall apply. (Repealed and added by Stats. 1989, Ch. 1352, Sec. 111. Effective October 2, 1989. Applicable to income years beginning on or after January 1, 1989, by Sec. 172 of Ch. 1352.)
  43. 24377.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 farming taxpayer may elect to treat certain soil-enriching or conditioning expenditures as deductible expenses, and the election has to be made on time and in the form prescribed by 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 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. ) ## 24377. (a) A taxpayer engaged in the business of farming may elect to treat as expenses which are not chargeable to capital account expenditures (otherwise chargeable to capital account) which are paid or incurred by it during the taxable year for the purchase or acquisition of fertilizer, lime, ground limestone, marl, or other materials to enrich, neutralize, or condition land used in farming, or for the application of such materials to such land. The expenditures so treated shall be allowed as a deduction. (b) For purposes of subdivision (a), the term “land used in farming” means land used (before or simultaneously with the expenditures described in subdivision (a)) by the taxpayer or its tenant for the production of crops, fruits, or other agricultural products or for the sustenance of livestock. (c) The election under subdivision (a) for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for that taxable year. The election shall be made in the form and manner as the Franchise Tax Board may prescribe. The election may not be revoked except with the consent of the Franchise Tax Board. (Amended by Stats. 2000, Ch. 862, Sec. 152. Effective January 1, 2001.)
  44. 24379.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 83 of the Internal Revenue Code applies to property transferred in connection with performance of services, 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. ) ## 24379. Section 83 of the Internal Revenue Code, relating to property transferred in connection with performance of services, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 52. Effective October 6, 1993.)
  45. 24382.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 IRC Section 216 apply to deductions for taxes, interest, and business depreciation for cooperative housing corporation tenant-stockholders, except as otherwise provided. It also makes Section 6282(b) of Public Law 100-647 apply to the effective date for distributions by cooperative housing corporations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24382. (a) Section 216 of the Internal Revenue Code, relating to deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder, shall apply, except as otherwise provided. (b) Section 6282(b) of Public Law 100-647, relating to the effective date for distributions by cooperative housing corporations, shall apply. (Amended by Stats. 1993, Ch. 877, Sec. 53. Effective October 6, 1993.)
  46. 24383.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 may elect a deduction for qualifying repair or remodeling costs for buildings, facilities, or transportation vehicles used to improve access or use for handicapped or elderly individuals.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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. ) ## 24383. (a) Every taxpayer, at the election of the taxpayer, shall be entitled to a deduction of the cost of repairing or remodeling any building, facility or transportation vehicle owned or leased by the taxpayer at the time of such repairing or remodeling, in order to permit handicapped or elderly individuals to enter or leave such building, facility or transportation vehicle, to increase the access handicapped or elderly individuals would have to such building, facility or transportation vehicle, or to allow handicapped or elderly individuals more effective use of the building, facility or transportation vehicle, provided that the repair or remodeling meets one or more standards established pursuant to Section 4450 or 4451 of the Government Code. In the absence of such state standards, those standards established by the Secretary of the Treasury of the United States with the concurrence of the Architectural and Transportation Barriers Compliance Board shall be used. The installation of emergency egress/safe area refuge systems shall be eligible for such deductions. (b) The deduction authorized by this section shall be taken with respect to the taxable year in which such repairing or remodeling is completed. (c) The deduction provided by this section with respect to any taxable year shall be in lieu of any deduction with respect to such repairing or remodeling relating to exhaustion, wear and tear or obsolescence. If, however, the costs of that repair or remodeling exceed the limit set forth in subdivision (g), the remaining balance may be charged to capital account. (d) If any building, facility or transportation vehicle is owned by more than one person, a taxpayer may deduct a portion of the costs of such repairing or remodeling apportionate to the interest in such building, facility or transportation vehicle which is owned by the taxpayer. (e) For purposes of this section, “building, facility or transportation vehicle” means a building, facility or transportation vehicle, or part thereof, which is intended to be used, and is actually used, by the taxpayer or the general public, in the taxpayer’s business or trade. (f) For purposes of this section, “handicapped individual” means any individual who has a physical or mental disability (including, but not limited to, blindness or deafness) which for such individual constitutes or results in a functional limitation to employment, or who has any physical or mental impairment (including, but not limited to, a sight or hearing impairment) which substantially limits one or more major life activities of such individual, and “elderly individual” means an individual who is 65 years of age or older. (g) The deduction authorized by this section shall not exceed fifteen thousand dollars ($15,000) with respect to any taxpayer for any taxable year. (h) The Franchise Tax Board shall prescribe such regulations as may be necessary to carry out the provisions of this section. (i) This section shall apply to taxable years beginning after December 31, 1976. (j) (1) The State Fire Marshal in cooperation with the Department of Rehabilitation and the Department of Aging shall adopt building standards and regulations for emergency egress/safe area refuge systems. The building standards and regulations shall include, but not be limited to, minimum requirements for safety, reliability, durability and usability. Emergency egress/safe area refuge systems that comply with the building standards and regulations adopted pursuant to this section shall be eligible for the deduction provided by this section. (2) It is the intent of the Legislature that this section and the building standards adopted pursuant to this section do not supersede more restrictive building standards and regulations adopted by the state and local governments. (k) “Emergency egress/safe area refuge system” shall include, but not be limited to, all of the following: (1) A building floor divided into not less than two compartments by not less than one-hour fire-resistive construction. Each door opening in the construction shall be protected by a twenty minute fire-resistive assembly as defined in regulations of the State Fire Marshal. Duct openings shall be protected by single-blade or curtain-type fire dampers to restrict the passage of smoke or flame. The smaller of the compartmental areas shall be not less than one-fourth the floor area of the story. Each such compartment shall contain a stairway or elevator or other means of ready egress from the building. (2) A fire alarm system defined in regulations by the State Fire Marshal. (3) Use of existing exiting systems and warning devices when practical, including, but not limited to, stairways, elevators, and fire alarms. (4) Accommodations for wheelchairs and all attached wheelchair equipment, as well as wheelchair occupants. (5) Its own power source. (Amended by Stats. 2000, Ch. 862, Sec. 153. Effective January 1, 2001.)
  47. 24401.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section allows the deductions listed in this article when computing taxable income, in addition to the deductions in Article 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24401. In addition to the deductions provided in Article 1 (commencing with Section 24341), there shall be allowed as deductions in computing taxable income the items specified in this article. (Amended by Stats. 1984, Ch. 193, Sec. 130.)
  48. 24402.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section lets a taxpayer deduct part of certain dividends, with the deduction rate depending on how much of the corporation the taxpayer owns, but it denies the deduction for some short-holding or related-payment 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24402. (a) A portion of the dividends received during the taxable year declared from income which has been included in the measure of the taxes imposed under Chapter 2 (commencing with Section 23101), Chapter 2.5 (commencing with Section 23400), or Chapter 3 (commencing with Section 23501) upon the taxpayer declaring the dividends. (b) The portion of dividends which may be deducted under this section shall be as follows: (1) In the case of any dividend described in subdivision (a), received from a “more than 50 percent owned corporation,” 100 percent. (2) In the case of any dividend described in subdivision (a), received from a “20 percent owned corporation,” 80 percent. (3) In the case of any dividend described in subdivision (a), received from a corporation that is less than 20 percent owned, 70 percent. (c) For purposes of this section: (1) The term “more than 50 percent owned corporation” means any corporation if more than 50 percent of the stock of that corporation (by vote and value) is owned by the taxpayer. For purposes of the preceding sentence, stock described in Section 1504(a)(4) of the Internal Revenue Code shall not be taken into account. (2) The term “20 percent owned corporation” means any corporation if 20 percent or more of the stock of that corporation (by vote and value) is owned by the taxpayer. For purposes of the preceding sentence, stock described in Section 1504(a)(4) of the Internal Revenue Code shall not be taken into account. (d) (1) No deduction shall be allowed under this section in respect of any dividend on any share of stock: (A) which is held by the taxpayer for 45 days or less during the 90-day period beginning on the date which is 45 days before the date on which the share becomes ex-dividend with respect to that dividend, or (B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. (2) In the case of stock having preference in dividends, if the taxpayer receives dividends with respect to that stock which are attributable to a period or periods aggregating in excess of 366 days, subparagraph (A) of paragraph (1) shall be applied as follows: (A) By substituting “90 days” for “45 days” in each place it appears. (B) By substituting “180-day period” for “90-day period.” (3) For purposes of this subdivision, in determining the period for which the taxpayer has held any share of stock: (A) the day of disposition, but not the day of acquisition, shall be taken into account, and (B) Section 1223(4) of the Internal Revenue Code shall not apply. (4) Section 246(c)(4) of the Internal Revenue Code, relating to the holding period reduced for periods where risk of loss diminished, shall apply, except as otherwise provided. (e) (1) The amendments made by the act adding this subdivision shall apply to dividends received or accrued after the 30th day after the date of the enactment of the act adding this subdivision. (2) The amendments made by the act adding this subdivision shall not apply to dividends received or accrued during the two-year period beginning on the date of the enactment of the act adding this subdivision if: (A) the dividend is paid with respect to stock held by the taxpayer on January 1, 1998 and all times thereafter until the dividend is received, (B) that stock is continuously subject to a position described in Section 246(c)(4) of the Internal Revenue Code on January 1, 1998, and all times thereafter until the dividend is received, and (C) that stock and position are clearly identified in the taxpayer’s records within 30 days after the date of the enactment of the act adding this subdivision. (3) Stock shall not be treated as meeting the requirement of subparagraph (B) of paragraph (2) if the position is sold, closed, or otherwise terminated and reestablished. (Amended by Stats. 2000, Ch. 862, Sec. 154. Effective January 1, 2001.)
  49. 24403.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain mutual building and loan associations and mutual federal savings and loan associations, the provision concerns the return paid, credited, or apportioned to withdrawable shares.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24403. In the case of a building and loan association, organized and operating wholly or partly on a mutual plan, or a federal savings and loan association, organized and operating wholly or partly on a mutual plan, the return paid or credited on or apportioned to their withdrawable shares. (Added by Stats. 1955, Ch. 938.)
  50. 24404.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section covers certain cooperative or mutual farmers’ and fruit growers’ associations and explains what income and member allocations count for 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24404. In the case of farmers, fruit growers, or like associations organized and operated in whole or in part on a cooperative or mutual basis, (a) for the purpose of marketing the products of members or other producers, and turning back to them the proceeds of sales, less the necessary marketing expenses, which may include reasonable reserves, on the basis of either the quantity or the value of the products furnished by them, or (b) for the purpose of purchasing, or producing, supplies and equipment for the use of members or other persons, and turning over such supplies and equipment to them at actual cost, plus necessary expenses, all income resulting from or arising out of such business activities for or with their members carried on by them or their agents; or when done on a nonprofit basis for or with nonmembers. For the purposes of this section “all income resulting from or arising out of such business activities for or with their members” shall include all amounts, whether or not derived from patronage, allocated to members during the taxable year. Amounts allocated include cash, merchandise, capital stock, revolving fund certificates, certificates of indebtedness, retain certificates, letters of advice, or written instruments which in some other manner disclose to each member the dollar amount allocated to him. Allocations made after the close of the taxable year and on or before the fifteenth day of the ninth month following the close of such year shall be considered as made on the last day of such taxable year to the extent the allocations are attributable to income derived before the close of such year. (Amended by Stats. 2000, Ch. 862, Sec. 155. Effective January 1, 2001.)
  51. 24405.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain cooperative or mutual associations may deduct qualifying income, but not if most of their income comes from selling tangible personal property other than water, agricultural products, or food sold at wholesale.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24405. (a) In the case of other associations organized and operated in whole or in part on a cooperative or a mutual basis, all income resulting from or arising out of business activities for or with their members carried on by them or their agents, or when done on a nonprofit basis for or with nonmembers, shall be an allowable deduction. However, the deduction allowable under this section shall not apply to those cooperative or mutual associations whose income is principally derived from the sale in the regular course of business of tangible personal property other than water, agricultural products, or food sold at wholesale. (b) For the purposes of subdivision (a), “food sold at wholesale” means a sale of food to anyone engaged in the business of selling food who holds a seller’s permit issued pursuant to Section 6066, and who at the time of purchasing the food either: (1) Intends to sell it in the regular course of business. (2) Is unable to ascertain at the time of purchase whether the food will be sold or used for some other purpose. (c) For the purposes of subdivision (a), a credit union’s activities are “for or with” the members of the credit union if the activities involve the investment of surplus member savings capital in investments permitted for credit unions pursuant to Sections 14406, 14652, 14653, 14653.5, 14654, 14655, and 14656 of the Financial Code. “Surplus member savings capital” means the savings capital of credit union members which is in excess of the amount of savings capital which is loaned to members of the credit union. The term “savings capital” shall have the meaning set forth in subdivision (a) of Section 14400 of the Financial Code. (d) For purposes of subdivision (a), “income resulting from or arising out of business activities for or with their members” includes, but is not limited to, all income resulting from reciprocal transactions with member credit unions. (Amended by Stats. 1993, Ch. 1121, Sec. 2. Effective October 11, 1993.)
  52. 24406.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section treats certain patronage refunds as allowed only if specific conditions are met, including how they are made, allocated, and notified.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24406. In the case of other associations organized and operated as co-operative corporations pursuant to Part 2 (commencing with Section 12200), Division 3, Title 1 of the Corporations Code, whose income is principally derived from the sale in the regular course of business of tangible personal property other than water, agricultural products or food sold at wholesale, all patronage refunds paid or accrued to patrons if the patronage refunds are made and allocated as follows: (a) Made pursuant to a pre-existing obligation which is created by the association’s bylaws or other written instrument. (b) Made from earnings which are attributable to business done by the association with the patrons to whom the patronage refunds are made, and allocated ratably according to patronage. (c) Allocated, and the patrons to whom the patronage refunds are to be made are notified of the allocation, on or before the due date for the filing of the association’s franchise tax return, including any extension of time, pursuant to this part, for the year in which the patronage occurred. (Added by Stats. 1961, Ch. 1934.)
  53. 24406.5.

    ## 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain gas producers’ cooperative associations may claim the deduction only if patronage refunds meet listed conditions, and each cooperative corporation must certify eligibility 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24406.5. (a) In the case of gas producers’ cooperative associations organized and operated as cooperative corporations pursuant to Chapter 1 (commencing with Section 3001) of Part 4 of Division 1 of the Public Utilities Code, whose income is principally derived from the sale in the regular course of business of tangible personal property other than water, agricultural products or food sold at wholesale, all patronage refunds paid or accrued to patrons if the patronage refunds are made and allocated as follows: (1) Made pursuant to a preexisting obligation which is created by the association’s bylaws or other written instrument. (2) Made from earnings which are attributable to business done by the association with the patrons to whom the patronage refunds are made, and allocated ratably according to patronage. (3) Allocated, and the patrons to whom the patronage refunds are to be made are notified of the allocation, on or before the due date for the filing of the association’s franchise tax return, including any extension of time, pursuant to this part, for the year in which the patronage occurred. (b) Each cooperative corporation shall certify to the Franchise Tax Board its eligibility for the deduction provided by this section. Certification shall be made at the time and in the manner prescribed by the Franchise Tax Board in forms or instructions. (Added by Stats. 1989, Ch. 349, Sec. 3.)
  54. 24406.6.

    ## 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain tax provisions, net earnings cannot be reduced by dividend amounts paid during the year, except where the organization’s governing documents or patron contracts make those dividends additional to amounts otherwise payable to patrons.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24406.6. For purposes of Section 24373.5, and Sections 24404 to 24406.5, inclusive, net earnings shall not be reduced by amounts paid during the year as dividends on capital stock or other proprietary capital interests of the organization to the extent that the articles of incorporation, bylaws of the organization, or other contract with patrons provide that those dividends are in addition to amounts otherwise payable to patrons that are derived from business done for or with patrons during the taxable year. (Added by Stats. 2005, Ch. 691, Sec. 65. Effective October 7, 2005.)
  55. 24407.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A corporation may elect to treat organizational expenditures as deferred expenses and may deduct them over time, subject to stated limits and timing 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24407. (a) The organizational expenditures of a corporation may, at the election of the corporation (made in accordance with regulations prescribed by the Franchise Tax Board), be treated as deferred expenses. In computing net income, the deferred expenses remaining, if any, after the application of subdivision (b) shall be allowed as a deduction ratably over that period of not less than 180 months as may be selected by the corporation (beginning with the month in which the corporation begins business). (b) (1) The corporation shall be allowed a deduction for the deferred expenses under subdivision (a) in an amount equal to the lesser of either of the following: (A) The amount of organizational expenditures of the taxpayer that are treated as deferred expenses under subdivision (a). (B) Five thousand dollars ($5,000), reduced, but not below zero, by an amount equal to the excess of the amount of the taxpayer’s organizational expenditures treated as deferred expenses under subdivision (a) over fifty thousand dollars ($50,000). (2) The deduction under paragraph (1) shall be allowed in the taxable year in which the first month of the period specified in subdivision (a) occurs. (c) The amendments made to this section by the act adding this subdivision shall apply to amounts paid or incurred on or after January 1, 2005. (Amended by Stats. 2005, Ch. 691, Sec. 66. Effective October 7, 2005.)
  56. 24408.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    “Organizational expenditures” means expenditures that satisfy all three 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24408. The term “organizational expenditures” means any expenditure that meets all of the following requirements: (a) Is incident to the creation of the corporation. (b) Is chargeable to capital account. (c) Is of a character which, if expended incident to the creation of a corporation having a limited life, would be amortizable over that life. (Amended by Stats. 1997, Ch. 605, Sec. 92. Effective January 1, 1998.)
  57. 24409.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A Section 24407 election may be made for a taxable year starting after December 31, 1960, if it is filed by the return-filing deadline, 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24409. The election provided by Section 24407 may be made for any taxable year beginning after December 31, 1960, but only if made not later than the time prescribed by law for filing the return for that taxable year (including extensions thereof). The period so elected shall be adhered to in computing the income of the corporation for the taxable year for which the election is made and all subsequent taxable years. The election shall apply only with respect to the expenditures paid or incurred on or after June 23, 1961. (Amended by Stats. 2000, Ch. 862, Sec. 156. Effective January 1, 2001.)
  58. 24410.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section sets the dividends received deduction rules for certain dividends from insurers and lets a taxpayer elect a special deduction treatment for earlier taxable years, subject to filing and ownership 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24410. (a) For taxable years commencing on or after January 1, 2004, the allowable dividends received deduction with respect to qualified dividends received by a corporation during the taxable year from a corporation that is an insurer within the meaning of Section 28 of Article XIII of the California Constitution, whether or not the insurer is engaged in business in California, if at the time of each dividend payment at least 80 percent of each class of the stock of the insurer was owned, directly or indirectly, by the corporation receiving the dividend shall equal the percentage specified in paragraph (1) of the amount of the qualified dividends received. (1) For purposes of this subdivision, the percentage is equal to: (A) Eighty percent for taxable years beginning on or after January 1, 2004, and before January 1, 2008. (B) Eighty-five percent for taxable years beginning on or after January 1, 2008, and thereafter. (b) (1) For all taxable years ending on or after December 1, 1997, and commencing before January 1, 2004, a taxpayer may elect to determine its deduction under this section for dividends received by the taxpayer (or the members of the taxpayer’s commonly controlled group, if any) during each taxable year from a corporation that is an insurer within the meaning of Section 28 of Article XIII of the California Constitution, whether or not the insurer is engaged in business in California, in an amount equal to 80 percent of the qualified dividends received, if at the time of each dividend payment at least 80 percent of each class of stock of the insurer was owned, directly or indirectly, by the corporation receiving the dividend. (2) A taxpayer shall make the election under this subdivision by timely filing a return for at least one taxable year ending on or after December 1, 1997, and commencing before January 1, 2004, expressly electing to be subject to the dividends received deduction in accordance with the percentage set forth in paragraph (1), and reporting and remitting any amounts due pursuant to that election. (3) A return is timely filed for purposes of paragraph (2) if it is filed within 180 days of the effective date of the act adding this section. (4) By making the election pursuant to this subdivision, the taxpayer agrees to all of the following: (A) To be subject to the dividends received deduction in accordance with the percentage set forth in paragraph (1) for all taxable years ending on or after December 1, 1997, and commencing before January 1, 2004, for which the Franchise Tax Board may propose an assessment or allow a claim for refund, or in which the final determination of tax for the taxable year has not been made because of a dispute related to the dividends received deduction or the application of Section 24425 to any expense related to that dividends received deduction. (B) (i) Except as provided in clause (ii), to file a return (or amended return) and remit any amounts due pursuant to the election for all taxable years ending on or after December 1, 1997, and commencing before January 1, 2004, for which the Franchise Tax Board may propose an assessment or allow a claim for refund, within 180 days of the effective date of the act adding this section. (ii) In the case of a taxable year for which the due date of the return is more than 180 days after the effective date of the act adding this section, to file the return and remit any amounts due pursuant to the election under this subdivision on or before the due date of the return. (5) For purposes of determining taxable income on the return (or amended returns) filed pursuant to the election set forth in paragraph (1), Section 24425 does not apply to the amount of the dividends received deduction. (6) The election is irrevocable. With respect to electing taxpayers, no refund, credit, or offset may be allowed for a deduction for dividends received from an insurance company in excess of the amounts allowed under this subdivision for taxable years ending on or after December 1, 1997, and beginning before January 1, 2004. (c) For purposes of determining the allowable dividend received deduction under this section, a qualified dividend received during the taxable year means a dividend received by the taxpayer during the taxable year multiplied by the percentage prescribed under paragraph (1), (2), or (3) of this subdivision, as the case may be. (1) If the ratio of the five-year average net written premiums for all insurance companies in a commonly controlled group to the five-year average total income for all insurance companies in the commonly controlled group for the taxable year is greater than or equal to the applicable percentage, then the percentage under this subdivision shall be 100 percent. (2) If the ratio of the five-year average net written premiums for all insurance companies in a commonly controlled group to the five-year average total income for all insurance companies in the commonly controlled group for the taxable year is less than the applicable percentage and greater than 10 percent, then the percentage under this subdivision shall be equal to the following fraction, expressed as a percentage: (A) The numerator is the five-year average net written premiums for the taxable year. (B) The denominator is the applicable percentage times the five-year average total income for that taxable year. (3) If the ratio of the five-year average net written premiums for all insurance companies in a commonly controlled group to the five-year average total income for all insurance companies in the commonly controlled group for the taxable year is equal to or less than 10 percent, the percentage under this subdivision shall be zero. (4) For purposes of this subdivision: (A) The “five-year average” means the aggregate net written premiums or total income, as the case may be, over the five immediately preceding calendar or fiscal years, divided by five. For purposes of this computation, if an insurance company in the commonly controlled group has been in existence for fewer than five years, its aggregate net written premiums and total income shall each be multiplied by five and divided by the number of years of its existence. If an insurance company does not have a regulatory filing requirement, the period covered shall be the fiscal year used for the insurance company’s financial statements. The use of either the calendar year or fiscal year, as the case may be, for determination of the five-year average shall, for the first taxable year in which it is computed, be treated as an accounting method under this part and may thereafter only be changed with the written consent of the Franchise Tax Board. (B) For taxable years beginning before January 1, 2008, the applicable percentage shall be 60 percent. For taxable years beginning on or after January 1, 2008, the applicable percentage shall be 70 percent. (d) The following rules apply with respect to the application of this section to dividends received from an insurance company that insures risks of a member of the insurance company’s commonly controlled group. (1) Notwithstanding paragraph (2), for purposes of determining the amount of the deduction authorized by subdivisions (a) and (b), no deduction is allowed for dividends attributable to premiums received or accrued by the insurance company from a member of the insurance company’s commonly controlled group. For purposes of this paragraph, dividends attributable to premiums received or accrued from a member of a commonly controlled group is equal to total dividends received multiplied by the greater of either of the following: (A) The ratio of net written premiums from a member of the insurance company’s commonly controlled group divided by total net written premiums. (B) (i) For a property casualty insurer, the ratio of the underwriting risk associated with a member of the commonly controlled group’s insurance contracts to the insurance company’s total underwriting risks for all insurance contracts. The underwriting risk is the underwriting risk reserves (losses plus expense risk-based capital after discount) as calculated using the “RBC Instructions.” (ii) For a life insurer, the ratio of aggregate reserves for life, accident, and health contracts plus liability for deposit type contracts plus contract claims held for policies issued to members of the insurance company’s commonly controlled group divided by total aggregate reserves for life, accident, and health contracts plus liability for deposit type contracts plus contract claims. (2) Net written premiums do not include premiums received or accrued from another member of the insurance company’s commonly controlled group. Premiums from another member of the commonly controlled group is the greater of either of the following: (A) Net written premiums from a member of the insurance company’s commonly controlled group. (B) (i) For a property casualty insurer, the net written premiums received or accrued by the insurance company multiplied by the ratio of the underwriting risk associated with the member of the commonly controlled group’s insurance contracts to the insurance company’s total underwriting risks for all insurance contracts. The underwriting risk is the underwriting risk reserves (loss plus expense risk-based capital after discount) as calculated using the “RBC Instructions.” (ii) For a life insurer, net written premiums received or accrued by the insurance company multiplied by the ratio of aggregate reserves for life, accident, and health contracts plus liability for deposit type contracts plus contract claims held for policies issued to members of the insurance company’s commonly controlled group divided by total aggregate reserves for life, accident, and health contracts plus liability for deposit type contracts plus contract claims. (3) For purposes of this section, investment income shall be limited to that portion of investment income equal to the ratio of net written premiums (determined under paragraph (2)) to total net written premiums (determined without regard to paragraph (2)). (4) For purposes of the limitations described in this subdivision, premiums received or accrued from a member of the insurance company’s commonly controlled group does not include premiums where the direct insurance risks ceded by affiliates and assumed by the insurance company originated with a person that is not a member of the insurance company’s commonly controlled group. (e) For purposes of this section: (1) “Net written premiums” means direct written premiums plus premiums from reinsurance assumed, less premiums ceded to a reinsurance company, as would be required to be reported in an insurer’s Statutory Annual Statement in accordance with the Annual Statement Instructions and Accounting Practices and Procedures Manual promulgated by the National Association of Insurance Commissioners. Net written premiums from life insurance contracts shall be determined by multiplying the net written premiums received, assumed, or ceded by 1.3. Net written premiums from financial guaranty insurance contracts shall be determined by multiplying the net written premiums received, assumed, or ceded by the lesser of 2.3 or an amount that would cause the ratio of the five-year average net written premiums for all financial guaranty insurance companies in the commonly controlled group to the five-year average total income for all financial guaranty insurance companies in the commonly controlled group to be equal to the applicable percentage. Paragraph (4) of subdivision (c) applies for purposes of the preceding sentence. (A) “Direct written premiums” means amounts written by an insurance company in consideration for insurance and annuity contracts issued to policyholders. (B) “Premiums from reinsurance assumed” means amounts received or accrued by an insurance company in consideration for liabilities it assumes from another insurance company. (C) “Premiums ceded” means insurance premiums paid or accrued by an insurance company to a reinsurer to support the liabilities assumed by the reinsurer. (2) “Total income” means net written premiums plus investment income. (3) “Investment income” means an insurance company’s earnings from its investment portfolio, including interest, dividends, realized gains (or losses), and rent, as would be required to be reported in an insurer’s Statutory Annual Statement in accordance with the Annual Statement Instructions and Accounting Practices and Procedures Manual promulgated by the National Association of Insurance Commissioners, except as otherwise provided. (A) Except for reinsurance transactions, realized gains (or losses) do not include losses incurred in transactions with a person that is a member of the taxpayer’s or the insurance company’s commonly controlled group. (B) Investment income does not include dividends from a person that is a member of the commonly controlled group. Intercompany dividends that have been eliminated from investment income as would be required to be reported in the Statutory Annual Statement in accordance with the Annual Statement Instructions and Accounting Practices and Procedures Manual promulgated by the National Association of Insurance Commissioners shall not again be eliminated for this purpose. (C) Investment income does not include income included in the taxpayer’s combined report filed in accordance with Chapter 17 (commencing with Section 25101) of this part. (4) For taxable years beginning before January 1, 2004, the “RBC Instructions” as defined in Section 739 of the Insurance Code means the Risk Based Capital Instructions and Report as promulgated by the National Association of Insurance Commissioners, as it read on January 1, 2004. For taxable years beginning on or after January 1, 2004, the “RBC Instructions” as defined in Section 739 of the Insurance Code means the Risk Based Capital Instructions and Report as promulgated by the National Association of Insurance Commissioners, or any substantially equivalent successor instructions and report, as it read on January 1 of the year in which the taxpayer’s taxable year begins. (5) The phrase “commonly controlled group” shall have the same meaning as that phrase has under Section 25105. (f) The Franchise Tax Board may prescribe those regulations that may be necessary to provide for the following: (1) Establishment of a comparable weighting factor as described in paragraph 1 of subdivision (e) for new lines of insurance not described in the act adding this subdivision. (2) For purposes of determining the applicable ratios described in subdivisions (c) and (d), the inclusion or exclusion of items of investment income to eliminate the effects of devices designed to manipulate those ratios for purposes of avoiding the tax imposed under this part. (3) For purposes of determining the applicable ratios described in subdivisions (c) and (d), the inclusion or exclusion of items of investment income to prevent distortion causing significant reduction in those ratios. (Repealed and added by Stats. 2004, Ch. 868, Sec. 2. Effective September 29, 2004.)
  59. 24411.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    Taxpayers electing to compute income under Section 25110 may deduct specified percentages of qualifying dividends, subject to the stated conditions 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24411. (a) For purposes of those taxpayers electing to compute income under Section 25110, 100 percent of the qualifying dividends described in subdivision (c) and 75 percent of other qualifying dividends to the extent not otherwise allowed as a deduction or eliminated from income. “Qualifying dividends” means those received by the water’s-edge group from corporations if both of the following conditions are satisfied: (1) The average of the property, payroll, and sales factors within the United States for the corporation is less than 20 percent. (2) More than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by the water’s-edge group. (b) The water’s-edge group consists of corporations whose income and apportionment factors are taken into account pursuant to Section 25110. (c) Dividends derived from a construction project, the location of which is not subject to the taxpayer’s control. For purposes of this subdivision: (1) “Construction project” means any activity which meets the following requirements: (A) Is undertaken for any entity, including a governmental entity, which is not affiliated with the taxpayer. (B) The majority of its cost of performance is attributable to an addition to real property or an alteration of land or any improvement thereto as those terms are utilized for purposes of this code. “Construction project” does not include the operation, rental, leasing, or depletion of real property, land, or any improvement thereto. (2) “Location of which is not subject to the taxpayer’s control” means that the place at which the majority of the construction takes place results from the nature or character of the construction project and not as a result of the terms of the contract or agreement governing the construction project. (Amended by Stats. 1997, Ch. 605, Sec. 94. Effective January 1, 1998.)
  60. 24414.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section makes IRC Section 195 apply to startup expenditures, except where otherwise provided, and changes certain IRC cross-references to California code sections.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24414. (a) Section 195 of the Internal Revenue Code, relating to startup expenditures, shall apply, except as otherwise provided. (b) References to Sections 163(a), 164, 165, and 174 of the Internal Revenue Code, relating to interest, taxes, losses, and research and experimental expenditures, are modified to refer to Sections 24344, 24345, 24347, and 24365, respectively. (Amended by Stats. 1993, Ch. 878, Sec. 17. Effective January 1, 1994.)
  61. 24415.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    A taxpayer may deduct qualifying interindemnity payments, with limits and carryforward rules, and refunds must be reported and included in 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24415. (a) To the extent specified in subdivision (b), there shall be allowed as a deduction to a taxpayer those payments of the taxpayer which are made pursuant to an interindemnity arrangement specified in Section 1280.7 of the Insurance Code and which are paid to a trust of members of a cooperative corporation organized and operated under Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code and the members of which consist solely of physicians and surgeons licensed in this state. (b) The deduction authorized by subdivision (a) shall be taken with respect to the taxable year in which the payment is made and shall be taken only to the extent that the payment does not exceed the amount which would otherwise be payable to an independent insurance company for similar coverage for medical malpractice insurance in that taxable year. Any portion of the payment in excess of that amount shall be treated as a payment under the interindemnity arrangement for five succeeding taxable years and may be carried forward as a deduction to those five succeeding taxable years until used. The deduction shall be applied first to the earliest years possible. (c) In the event any payment is refunded by the trust to the taxpayer for any reason, the payment shall be included in the taxpayer’s income for the taxable year in which it is received to the extent that the payment or any portion thereof was taken as a deduction in any earlier taxable year. (d) Any refund of a payment which is made by a trust to a taxpayer shall be reported by the trust to the Franchise Tax Board in the year in which the refund is made. The trust shall furnish the taxpayer with a copy of that report. In the case of any payment to be made to a taxpayer who is not a resident of the State of California in the year in which the refund is made, the Franchise Tax Board may, by regulation, require the trust to withhold an amount from the refund, determined by the Franchise Tax Board to reasonably represent the amount of tax due when that refund is included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at a time as it may designate. (e) For purposes of this section: (1) “Payment” means a contribution to or an assessment by an interindemnity arrangement described in Section 1280.7 of the Insurance Code. (2) “Taxpayer” means a corporation whose shares are held by a physician and surgeon, or physicians and surgeons, licensed in this state which is a participating member in an interindemnity arrangement described in Section 1280.7 of the Insurance Code. (3) “Trust” means a trust described in subdivision (a). (f) Upon request, the trust shall submit to the Franchise Tax Board the names and membership dates of all participating corporations. (g) The Franchise Tax Board shall prescribe those regulations as may be necessary to carry out the purposes of this section. (Amended by Stats. 2000, Ch. 862, Sec. 158. Effective January 1, 2001.)
  62. 24416.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section lets taxpayers claim a net operating loss deduction, but it limits when losses can be carried back or forward and sets special rules for new businesses, eligible small businesses, and certain 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416. Except as provided in Sections 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, and 24416.7, a net operating loss deduction shall be allowed in computing net income under Section 24341 and shall be determined in accordance with Section 172 of the Internal Revenue Code, except as otherwise provided. (a) (1) Net operating losses attributable to taxable years beginning before January 1, 1987, shall not be allowed. (2) A net operating loss shall not be carried forward to any taxable year beginning before January 1, 1987. (3) The amendments made by Section 13302(a)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) and Section 2303(a)(1) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136) to Section 172(a) of the Internal Revenue Code, relating to the deduction allowed, shall not apply. (b) (1) Except as provided in paragraphs (3) and (4), the provisions of Section 172(b)(2) of the Internal Revenue Code, relating to amount of carrybacks and carryovers, shall be modified so that the applicable percentage of the entire amount of the net operating loss for any taxable year shall be eligible for carryover to any subsequent taxable year. For purposes of this subdivision, the applicable percentage shall be: (A) Fifty percent for any taxable year beginning before January 1, 2000. (B) Fifty-five percent for any taxable year beginning on or after January 1, 2000, and before January 1, 2002. (C) Sixty percent for any taxable year beginning on or after January 1, 2002, and before January 1, 2004. (D) One hundred percent for any taxable year beginning on or after January 1, 2004. (2) Section 172(b)(2)(C) of the Internal Revenue Code shall not apply. (3) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates a new business during that taxable year, each of the following shall apply to each loss incurred during the first three taxable years of operating the new business: (A) If the net operating loss is equal to or less than the net loss from the new business, 100 percent of the net operating loss shall be carried forward as provided in subdivision (e). (B) If the net operating loss is greater than the net loss from the new business, the net operating loss shall be carried over as follows: (i) With respect to an amount equal to the net loss from the new business, 100 percent of that amount shall be carried forward as provided in subdivision (e). (ii) With respect to the portion of the net operating loss that exceeds the net loss from the new business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d). (C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B). (4) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates an eligible small business during that taxable year, each of the following apply: (A) If the net operating loss is equal to or less than the net loss from the eligible small business, 100 percent of the net operating loss shall be carried forward to the taxable years specified in paragraph (1) of subdivision (e). (B) If the net operating loss is greater than the net loss from the eligible small business, the net operating loss shall be carried over as follows: (i) With respect to an amount equal to the net loss from the eligible small business, 100 percent of that amount shall be carried forward as provided in subdivision (e). (ii) With respect to that portion of the net operating loss that exceeds the net loss from the eligible small business, the applicable percentage of that amount shall be carried forward as provided in subdivision (e). (C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B). (5) In the case of a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates a business that qualifies as both a new business and an eligible small business under this section, that business shall be treated as a new business for the first three taxable years of the new business. (6) In the case of a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates more than one business, and more than one of those businesses qualifies as either a new business or an eligible small business under this section, paragraph (2) shall be applied first, except that if there is any remaining portion of the net operating loss after application of clause (i) of subparagraph (B) of paragraph (2), paragraph (3) shall be applied to the remaining portion of the net operating loss as though that remaining portion of the net operating loss constituted the entire net operating loss. (7) For purposes of this section, “net loss” means the amount of net loss after application of Sections 465 and 469 of the Internal Revenue Code. (c) For any taxable year in which the taxpayer has in effect a water’s-edge election under Section 25110, the deduction of a net operating loss carryover shall be denied to the extent that the net operating loss carryover was determined by taking into account the income and factors of an affiliated corporation in a combined report whose income and apportionment factors would not have been taken into account if a water’s-edge election under Section 25110 had been in effect for the taxable year in which the loss was incurred. (d) Section 172(b)(1) of the Internal Revenue Code, relating to years to which the loss may be carried, is modified as follows: (1) Net operating loss carrybacks shall not be allowed for any net operating losses attributable to taxable years beginning after December 31, 2018, and before January 1, 2013. (2) A net operating loss attributable to taxable years beginning on or after January 1, 2013, and before January 1, 2019, shall be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss in lieu of the number of years provided therein. (A) For a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2014, the amount of carryback to any taxable year shall not exceed 50 percent of the net operating loss. (B) For a net operating loss attributable to a taxable year beginning on or after January 1, 2014, and before January 1, 2015, the amount of carryback to any taxable year shall not exceed 75 percent of the net operating loss. (C) For a net operating loss attributable to a taxable year beginning on or after January 1, 2015, and before January 1, 2019, the amount of carryback to any taxable year shall not exceed 100 percent of the net operating loss. (3) A net operating loss carryback shall not be carried back to any taxable year beginning before January 1, 2011. (e) (1) (A) For a net operating loss for any taxable year beginning on or after January 1, 1987, and before January 1, 2000, Section 172(b)(1)(A)(ii) of the Internal Revenue Code shall apply as it read on January 1, 2015, and is modified to substitute “five taxable years” in lieu of “20 years” except as otherwise provided in paragraphs (2), (3), and (4). (B) For a net operating loss for any income year beginning on or after January 1, 2000, and before January 1, 2008, Section 172(b)(1)(A)(ii)(I) of the Internal Revenue Code is modified to substitute “10 taxable years” in lieu of “20 taxable years.” (C) Section 172(b)(1)(A) of the Internal Revenue Code shall not apply. (D) Section 172(b)(1)(D) of the Internal Revenue Code shall not apply. (2) For any income year beginning before January 1, 2000, in the case of a “new business,” the “five taxable years” referred to in paragraph (1) shall be modified to read as follows: (A) “Eight taxable years” for a net operating loss attributable to the first taxable year of that new business. (B) “Seven taxable years” for a net operating loss attributable to the second taxable year of that new business. (C) “Six taxable years” for a net operating loss attributable to the third taxable year of that new business. (3) For any carryover of a net operating loss for which a deduction is denied by Section 24416.3, the carryover period specified in this subdivision shall be extended as follows: (A) By one year for a net operating loss attributable to taxable years beginning in 1991. (B) By two years for a net operating loss attributable to taxable years beginning prior to January 1, 1991. (4) The net operating loss attributable to taxable years beginning on or after January 1, 1987, and before January 1, 1994, shall be a net operating loss carryover to each of the 10 taxable years following the year of the loss if it is incurred by a corporation that was either of the following: (A) Under the jurisdiction of the court in a Title 11 or similar case at any time prior to January 1, 1994. The loss carryover provided in the preceding sentence shall not apply to any loss incurred in an income year after the taxable year during which the corporation is no longer under the jurisdiction of the court in a Title 11 or similar case. (B) In receipt of assets acquired in a transaction that qualifies as a tax-free reorganization under Section 368(a)(1)(G) of the Internal Revenue Code. (f) For purposes of this section: (1) “Eligible small business” means any trade or business that has gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the income year. (2) Except as provided in subdivision (g), “new business” means any trade or business activity that is first commenced in this state on or after January 1, 1994. (3) “Title 11 or similar case” shall have the same meaning as in Section 368(a)(3) of the Internal Revenue Code. (4) In the case of any trade or business activity conducted by a partnership or an “S” corporation, paragraphs (1) and (2) shall be applied to the partnership or “S” corporation. (g) For purposes of this section, in determining whether a trade or business activity qualifies as a new business under paragraph (2) of subdivision (e), the following rules shall apply: (1) In any case where a taxpayer purchases or otherwise acquires all or any portion of the assets of an existing trade or business (irrespective of the form of entity) that is doing business in this state (within the meaning of Section 23101), the trade or business thereafter conducted by the taxpayer (or any related person) shall not be treated as a new business if the aggregate fair market value of the acquired assets (including real, personal, tangible, and intangible property) used by the taxpayer (or any related person) in the conduct of its trade or business exceeds 20 percent of the aggregate fair market value of the total assets of the trade or business being conducted by the taxpayer (or any related person). For purposes of this paragraph only, the following rules shall apply: (A) The determination of the relative fair market values of the acquired assets and the total assets shall be made as of the last day of the first taxable year in which the taxpayer (or any related person) first uses any of the acquired trade or business assets in its business activity. (B) Any acquired assets that constituted property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the transferor shall not be treated as assets acquired from an existing trade or business, unless those assets also constitute property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the acquiring taxpayer (or related person). (2) In any case where a taxpayer (or any related person) is engaged in one or more trade or business activities in this state, or has been engaged in one or more trade or business activities in this state within the preceding 36 months (“prior trade or business activity”), and thereafter commences an additional trade or business activity in this state, the additional trade or business activity shall only be treated as a new business if the additional trade or business activity is classified under a different division of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, than are any of the taxpayer’s (or any related person’s) current or prior trade or business activities. (3) In a case in which a taxpayer, including all related persons, is engaged in trade or business activities wholly outside of this state and the taxpayer first commences doing business in this state (within the meaning of Section 23101) after December 31, 1993 (other than by purchase or other acquisition described in paragraph (1)), the trade or business activity shall be treated as a new business under paragraph (2) of subdivision (e). (4) In a case in which the legal form under which a trade or business activity is being conducted is changed, the change in form shall be disregarded and the determination of whether the trade or business activity is a new business shall be made by treating the taxpayer as having purchased or otherwise acquired all or any portion of the assets of an existing trade or business under the rules of paragraph (1). (5) “Related person” shall mean any person that is related to the taxpayer under either Section 267 or 318 of the Internal Revenue Code. (6) “Acquire” shall include any transfer, whether or not for consideration. (7) (A) For taxable years beginning on or after January 1, 1997, the term “new business” shall include any taxpayer that is engaged in biopharmaceutical activities or other biotechnology activities that are described in Codes 2833 to 2836, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, and as further amended, and that has not received regulatory approval for any product from the Food and Drug Administration. (B) For purposes of this paragraph: (i) “Biopharmaceutical 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. (ii) “Other biotechnology activities” means activities consisting of the application of recombinant DNA technology to produce commercial products, as well as activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (h) For purposes of corporations whose net income is determined under Chapter 17 (commencing with Section 25101), Section 25108 applies to each of the following: (1) The amount of net operating loss incurred in any taxable year that may be carried forward to another taxable year. (2) The amount of any loss carry forward that may be deducted in any taxable year. (i) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this section, including any regulations necessary to prevent the avoidance of the purposes of this section through splitups, shell corporations, partnerships, tiered ownership structures, or otherwise. (j) The Franchise Tax Board may reclassify any net operating loss carryover determined under either paragraph (2) or (3) of subdivision (b) as a net operating loss carryover under paragraph (1) of subdivision (b) upon a showing that the reclassification is necessary to prevent evasion of the purposes of this section. (k) Except as otherwise provided, the amendments made by Chapter 107 of the Statutes of 2000 apply to net operating losses for taxable years beginning on or after January 1, 2000. (Amended by Stats. 2025, Ch. 231, Sec. 98. (SB 711) Effective October 1, 2025.)
  63. 24416.1.

    ## 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    Qualified taxpayers may elect a specified net operating loss deduction, but the election must be filed with the original return and is irrevocable.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.1. (a) A qualified taxpayer, as defined in Section 24416.2, 24416.4, 24416.5, 24416.6, or 24416.7, may elect to take the deduction provided by Section 172 of the Internal Revenue Code, relating to the net operating loss deduction, as modified by Section 24416, in computing net income under Section 24341, with the following exceptions to Section 24416: (1) Subdivision (a) of Section 24416, relating to years in which allowable losses are sustained, shall not be applicable. (2) Subdivision (b) of Section 24416, relating to the 50-percent reduction of losses, shall not be applicable. (3) The provisions of subparagraphs (B) and (C) of Section 172 (b) (1) of the Internal Revenue Code shall not apply. To the extent applicable to California law, net operating losses attributable to entities with losses described by Section 172(b)(1)(J) shall be applied in accordance with Section 172(b)(1)(A) and (B) of the Internal Revenue Code. (b) Corporations whose income is subject to the provisions of Section 25101 or 25101.15 shall make the computations required by Section 25108. (c) The election to compute the net operating loss under this section shall be made in a statement attached to the original return, timely filed for the year in which the net operating loss is incurred and shall be irrevocable. In addition to the exceptions specified in subdivision (a), Section 24416.2, 24416.4, 24416.5, 24416.6, or 24416.7, as appropriate, shall be applicable. (d) Any carryover of a net operating loss sustained by a qualified taxpayer, as defined in subdivision (a) or (b) of Section 24416.2 as that section read immediately prior to January 1, 1997, shall, if previously elected, continue to be a deduction, as provided in subdivision (a), applied as if the provisions of subdivision (a) or (b) of Section 24416.2, as that section read prior to January 1, 1997, still applied. (Amended by Stats. 2001, Ch. 623, Sec. 5. Effective October 9, 2001.)
  64. 24416.21.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section limits when net operating loss deductions are allowed, extends carryover periods for denied losses, and creates income-based exceptions and a bankruptcy-related 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.21. (a) Notwithstanding Sections 24416, 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, and 24416.7 of this code and Section 172 of the Internal Revenue Code, no net operating loss deduction shall be allowed for any taxable year beginning on or after January 1, 2008, and before January 1, 2012. (b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows: (1) By one year, for losses incurred in taxable years beginning on or after January 1, 2010, and before January 1, 2011. (2) By two years, for losses incurred in taxable years beginning on or after January 1, 2009, and before January 1, 2010. (3) By three years, for losses incurred in taxable years beginning on or after January 1, 2008, and before January 1, 2009. (4) By four years, for losses incurred in taxable years beginning before January 1, 2008. (c) Notwithstanding subdivision (a), a net operating loss deduction shall be allowed for carryback of a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019. (d) The disallowance of any net operating loss deduction for any taxable year beginning on or after January 1, 2008, and before January 1, 2010, pursuant to subdivision (a) shall not apply to a taxpayer with income subject to tax under this part of less than five hundred thousand dollars ($500,000) for the taxable year. (e) (1) The disallowance of any net operating loss deduction for any taxable year beginning on or after January 1, 2010, and before January 1, 2012, pursuant to subdivision (a) shall not apply to a taxpayer with preapportioned income of less than three hundred thousand dollars ($300,000) for the taxable year. (2) For purposes of this subdivision, “preapportioned income” means net income after state adjustments, before the application of the apportionment and allocation provisions of this part. (3) 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 amount prescribed in paragraph (1) shall apply to the aggregate amount of preapportioned income for all members included in a combined report. (f) Notwithstanding subdivision (a), this section shall not apply to a taxpayer that ceased to do business or has a final taxable year ending prior to August 28, 2008, that sold or transferred substantially all of its assets resulting in a gain on sale during a taxable year ending prior to August 28, 2008, for which the gain could be offset with existing net operating loss deductions and the sale or transfer occurred pursuant to a plan of reorganization under Chapter 11 of Title 11 of the United States Code. An amended tax return claiming net operating loss deductions allowed pursuant to this subdivision shall be treated as a timely filed original return. (g) The Legislature finds and declares that the addition of subdivision (f) to this section by the act adding this subdivision fulfills a statewide public purpose by providing necessary tax relief for a taxpayer that ceased to do business or has a final taxable year ending prior to August 28, 2008, that sold or transferred substantially all of its assets resulting in a gain or sale during a taxable year prior to August 28, 2008, for which the gain could be offset with existing net operating loss deductions and the sale or transfer occurred pursuant to a plan of reorganization under Chapter 11 of Title 11 of the United States Code, in order to ensure that these taxpayers are not permanently denied the net operating loss deduction. (Amended by Stats. 2019, Ch. 39, Sec. 25. (AB 91) Effective July 1, 2019.)
  65. 24416.22.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    A net operating loss can be carried forward for 20 taxable years, and losses from taxable years beginning on or after January 1, 2013, and before January 1, 2019 can also be carried back for two 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.22. Notwithstanding Section 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, or 24416.7 to the contrary, a net operating loss attributable to a taxable year beginning on or after January 1, 2008, shall be a net operating carryover to each of the 20 taxable years following the year of the loss, and a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019, shall also be a net operating loss carryback to each of the two taxable years preceding the taxable year of loss. (Amended by Stats. 2019, Ch. 39, Sec. 26. (AB 91) Effective July 1, 2019.)
  66. 24416.23.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section temporarily disallows net operating loss deductions for certain taxable years, with an exception for taxpayers below a $1,000,000 income threshold.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.23. (a) Notwithstanding Sections 24416, 24416.1, 24416.4, 24416.7, and 24416.22, former Sections 24416.2, 24416.5, 24416.6, and 24416.20, and Section 172 of the Internal Revenue Code, a net operating loss deduction shall not be allowed for any taxable year beginning on or after January 1, 2020, and before January 1, 2022. (b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows: (1) By one year, for losses incurred in taxable years beginning on or after January 1, 2021, and before January 1, 2022. (2) By two years, for losses incurred in taxable years beginning on or after January 1, 2020, and before January 1, 2021. (3) By three years, for losses incurred in taxable years beginning before January 1, 2020. (c) The disallowance of any net operating loss deduction for any taxable year beginning on or after January 1, 2020, and before January 1, 2022, pursuant to subdivision (a) shall not apply to a taxpayer with income subject to tax under this part of less than one million dollars ($1,000,000) for the taxable year. (d) The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2022. (Amended by Stats. 2022, Ch. 3, Sec. 21. (SB 113) Effective February 9, 2022.)
  67. 24416.24.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    Net operating loss deductions are generally disallowed for taxable years beginning between January 1, 2024 and January 1, 2027, subject to stated exceptions and possible suspension of the section for later years if the Director of Finance makes the required determination.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.24. (a) Notwithstanding Sections 24416, 24416.1, 24416.4, 24416.7, and 24416.22, former Sections 24416.2, 24416.5, 24416.6, and 24416.20, and Section 172 of the Internal Revenue Code, a net operating loss deduction shall not be allowed for any taxable year beginning on or after January 1, 2024, and before January 1, 2027. (b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows: (1) By one year, for losses incurred in taxable years beginning on or after January 1, 2025, and before January 1, 2026. (2) By two years, for losses incurred in taxable years beginning on or after January 1, 2024, and before January 1, 2025. (3) By three years, for losses incurred in taxable years beginning before January 1, 2024. (c) The disallowance of any net operating loss deduction for any taxable year beginning on or after January 1, 2024, and before January 1, 2027, pursuant to subdivision (a) shall not apply to a taxpayer with income subject to tax under this part of less than one million dollars ($1,000,000) for the taxable year. (d) (1) For taxable years beginning on or after January 1, 2025, and before January 1, 2026, this section shall not apply if, by May 14, 2025, the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and pursuant to legislation in the annual Budget Act to not apply this section of law. (2) For taxable years beginning on or after January 1, 2026, and before January 1, 2027, this section shall not apply if, by May 14, 2026, the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and pursuant to legislation in the annual Budget Act to not apply this section of law. (Amended by Stats. 2024, Ch. 42, Sec. 13. (SB 175) Effective June 29, 2024.)
  68. 24416.3.

    ## 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    No net operating loss deduction is allowed for taxable years beginning on or after January 1, 2002, and before January 1, 2004.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.3. (a) Notwithstanding Sections 24416, 24416.1, 24416.2, 24416.4, 24416.5, 24416.6, and 24416.7 of this code and Section 172 of the Internal Revenue Code, no net operating loss deduction shall be allowed for any taxable year beginning on or after January 1, 2002, and before January 1, 2004. (b) For any carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows: (1) By one year, for losses incurred in taxable years beginning on or after January 1, 2002, and before January 1, 2003. (2) By two years, for losses incurred in taxable years beginning before January 1, 2002. (Amended by Stats. 2002, Ch. 488, Sec. 11. Effective September 12, 2002.)
  69. 24416.4.

    ## 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section defines when a corporation can be a “qualified taxpayer” in the Los Angeles Revitalization Zone and sets rules for net operating loss carryovers and return filing designations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.4. (a) The term “qualified taxpayer” as used in Section 24416.1 includes a corporation engaged in the conduct of a trade or business within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code. For purposes of this subdivision, all of the following shall apply: (1) A net operating loss shall not be a net operating loss carryback for any taxable year and, except as provided in subparagraph (B), a net operating loss for any taxable year beginning on or after the date the area in which the taxpayer conducts a trade or business is designated the Los Angeles Revitalization Zone shall be a net operating loss carryover to each following taxable year that ends before the Los Angeles Revitalization Zone expiration date or to each of the 15 taxable years following the taxable year of loss, if longer. (2) In the case of a financial institution to which Section 585, 586, or 593 of the Internal Revenue Code applies, a net operating loss for any taxable year beginning on or after January 1, 1984, shall be a net operating loss carryover to each of the five years following the taxable year of the loss. Subdivision (b) of Section 24416.1 shall not apply. (3) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the taxpayer’s business activities within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) prior to the Los Angeles Revitalization Zone expiration date. The attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11, modified as follows: (A) The loss shall be apportioned to the Los Angeles Revitalization Zone by multiplying the loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2. (B) “The Los Angeles Revitalization Zone” shall be substituted for “this state.” (4) A net operating loss carryover shall be a deduction only with respect to the taxpayer’s business income attributable to the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) determined in accordance with subdivision (c). (5) If a loss carryover is allowable pursuant to this section for any taxable year after the Los Angeles Revitalization Zone designation has expired, the Los Angeles Revitalization Zone shall be deemed to remain in existence for purposes of computing the limitation set forth in paragraph (2) and allowing a net operating loss deduction. (6) Attributable income shall be that portion of the taxpayer’s California source business income which is apportioned to the Los Angeles Revitalization Zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the Los Angeles Revitalization Zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified as follows: (A) Business income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2. (B) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the Los Angeles Revitalization Zone during the taxable year and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year. (C) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the Los Angeles Revitalization Zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year. (7) “Los Angeles Revitalization Zone expiration date” means the date the Los Angeles Revitalization Zone designation expires, is repealed, or becomes inoperative pursuant to Section 7102, 7103, or 7104 of the Government Code. (b) This section shall be inoperative on the first day of the taxable year beginning on or after the determination date, and each taxable year thereafter, with respect to the taxpayer’s business activities within a geographic area that is excluded from the map pursuant to Section 7102 of the Government Code, or an excluded area determined pursuant to Section 7104 of the Government Code. The determination date is the earlier of the first effective date of a determination under subdivision (c) of Section 7102 of the Government Code occurring after December 1, 1994, or the first effective date of an exclusion of an area from the amended Los Angeles Revitalization Zone under Section 7104 of the Government Code. However, if the taxpayer has any unused loss amount as of the date this section becomes inoperative, that unused loss amount may continue to be carried forward as provided in this section. (c) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section that applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (d). (d) If a taxpayer is eligible to qualify under this section and either Section 24416.2, 24416.5, or 24416.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer. (e) Notwithstanding Section 24416, the amount of the loss determined under this section or Section 24416.2, 24416.5, or 24416.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (c) shall be included in the election under Section 24416.1. (f) This section shall cease to be operative on December 1, 1998. However, any unused net operating loss may continue to be carried over to following years as provided in this section. (Amended by Stats. 2000, Ch. 862, Sec. 161. Effective January 1, 2001. Section inoperative December 1, 1998, as prescribed in subd. (f). Note: See also provisions for inoperation in subd. (b).)
  70. 24416.7.

    ## 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section lets certain farming corporations affected by Pierce’s disease treat qualifying net operating losses as carryovers, not carrybacks, if the Department of Food and Agriculture confirms the disease caused the loss.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 2. Special Deductions [24401 - 24416.24] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24416.7. (a) The term “qualified taxpayer” as used in Section 24416.1 includes a corporation that conducts a farming business that is directly affected by Pierce’s disease and its vectors. For purposes of this subdivision, all of the following shall apply: (1) A net operating loss shall not be a net operating loss carryback to any taxable year, and a net operating loss for any taxable year beginning on or after the date that the area in which the taxpayer conducts a farming business is affected by Pierce’s disease and its vectors shall be a net operating loss carryover to each of the nine taxable years following the taxable year of loss, until used. (2) For purposes of this subdivision: (A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the taxpayer’s farming business activities affected by Pierce’s disease and its vectors. That attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11, modified for purposes of this subdivision, as follows: (i) A loss shall be apportioned to the area affected by Pierce’s disease and its vectors by multiplying the total loss from the farming business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. (ii) “The area affected by Pierce’s disease and its vectors” shall be substituted for “this state.” (B) A net operating loss carryover computed under this section shall be allowed as a deduction only with respect to the taxpayer’s farming business income attributable to the area affected by Pierce’s disease and its vectors. (C) Attributable income is that portion of the taxpayer’s California source farming business income that is apportioned to the area affected by Pierce’s disease and its vectors. For that purpose, that taxpayer’s farming business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That farming business income shall be further apportioned to the area affected by Pierce’s disease and its vectors in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this subdivision as follows: (i) Farming business income shall be apportioned to the area affected by Pierce’s disease and its vectors by multiplying the total California farming business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph: (I) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the area affected by Pierce’s disease and its vectors during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year. (II) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the area affected by Pierce’s disease and its vectors during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year. (ii) If a loss carryover is allowable pursuant to this section for any taxable year after Pierce’s disease and its vectors occurred, the area affected by Pierce’s disease and its vectors shall be deemed to remain in existence for purposes of computing the limitation set forth in subparagraph (B) and allowing a net operating loss deduction. (b) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section that applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (c). (c) If a taxpayer is eligible to compute its net operating loss under this section and either Section 24416.2, 24416.4, 24416.5, or 24416.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer. (d) Notwithstanding Section 24416, the amount of the loss determined under this section or Section 24416.2, 24416.4, 24416.5, or 24416.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (b) shall be included in the election under Section 24416.1. (e) (1) A qualified taxpayer may utilize the net operating loss carryover allowed by this section only if the Department of Food and Agriculture determines that Pierce’s disease and its vectors caused the net operating loss for which the qualified taxpayer seeks a deduction under this section. (2) To make the determination required by this subdivision, the Department of Food and Agriculture shall utilize the definitions in Title 3 of the California Code of Regulations, relating to Pierce’s disease and its vectors. (3) The Department of Food and Agriculture may prescribe regulations necessary to implement this subdivision. (f) This section applies to net operating losses attributable to taxable years beginning on or after January 1, 2001, and before January 1, 2003. (Added by Stats. 2001, Ch. 623, Sec. 6. Effective October 9, 2001.)
  71. 24421.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    When computing net income under this part, taxpayers may not claim deductions for 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24421. In computing “net income” of taxpayers under this part, no deduction shall be allowed for the items specified in this article. (Added by Stats. 1955, Ch. 938.)
  72. 24422.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section disallows deductions for certain capital and restoration expenses, 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24422. No deduction shall be allowed for both of the following: (a) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. This subdivision shall not apply to: (1) Expenditures for the development of mines or deposits deductible under Section 616 of the Internal Revenue Code. (2) Soil and water conservation expenditures deductible under Section 24369. (3) Expenditures for farmers for fertilizer, etc., deductible under Section 24377. (4) Research and experimental expenditures deductible under Section 24365. (5) Expenditures for which a deduction is allowed under Section 24356.7. (6) Expenditures for removal of architectural and transportation barriers to the handicapped and elderly that the taxpayer elects to deduct under Section 24383. (b) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made. (Amended by Stats. 2011, Ch. 296, Sec. 285. (AB 1023) Effective January 1, 2012.)
  73. 24422.3.

    ## 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies IRC Section 263A, with exceptions, and lets taxpayers elect to apply the subdivision to certain taxable years in 2018 before the 2019 change takes effect.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24422.3. (a) Section 263A of the Internal Revenue Code, relating to capitalization and inclusion in inventory costs of certain expenses, shall apply, except as otherwise provided. (b) (1) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(b) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 263A of the Internal Revenue Code, relating to capitalization and inclusion in inventory cost of certain expenses, shall apply, except as otherwise provided. (2) (A) Any change in method of accounting made pursuant to this subdivision shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board. (B) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to this subdivision. (C) Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision to taxable years beginning on or after January 1, 2018, and before January 1, 2019. (Amended by Stats. 2019, Ch. 39, Sec. 27. (AB 91) Effective July 1, 2019.)
  74. 24424.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 264 of the Internal Revenue Code applies to certain amounts paid in connection with insurance contracts, 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24424. Section 264 of the Internal Revenue Code, relating to certain amounts paid in connection with insurance contracts, shall apply, except as otherwise provided. (Repealed and added by Stats. 2002, Ch. 35, Sec. 52. Effective May 8, 2002.)
  75. 24425.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section disallows deductions for certain amounts tied to income not included in the tax base, and for specified expenses or interest paid to insurers in a commonly controlled group.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24425. (a) No deduction shall be allowed for any amount otherwise allowable as a deduction which is allocable to one or more classes of income not included in the measure of the tax imposed by this part, regardless of whether that income was received or accrued during the taxable year. (b) No deduction shall be allowed for any expense described in paragraphs (1) or (2) that is paid or incurred to an insurer if the insurer is a member of the taxpayer’s commonly controlled group and the amount paid or incurred would constitute income to the insurer if the insurer were subject to the California income or franchise tax. (1) An expense described in this paragraph means any of the following interest amounts payable to an insurer in the same commonly controlled group: (A) (i) Interest paid or incurred to an insurer in the taxpayer’s commonly controlled group with respect to indebtedness (other than qualified marketable debt instruments), the principal amount of which is attributable to a contribution of money by a noninsurer member of the taxpayer’s commonly controlled group to the capital of an insurer member of that group, including the principal amount of a loan arising from a direct or indirect transfer of money from that contribution to capital from one insurer to another insurer of the same commonly controlled group. (ii) Interest paid or incurred to an insurer with respect to a note or other debt instrument (other than qualified marketable debt instruments) contributed to the capital of an insurer with respect to its stock by a noninsurer member of the commonly controlled group. (iii) For purposes of this subparagraph, “qualified marketable debt instruments” means publicly available debt instruments of all noninsurer members of the commonly controlled group issued, but only to the extent that the aggregate principal amount of publicly available debt instruments held by all insurer members of the commonly controlled group constitutes less than 10 percent of the total outstanding principal amount of publicly available debt instruments issued by all noninsurer members. (iv) For purposes of this subparagraph, “publicly available debt instruments” means debt instruments available to the general public, including bonds, debentures, and negotiable instruments (as defined in Section 3104 of the California Commercial Code) that are rated by a nationally recognized statistical rating agency (as that term is used in Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934) in one of its generic rating categories that signifies investment grade. (B) Interest paid or incurred within five years after the direct or indirect acquisition of the insurer by a member of the commonly controlled group (other than interest on qualified marketable debt instruments as defined in clause (iii) of subparagraph (A)). (C) The amount of interest paid or incurred during the taxable year to any insurer in the commonly controlled group multiplied by the disqualifying percentage. The disqualifying percentage is an amount equal to 100 percent less the percentage described in paragraph (1), (2), or (3) of subdivision (c) of Section 24410 (as the case may be) for that taxable year whether or not a dividend is paid or accrued. (D) An amount of interest determined by multiplying the amount of interest paid or incurred to an insurer in the commonly controlled group by the ratio of the commonly controlled group determined under paragraph (1) of subdivision (d) of Section 24410 for the taxable year (whether or not a dividend was paid or accrued in that year). (2) An expense described in this paragraph means any expense other than interest described by paragraph (1), that is either of the following: (A) Attributable to property formerly held by the taxpayer or a member of the taxpayer’s commonly controlled group that was acquired by the insurer in a transaction in which gain was realized but not recognized (including for this purpose any income deferred under Section 24465) by the taxpayer or a member of its commonly controlled group. (B) Attributable to property purchased with the proceeds attributable to a contribution by a noninsurer member of the taxpayers’ commonly controlled group to the capital of an insurer member of that group, including amounts attributable to a direct or indirect transfer of money from that contribution from one insurer to another insurer in the same group. (3) For purposes of this subdivision, amounts that are described in more than one subparagraph of either paragraph (1) or (2) shall be included only in that subparagraph that will result in the highest disallowance amount. (4) For purposes of this subdivision, the phrase “commonly controlled group” shall have the same meaning as that phrase has under Section 25105. (5) For purposes of this subdivision, an insurer is an insurer within the meaning of Section 28 of Article XIII of the California Constitution, whether or not the insurer is engaged in business in California. (Amended by Stats. 2004, Ch. 868, Sec. 3. Effective September 29, 2004.)
  76. 24426.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A taxpayer may elect, under Franchise Tax Board regulations, to treat certain taxes and carrying charges on property as chargeable to capital account.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24426. Amounts paid or accrued for such taxes and carrying charges as, under regulations prescribed by the Franchise Tax Board, are chargeable to capital account with respect to property, if the taxpayer elects, in accordance with such regulations, to treat such taxes or charges as so chargeable. (Added by Stats. 1955, Ch. 938.)
  77. 24427.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 267 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24427. Section 267 of the Internal Revenue Code, relating to losses, expenses, and interest with respect to transactions between related taxpayers, shall apply, except as otherwise provided. (Amended by Stats. 2015, Ch. 359, Sec. 32. (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.)
  78. 24428.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes IRC Section 267A apply to related party amounts paid or accrued in hybrid transactions or with hybrid entities.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24428. Section 267A of the Internal Revenue Code, relating to certain related party amounts paid or accrued in hybrid transactions or with hybrid entities, shall apply. (Added by Stats. 2025, Ch. 231, Sec. 100. (SB 711) Effective October 1, 2025.)
  79. 24429.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 276 of the Internal Revenue Code applies here, except where this section 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24429. Section 276 of the Internal Revenue Code, relating to certain indirect contributions to political parties, shall apply, except as otherwise provided. (Added by Stats. 1997, Ch. 611, Sec. 89. Effective October 3, 1997.)
  80. 24430.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    The cited federal tax amendments to IRC Section 274 do 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24430. The amendments made by Section 13304 of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 274 of the Internal Revenue Code, relating to limitation on deduction by employers of expenses for fringe benefits, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 101. (SB 711) Effective October 1, 2025.)
  81. 24431.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Certain acquisitions made to evade tax can prevent deductions, credits, or other allowances from being claimed, and the Franchise Tax Board may disallow them 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24431. (a) If— (1) Any person or persons acquire, or acquired on or after October 8, 1940, directly or indirectly, control of a corporation; or (2) Any corporation acquires, or acquired on or after October 8, 1940, directly or indirectly, property of another corporation, not controlled, directly or indirectly, immediately before such acquisition, by such acquiring corporation or its stockholders, the basis of which property, in the hands of the acquiring corporation, is determined by reference to the basis in the hands of the transferor corporation; and the principal purpose for which such acquisition was made is evasion or avoidance of tax under this part by securing the benefit of a deduction, credit, or other allowance which such person or corporation would not otherwise enjoy, then such deduction, credit, or other allowance shall not be allowed. For purposes of this subdivision, control means the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock of the corporation. (b) (1) If— (A) There is a qualified stock purchase by a corporation of another corporation, (B) An election is not made under Section 24519 with respect to that purchase, (C) The acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than two years after the acquisition date, and (D) The principal purpose for that liquidation is the evasion or avoidance of tax under this part by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Franchise Tax Board may disallow that deduction, credit, or other allowance. (2) For purposes of paragraph (1), the terms “qualified stock purchase” and “acquisition date” have the same respective meanings as when used in Section 24519. (c) In any case to which subdivision (a) applies, the Franchise Tax Board may do any of the following: (1) Allow as a deduction, credit, or allowance any part of any amount disallowed by that section, if it determines that such allowance will not result in the evasion or avoidance of tax under this part for which the acquisition was made. (2) Distribute, apportion, or allocate gross income, and distribute, apportion, or allocate the deductions, credits, or allowances the benefit of which was sought to be secured, between or among the corporations, or properties, or parts thereof, involved, and to allow those deductions, credits, or allowances so distributed, apportioned, or allocated, but to give effect to that allowance only to the extent which it determines shall not result in the evasion or avoidance of tax under this part for which the acquisition was made. (3) Exercise its powers, in part, under paragraph (1) and, in part, under paragraph (2). (Amended by Stats. 1985, Ch. 1461, Sec. 111. Effective October 1, 1985.)
  82. 24434.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Taxpayers generally cannot deduct worthless debts owed by a political party under Sections 24347 or 24348, except in a narrow accrual-method 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24434. (a) In the case of a taxpayer (other than a bank as defined in Section 23039) no deduction shall be allowed under Section 24347 or 24348 by reason of the worthlessness of any debt owed by a political party. (b) (1) For purposes of subdivision (a), the term “political party” means any of the following: (A) A political party. (B) A national, state, or local committee of a political party. (C) A committee, association, or organization which accepts contributions or makes expenditures for the purpose of influencing or attempting to influence the election of presidential or vice presidential electors or of any individual whose name is presented for election to any federal, state, or local elective public office, whether or not such individual is elected. (2) For purposes of paragraph (1)(C), the term “contributions” includes a gift, subscription, loan, advance, or deposit, of money, or anything of value, and includes a contract, promise, or agreement to make a contribution, whether or not legally enforceable. (3) For purposes of paragraph (1)(C), the term “expenditures” includes a payment, distribution, loan, advance, deposit, or gift, of money, or anything of value, and includes a contract, promise, or agreement to make an expenditure, whether or not legally enforceable. (c) In the case of a taxpayer who uses an accrual method of accounting, subdivision (a) shall not apply to a debt which accrued as a receivable on a bona fide sale of goods or services in the ordinary course of a taxpayer’s trade or business if both of the following apply: (1) For the taxable year in which the receivable accrued, more than 30 percent of all receivables which accrued in the ordinary course of the trades or businesses of the taxpayer were due from political parties. (2) The taxpayer made substantial continuing efforts to collect on the debt. (Amended by Stats. 2000, Ch. 862, Sec. 166. Effective January 1, 2001.)
  83. 24436.1.

    ## 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Taxpayers may not deduct income tied to specified criminal profiteering activity, and tax authorities are bound by a prior final court determination on the legality of the activities.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24436.1. (a) In computing net income, deductions, including deductions for cost of goods sold, shall not be allowed to any taxpayer from any of its gross income directly derived from any act or omission of criminal profiteering activity, as defined in Section 186.2 of the Penal Code, or as defined in Chapter 6 (commencing with Section 11350) of Division 10 of the Health and Safety Code, or Article 5 (commencing with Section 750) of Chapter 1 of Part 2 of Division 1 of the Insurance Code; and deductions shall not be allowed to any taxpayer on any of its gross income derived from any other activities which directly tend to promote or to further, or are directly connected or associated with, those acts or omissions. (b) A prior, final determination by a court of competent jurisdiction of this state in any criminal proceedings or any proceeding in which the state, county, city and county, city, or other political subdivision was a party thereto on the merits of the legality of the activities of a taxpayer, or predecessor in interest of a taxpayer, shall be required in order for subdivision (a) to apply and shall be binding upon the Franchise Tax Board and the State Board of Equalization. (c) (1) Except as provided in paragraphs (2) and (3), this section shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of September 14, 1982. (2) The amendments made to this section by Chapter 962 of the Statutes of 1984 shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of January 1, 1985. (3) The amendments made to this section by Chapter 454 of the Statutes of 2011 shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of the effective date of that act. (Amended by Stats. 2012, Ch. 162, Sec. 173. (SB 1171) Effective January 1, 2013.)
  84. 24436.5.

    ## 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section denies certain tax deductions for substandard housing in California, and requires local regulatory agencies to issue notices, report noncompliance, and notify the Franchise Tax Board when compliance does not occur.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24436.5. (a) No deduction shall be allowed for interest, depreciation, taxes, or amortization paid or incurred in the taxable year under Section 24343, 24344, 24345, or 24349, with respect to substandard housing located in this state, except as provided in subdivision (e). (b) “Substandard housing” means occupied dwellings from which the taxpayer derives rental income or unoccupied or abandoned dwellings for which both of the following apply: (1) Either of the following occurs: (A) For occupied dwellings from which the taxpayer derives rental income, a state or local government regulatory agency has determined that the housing violates state law or local codes dealing with health, safety, or building. (B) For dwellings that are unoccupied or abandoned for at least 90 days, a state or local government regulatory agency has cited the housing for conditions that constitute a serious violation of state law or local codes dealing with health, safety, or building, and that constitute a threat to public health and safety. (2) Either of the following occurs: (A) After written notice of violation by the regulatory agency, specifying the applicability of this section, the housing has not been repaired or brought to a condition of compliance within six months after the date of the notice or the time prescribed in the notice, whichever period is later. (B) Good faith efforts for compliance have not been commenced, as determined by the regulatory agency. “Substandard housing” also means employee housing that has not, within 30 days of the date of the written notice of violation or the date for compliance prescribed in the written notice of violation, been brought into compliance with the conditions stated in the written notice of violation of the Employee Housing Act (Part 1 (commencing with Section 17000) of Division 13 of the Health and Safety Code) issued by the enforcement agency that specifies the application of this section. The regulatory agency may, for good cause shown, extend the compliance date prescribed in a violation notice. (c) (1) When the period specified in paragraph (2) of subdivision (b) has expired without compliance, the government regulatory agency shall mail to the taxpayer a notice of noncompliance. The notice of noncompliance shall be in a form and shall include information prescribed by the Franchise Tax Board, shall be mailed by certified mail to the taxpayer at his or her last known address, and shall advise the taxpayer of (A) an intent to notify the Franchise Tax Board of the noncompliance within 10 days unless an appeal is filed, (B) where an appeal may be filed, and (C) a general description of the tax consequences of that filing with the Franchise Tax Board. Appeals shall be made to the same body and in the same manner as appeals from other actions of the regulatory agency. If no appeal is made within 10 days or if after disposition of the appeal the regulatory agency is sustained, the regulatory agency shall notify, in writing, the Franchise Tax Board of the noncompliance. (2) The notice of noncompliance shall contain the legal description or the lot and block numbers of the real property, the assessor’s parcel number, and the name of the owner of record as shown on the latest equalized assessment roll. In addition, the regulatory agency shall, at the same time as notification of the notice of noncompliance is sent to the Franchise Tax Board, record a copy of the notice of noncompliance in the office of the recorder for the county in which the substandard housing is located that includes a statement of tax consequences that may be determined by the Franchise Tax Board. However, the failure to record a notice with the county recorder does not relieve the liability of any taxpayer nor does it create any liability on the part of the regulatory agency. (3) The regulatory agency may charge the taxpayer a fee in an amount not to exceed the regulatory agency’s costs incurred in recording any notice of noncompliance or issuing any release of that notice. The notice of compliance shall be recorded and shall serve to expunge the notice of noncompliance. The notice of compliance shall contain the same recording information required for the notice of noncompliance. No deduction by the taxpayer, or any other taxpayer who obtains title to the property subsequent to the recordation of the notice of noncompliance, shall be allowed for the items provided in subdivision (a) from the date of the notice of noncompliance until the date the regulatory agency determines that the substandard housing has been brought to a condition of compliance. The regulatory agency shall mail to the Franchise Tax Board and the taxpayer a notice of compliance, which notice shall be in the form and include the information prescribed by the Franchise Tax Board. In the event the period of noncompliance does not cover an entire taxable year, the deductions shall be denied at the rate of1/12 for each full month during the period of noncompliance. (4) If the property is owned by more than one owner or the recorded title is in the name of a fictitious owner, the notice requirements provided in subdivision (b) and this subdivision shall be satisfied for each owner if the notices are mailed to one owner or to the fictitious name owner at the address appearing on the latest available property tax bill. However, notices made pursuant to this subdivision shall not relieve the regulatory agency from furnishing taxpayer identification information required to implement this section to the Franchise Tax Board. (d) For the purposes of this section, a notice of noncompliance shall not be mailed by the regulatory agency to the Franchise Tax Board if any of the following occur: (1) The housing was rendered substandard solely by reason of earthquake, flood or other natural disaster except where the condition remains for more than three years after the disaster. (2) The owner of the substandard housing has secured financing to bring the housing into compliance with those laws or codes that have been violated, causing the housing to be classified as substandard, and has commenced repairs or other work necessary to bring the housing into compliance. (3) The owner of substandard housing that is not within the meaning of housing accommodation, as defined in subdivision (d) of Section 35805 of the Health and Safety Code, has done both of the following: (A) Attempted to secure financing to bring the housing into compliance with those laws or codes that have been violated, causing the housing to be classified as substandard. (B) Been denied that financing solely because the housing is located in a neighborhood or geographical area in which financial institutions do not provide financing for rehabilitation of any of that type of housing. (e) The provisions of this section do not apply to deductions from income derived from property rendered substandard solely by reason of a change in applicable state or local housing standards unless those violations cause substantial danger to the occupants of the property, as determined by the regulatory agency which has served notice of violation pursuant to subdivision (b). (f) The owner of substandard housing found to be in noncompliance shall, upon total or partial divestiture of interest in the property, immediately notify the regulatory agency of the name and address of the person or persons to whom the property has been sold or otherwise transferred and the date of the sale or transference. (g) By July 1 of each year, the regulatory agency shall report to the appropriate legislative body of its jurisdiction all of the following information, for the preceding calendar year, regarding its activities to secure code enforcement, which shall be public information: (1) The number of written notices of violation issued for substandard housing under subdivision (b). (2) The number of violations complied with within the period prescribed in subdivision (b). (3) The number of notices of noncompliance issued pursuant to subdivision (c). (4) The number of appeals from those notices pursuant to subdivision (c). (5) The number of successful appeals by owners. (6) The number of notices of noncompliance mailed to the Franchise Tax Board pursuant to subdivision (c). (7) The number of cases in which a notice of noncompliance was not sent pursuant to the provisions of subdivision (d). (8) The number of extensions for compliance granted pursuant to subdivision (b) and the mean average length of the extensions. (9) The mean average length of time from the issuance of a notice of violation to the mailing of a notice of noncompliance to the Franchise Tax Board where the notice is actually sent to the Franchise Tax Board. (10) The number of cases where compliance is achieved after a notice of noncompliance has been mailed to the Franchise Tax Board. (11) The number of instances of disallowance of tax deductions by the Franchise Tax Board resulting from referrals made by the regulatory agency. This information may be filed in a supplemental report in succeeding years as it becomes available. (h) The provisions of this section relating to substandard housing consisting of abandoned or unoccupied dwellings do not apply to any lender engaging in a “federally related transaction,” as defined in Section 11302 of the Business and Professions Code, who acquires title through judicial or nonjudicial foreclosure, or accepts a deed in lieu of foreclosure. The exception provided in this subdivision covers only substandard housing consisting of abandoned or unoccupied dwellings involved in the federally related transaction. (Amended by Stats. 2000, Ch. 862, Sec. 168. Effective January 1, 2001.)
  85. 24437.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    Section 277 of the Internal Revenue Code applies here, except where this provision or other law 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24437. Section 277 of the Internal Revenue Code, relating to deductions incurred by certain membership organizations in transactions with members, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 58. Effective October 6, 1993.)
  86. 24438.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    A taxpayer may not deduct interest on corporate acquisition indebtedness above the section’s limit, and the section defines when an obligation counts as that kind of indebtedness.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24438. (a) No deduction shall be allowed for any interest paid or incurred by a taxpayer during the taxable year with respect to its corporate acquisition indebtedness to the extent that such interest exceeds— (1) Five million dollars ($5,000,000), reduced by (2) The amount of interest paid or incurred by such corporation during such year on obligations (A) issued after December 31, 1967, to provide consideration for an acquisition described in paragraph (1) of subdivision (b), but (B) which are not corporate acquisition indebtedness. (b) For purposes of this section, the term “corporate acquisition indebtedness” means any obligation evidenced by a bond, debenture, note, or certificate or other evidence of indebtedness issued after October 9, 1969, by a corporation (hereinafter in this section referred to as “issuing corporation”) if— (1) Such obligation is issued to provide consideration for the acquisition of— (A) Stock in another corporation (hereinafter in this section referred to as “acquired corporation”), or (B) Assets of another corporation (hereinafter in this section referred to as “acquired corporation”) pursuant to a plan under which at least two-thirds (in value) of all the assets (excluding money) used in trades and businesses carried on by such corporation are acquired, (2) Such obligation is either— (A) Subordinated to the claims of trade creditors of the issuing corporation generally, or (B) Expressly subordinated in right of payment to the payment of any substantial amount of unsecured indebtedness, whether outstanding or subsequently issued, of the issuing corporation, (3) The bond or other evidence of indebtedness is either— (A) Convertible directly or indirectly into stock of the issuing corporation, or (B) Part of an investment unit or other arrangement which includes, in addition to such bond or other evidence of indebtedness, an option to acquire, directly or indirectly, stock in the issuing corporation, and (4) As of a day determined under paragraph (1) of subdivision (c) either— (A) The ratio of debt to equity (as defined in paragraph (2) of subdivision (c)) of the issuing corporation exceeds 2 to 1, or (B) The projected earnings (as defined in paragraph (3) of subdivision (c)), do not exceed three times the annual interest to be paid or incurred (determined under paragraph (4) of subdivision (c)). (c) For purposes of paragraph (4) of subdivision (b)— (1) Determinations are to be made as of the last day of any taxable year of the issuing corporation in which it issues any obligation to provide consideration for an acquisition described in paragraph (1) of subdivision (b) of stock in, or assets of, the acquired corporation. (2) The term “ratio of debt to equity” means the ratio which the total indebtedness of the issuing corporation bears to the sum of its money and all its other assets (in an amount equal to their adjusted basis for determining gain) less such total indebtedness. (3) (A) The term “projected earnings” means the “average annual earnings” (as defined in subparagraph (B)) of— (i) The issuing corporation only, if cause (ii) does not apply, or (ii) Both the issuing corporation and the acquired corporation, in any case where the issuing corporation has acquired control (as defined in Section 24564), or has acquired substantially all of the properties of the acquired corporation. (B) The average annual earnings referred to in subparagraph (A) is, for any corporation, the amount of its earnings and profits for any three-year period ending with the last day of a taxable year of the issuing corporation described in paragraph (1), computed without reduction for— (i) Interest paid or incurred, (ii) Depreciation or amortization allowed under this part, (iii) Liability for tax under this part, and (iv) Distributions to which Section 301(c)(1) of the Internal Revenue Code, relating to property distributions, applies (other than such distributions from the acquired to the issuing corporation), and reduced to an annual average for such three-year period pursuant to regulations prescribed by the Franchise Tax Board. Such regulations shall include rules for cases where any corporation was not in existence for all of such three-year period or such period includes only a portion of a taxable year of any corporation. (4) The term “annual interest to be paid or incurred” means— (A) If subparagraph (B) does not apply, the annual interest to be paid or incurred by the issuing corporation only, determined by reference to its total indebtedness outstanding, or (B) If projected earnings are determined under clause (ii) of subparagraph (A) of paragraph (3), the annual interest to be paid or incurred by both the issuing corporation and the acquired corporation, determined by reference to their combined total indebtedness outstanding. (5) With respect to any corporation which is a bank or is primarily engaged in a lending or finance business— (A) In determining under paragraph (2) the ratio of debt to equity of such corporation (or of the affiliated group of which such corporation is a member), the total indebtedness of such corporation (and the assets of such corporation) shall be reduced by an amount equal to the total indebtedness owed to such corporation which arises out of the banking business of such corporation, or out of the lending or finance business of such corporation, as the case may be; (B) In determining under paragraph (4) the annual interest to be paid or incurred by such corporation (or by the issuing and acquired corporations referred to in subparagraph (B) of paragraph (4) or by the affiliated group of which such corporation is a member) the amount of such interest (determined without regard to this paragraph) shall be reduced by an amount which bears the same ratio to the amount of such interest as the amount of the reduction for the taxable year under subparagraph (A) bears to the total indebtedness of such corporation; and (C) In determining under subparagraph (B) of paragraph (3), the average annual earnings, the amount of the earnings and profits for the three-year period shall be reduced by the sum of the reductions under subparagraph (B) for such period. For purposes of this paragraph, the term “lending or finance business” means a business of making loans or purchasing or discounting accounts receivable, notes, or installment obligations. (d) In applying this section— (1) The deduction of interest on any obligation shall not be disallowed under subdivision (a) before the first taxable year of the issuing corporation as of the last day of which the application of either subparagraph (A) or subparagraph (B) of paragraph (4) of subdivision (b) results in such obligation being corporate acquisition indebtedness. (2) Except as provided in paragraphs (3), (4), and (5), if an obligation is determined to be corporate acquisition indebtedness as of the last day of any taxable year of the issuing corporation, it shall be corporate acquisition indebtedness for such taxable year and all subsequent taxable years. (3) If an obligation is determined to be corporate acquisition indebtedness as of the close of a taxable year of the issuing corporation in which clause (i) of subparagraph (A) of paragraph (3) of subdivision (c) applied, but would not be corporate acquisition indebtedness if the determination were made as of the close of the first taxable year of such corporation thereafter in which clause (ii) of subparagraph (A) of paragraph (3) of subdivision (c) could apply, such obligation shall be considered not to be corporate acquisition indebtedness for such later taxable year and all taxable years thereafter. (4) If an obligation which has been determined to be corporate acquisition indebtedness for any taxable year would not be such indebtedness for each of any three consecutive taxable years thereafter if paragraph (4) of subdivision (b) were applied as of the close of each of such three years, then such obligation shall not be corporate acquisition indebtedness for all taxable years after such three consecutive taxable years. (5) In the case of obligations issued to provide consideration for the acquisition of stock in another corporation, such obligations shall be corporate acquisition indebtedness for a taxable year only if the issuing corporation owns 5 percent or more of the total combined voting power of all classes of stock entitled to vote of such other corporation. (e) An acquisition of stock of a corporation of which the issuing corporation is in control (as defined in Section 24564) in a transaction in which gain or loss is not recognized shall be deemed an acquisition described in paragraph (1) of subdivision (b) only if immediately before such transaction (1) the acquired corporation was in existence, and (2) the issuing corporation was not in control (as defined in Section 24564) of such corporation. (f) For purposes of this section, the term “corporate acquisition indebtedness” does not include any indebtedness issued to any person to provide consideration for the acquisition of stock in, or assets of, any foreign corporation substantially all of the income of which, for the three-year period ending with the date of such acquisition or for such part of such period as the foreign corporation was in existence, is from sources without the United States. (g) In any case in which the issuing corporation is a member of an affiliated group, the application of this section shall be determined, pursuant to regulations prescribed by the Franchise Tax Board, by treating all of the members of the affiliated group in the aggregate as the issuing corporation, except that the ratio of debt to equity of, projected earnings of, and annual interest to be paid or incurred by any corporation (other than the issuing corporation determined without regard to this subdivision) shall be included in the determinations required under subparagraphs (A) and (B) of paragraph (4) of subdivision (b) as of any day only if such corporation is a member of the affiliated group on such day, and, in determining projected earnings of such corporation under paragraph (3) of subdivision (c), there shall be taken into account only the earnings and profits of such corporation for the period during which it was a member of the affiliated group. For purposes of this section, the term “affiliated group” has the meaning assigned to such term by Section 1504 of the Internal Revenue Code except that all corporations other than the acquired corporation shall be treated as includable corporations and the acquired corporation shall not be treated as an includable corporation. (h) For purposes of this section— (1) Any extension, renewal, or refinancing of an obligation evidencing a preexisting indebtedness shall not be deemed to be the issuance of a new obligation. (2) Any obligation which is corporate acquisition indebtedness of the issuing corporation is also corporate acquisition indebtedness of any corporation which becomes liable for such obligation as guarantor, endorser, or indemnitor or which assumes liability for such obligation in any transaction. (i) No inference shall be drawn from any provision in this section that any instrument designated as a bond, debenture, note, or certificate or other evidence of indebtedness by its issuer represents an obligation or indebtedness of such issuer in applying any other provision of this part. (j) This section shall apply to the determination of the allowability of the deduction of interest paid or incurred with respect to indebtedness incurred after December 31, 1970. (Amended by Stats. 2000, Ch. 862, Sec. 169. Effective January 1, 2001.)
  87. 24439.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    The issuing corporation cannot deduct certain premiums paid when repurchasing convertible debt, unless it proves the excess is borrowing cost rather than conversion value, or the repurchase falls within the stated old binding-obligation 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24439. (a) No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in the same parent-subsidiary controlled group, within the meaning of Section 1563(a)(1) of the Internal Revenue Code, relating to parent-subsidiary controlled group, as the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Franchise Tax Board that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature. (b) For purposes of subdivision (a), the adjusted issue price is the issue price, as defined in Sections 1273(b) and 1274 of the Internal Revenue Code, increased by any amount of discount deducted before repurchase, or, in the case of bonds or other evidences of indebtedness issued after February 28, 1913, decreased by any amount of premium included in gross income before repurchase by the issuing corporation. (c) The provisions of this section shall not apply to a convertible bond or other convertible evidence of indebtedness repurchased pursuant to a binding obligation incurred on or before April 22, 1969, to repurchase such bond or other evidence of indebtedness at a specified call premium, but no inference shall be drawn from the fact that this section does not apply to the repurchase of such convertible bond or other convertible evidence of indebtedness. (d) The amendments made to this section by the act adding this subdivision shall apply to repurchases on or after January 1, 2015. (Amended by Stats. 2015, Ch. 359, Sec. 33. (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.)
  88. 24440.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section makes specified Internal Revenue Code credit provisions apply in California, with stated exceptions and a modification to one reference for research credit 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24440. (a) Section 280C(b) of the Internal Revenue Code, relating to credit for qualified clinical testing expenses for certain drugs, shall apply, except as otherwise provided. (b) (1) Section 280C(c) of the Internal Revenue Code, relating to credit for increasing research activities, shall apply, except as otherwise provided. (2) The amendments made by Section 13206(d)(2)(A) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 280C(c) of the Internal Revenue Code, relating to credit for increasing research activities, shall not apply, except as otherwise provided. (3) Section 280C(c)(2)(B) of the Internal Revenue Code, as enacted pursuant to Section 13206(d)(2)(A) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified to refer to Section 23151, 23186, or 23802 in lieu of Section 11(b) of the Internal Revenue Code. (Amended by Stats. 2025, Ch. 231, Sec. 102. (SB 711) Effective October 1, 2025.)
  89. 24441.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    When computing net income, deductions are not allowed for certain abandonment fees and tax recoupment fees.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24441. In computing net income no deduction shall be allowed for (a) abandonment fees paid in respect of property on which the open-space easement is terminated under Section 51061 or 51093 of the Government Code or (b) tax recoupment fees paid under Section 51142 of the Government Code. (Amended by Stats. 1977, Ch. 853.)
  90. 24442.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

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    If a structure is demolished, the owner or lessee cannot take a deduction for demolition expenses or demolition losses, and those amounts are treated as capital account items for the land.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24442. In the case of the demolition of any structure— (1) No deduction otherwise allowable under this part shall be allowed to the owner or lessee of such structure for— (A) Any amount expended for such demolition, or (B) Any loss sustained on account of such demolition; and (2) Amounts described in paragraph (1) shall be treated as property chargeable to capital account with respect to the land on which the demolished structure was located. (Amended by Stats. 1985, Ch. 1461, Sec. 114. Effective October 1, 1985.)
  91. 24442.5.

    ## 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 280H of the Internal Revenue Code applies here to taxable years beginning on or after January 1, 1989, 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24442.5. Section 280H of the Internal Revenue Code, relating to limitation on certain amounts paid to employee-owners by personal service corporations electing alternative taxable years, shall apply to taxable years beginning on or after January 1, 1989, except as otherwise provided. (Amended by Stats. 2000, Ch. 862, Sec. 170. Effective January 1, 2001.)
  92. 24443.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 274 of the Internal Revenue Code applies here, 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 7. Net Income [24341 - 24449] ( Chapter 7 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24443. Section 274 of the Internal Revenue Code, relating to the disallowance of certain entertainment, gift, travel, etc., expenses, shall apply, except as otherwise provided. (Amended by Stats. 2002, Ch. 35, Sec. 53. Effective May 8, 2002.)
  93. 24447.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    The Franchise Tax Board may disallow a deduction for personal-services payments if the payor fails to report the payments on time.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24447. The Franchise Tax Board may disallow a deduction under this part to an individual or entity for amounts paid as remuneration for personal services if that individual or entity fails to report the payments required under Section 13050 of the Unemployment Insurance Code or Section 18631 on the date prescribed therefor (determined with regard to any extension of time for filing). (Amended by Stats. 2007, Ch. 156, Sec. 3. Effective January 1, 2008.)
  94. 24448.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A taxpayer who owns real property loses deductions for certain property-related items if required Section 18642 information is not provided, or if the information return is false, misleading, or incomplete.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24448. (a) Notwithstanding any other provisions in this part, in the case of a taxpayer who owns real property and has either failed to provide the information required pursuant to Section 18642 or has provided information which is either false, misleading, or incomplete in the information return required pursuant to Section 18642, no deduction for interest, taxes, depreciation, or amortization under Section 24343, 24344, 24345, 24349, or 24354.2 shall be allowed which relate to that real property, as provided in subdivision (b). (b) No deduction shall be allowed for the items provided in subdivision (a) from 60 days after the due date for filing the information return required pursuant to Section 18642 until the date the Franchise Tax Board determines that all provisions of Section 18642 have been complied with. (c) In the event the period of noncompliance does not cover an entire taxable year, the deductions shall be denied at the rate of one-twelfth for each full month during the period of noncompliance. (Amended by Stats. 2000, Ch. 862, Sec. 171. Effective January 1, 2001.)
  95. 24449.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by 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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes Internal Revenue Code Section 291 apply here, unless another rule in this section says otherwise, and changes one reference in Section 291(b)(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 3. Items Not Deductible [24421 - 24449] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24449. (a) Section 291 of the Internal Revenue Code, relating to special rules relating to corporate preference items, shall apply, except as otherwise provided. (b) The reference in Section 291(b)(1) of the Internal Revenue Code to “Section 263(c)” shall be modified to mean the deduction under Section 24423 of this part. (Amended by Stats. 2002, Ch. 488, Sec. 12. Effective September 12, 2002.)
  96. 24451.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    This section makes Subchapter C of the Internal Revenue Code apply to corporate distributions and adjustments, 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24451. Subchapter C of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to corporate distributions and adjustments, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 873, Sec. 40. Effective October 6, 1993.)
  97. 24451.1.

    ## 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    A taxpayer generally cannot make a separate California Section 338 state election if a federal Section 338 election has been made or is deemed made; the federal election binds this part and related parts.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24451.1. (a) Notwithstanding paragraph (3) of subdivision (e) of Section 23051.5, if an election has been made by a taxpayer under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, or where a taxpayer is deemed to have made an election under Section 338(e) of the Internal Revenue Code, relating to deemed election where purchasing corporation acquires asset of target corporation, for federal income tax purposes, a separate election shall not be allowed under this part and the federal election shall be binding for purposes of this part, Part 10 (commencing with Section 17001), and Part 10.2 (commencing with Section 18401). (b) Notwithstanding paragraph (3) of subdivision (e) of Section 23051.5, if an election has not been made by a taxpayer under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, or where a taxpayer has not been deemed to have made an election under Section 338(e) of the Internal Revenue Code, relating to deemed election where purchasing corporation acquires asset of target corporation, for federal income tax purposes, the taxpayer shall not make a separate state election with respect to Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, under this part. (c) This section shall apply to acquisitions made on or after the effective date of this section, except as provided in subdivision (d). (d) This section shall not apply in the case of an acquisition that is subject to a binding contract entered into before the effective date of this section and which remains binding at all times after that date. (Added by Stats. 2019, Ch. 39, Sec. 28. (AB 91) Effective July 1, 2019.)
  98. 24452.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    This section changes a cross-reference in Internal Revenue Code section 301(e)(2) so it points to Section 24402 instead of Sections 243, 244, and 245.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24452. Section 301(e)(2) of the Internal Revenue Code, relating to 20 percent corporate shareholders, is modified to refer to Section 24402 in lieu of Sections 243, 244, and 245 of the Internal Revenue Code. (Added by Stats. 1991, Ch. 117, Sec. 82. Effective July 16, 1991.)
  99. 24453.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    This section changes how Internal Revenue Code section 302(c)(2) works for California 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24453. Section 302(c)(2) of the Internal Revenue Code, relating to determining termination of interest, is modified to refer to the periods of limitation provided in “Chapter 4 (commencing with Section 19001) and Chapter 5 (commencing with Section 19201) of Part 10.2,” in lieu of “Sections 6501 and 6502” of the Internal Revenue Code and to refer to “taxes imposed under the Personal Income Tax Law” and the “Corporation Tax Law,” in lieu of “Federal income tax.” (Amended by Stats. 2001, Ch. 543, Sec. 38. Effective January 1, 2002.)
  100. 24454.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    This section makes a federal tax rule for foreign acquiring corporations apply to acquisitions on or after January 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24454. Section 304(b)(5)(B) of the Internal Revenue Code, relating to special rule in case of foreign acquiring corporation, shall apply to acquisitions on or after January 1, 2015. (Added by Stats. 2015, Ch. 359, Sec. 35. (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.)
  101. 24454.1.

    ## 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    These federal tax amendments do not apply under 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24454.1. The amendments to Section 367(a) of the Internal Revenue Code as enacted by Section 14102 of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to repeal of the exception for transfers of certain property used in the active conduct of a trade or business, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 103. (SB 711) Effective October 1, 2025.)
  102. 24455.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    The Franchise Tax Board may include certain insurers’ earnings and profits in a taxpayer’s gross income if the group and tax-avoidance 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24455. (a) The Franchise Tax Board may include in the gross income of the taxpayer (or a member of the taxpayer’s combined reporting group) in that taxable year the taxpayer’s pro rata share (or the pro rata share of a member of the taxpayer’s combined reporting group) of any of those insurers’ current earnings and profits in that taxable year, but not to exceed an amount equal to the specific insurer’s net income attributable to investment income for that year minus that insurer’s net written premiums received in that same taxable year, if all of the following apply: (1) For any taxable year an insurer is a member of a taxpayer’s commonly controlled group. (2) The ratio of the five-year average net written premiums to the five-year average total income of all insurers in the commonly controlled group is equal to or less than 0.10 (or, for taxable years beginning on or after January 1, 2008, 0.15). (3) The accumulation of earnings and profits of the insurers in the commonly controlled group had a substantial purpose of avoidance of taxes on, according to, or measured by income, of this state or any other state. The amount so included shall be treated as a dividend received from an insurance company during the taxable year, and to the extent applicable, Section 24410 shall apply to that amount. (b) If the insurer members of the commonly controlled group constitute a predominantly captive insurance group (as defined in paragraph (6) of subdivision (e)), then the ratio described in subdivision (a) shall be 0.40. (c) To the extent that amounts are included in the gross income of a taxpayer (or a member of the taxpayer’s combined reporting group) pursuant to subdivision (a), those amounts shall not again be considered as investment income in the application of the ratio described in paragraph (2) of subdivision (a). (d) The amounts included in gross income under subdivision (a) shall not again be included in gross income when subsequent distributions are made to the taxpayer (or a member of the taxpayer’s combined reporting group), or another taxpayer that acquires an interest in the stock of the taxpayer (or a member of the taxpayer’s combined reporting group with respect to which subdivision (a) was applied), or any successor or assign of the respective taxpayers (or a member of the taxpayer’s combined reporting group) described in this subdivision. For purposes of applying this subdivision, distributions from an insurer shall be considered first made from amounts included under subdivision (a). (e) For purposes of this section, the following definitions shall apply: (1) Except as otherwise provided, the phrases “net written premiums,” “five-year average net written premiums” and the “five-year average total income” shall each have the same meaning, respectively, as applicable for purposes of subdivision (c) of Section 24410, whether or not a dividend is actually received from any insurer member of the taxpayer’s commonly controlled group in that taxable year. (2) “Net income attributable to investment income” means net income of the insurer multiplied by a ratio, the numerator of which is the insurer’s gross investment income from interest, dividends (other than dividends from members of the taxpayer’s commonly controlled group), rent, and realized gains or losses, and the denominator of which is the insurer’s gross income (other than dividends from members of the taxpayer’s commonly controlled group) from all sources. In the application of the preceding sentence, if an insurer is required to file a Statutory Annual Statement pursuant to the Annual Statement Instructions and Accounting Practices and Procedures Manual promulgated by the National Association of Insurance Commissioners, “net income” means net income required to be reported in the insurer’s Statutory Annual Statement. (3) An insurer is any insurer within the meaning of Section 28 of Article XIII of the California Constitution, whether or not the insurer is engaged in business in California. (4) The phrase “commonly controlled group” shall have the same meaning as that phrase has under Section 25105. (5) The phrase “combined reporting group” means those corporations whose income is required to be included in the same combined report pursuant to Section 25101 or 25110. (6) A “predominantly captive insurance group” means the insurer members of a commonly controlled group where the insurers receive more than 50 percent of their net written premiums (without regard to the weighting factors in paragraph (1) of subdivision (e) of Section 24410) from members of the commonly controlled group or the ratios in clause (i) or clause (ii) of subparagraph (B) of paragraph (1) of subdivision (d) of Section 24410 is greater than 50 percent. The provisions of paragraph (4) of subdivision (d) of Section 24410 shall apply for purposes of this paragraph. (7) (A) The taxpayer’s “pro rata share” of the current earnings and profits of an insurer member of a commonly controlled group is the amount that would have been received as a dividend by the taxpayer (or a member of the taxpayer’s combined reporting group) if both of the following apply: (i) The insurer had directly distributed its current earnings and profits with respect to its stock held by the taxpayer (or member of the taxpayer’s combined reporting group). (ii) In the case of an insurer holding the stock of another insurer, all other insurer members of the taxpayer’s commonly controlled group had distributed the same current earnings and profits with respect to their stock, in the same taxable year, until amounts were received as a dividend by the taxpayer (or a member of the taxpayer’s combined reporting group) from an insurer member of the commonly controlled group. (B) In the application of this section, amounts treated as a dividend received by a partnership shall be considered a dividend received by each partner that is a member of the commonly controlled group, either directly or through a series of tiered partnerships. (f) The Franchise Tax Board may prescribe those regulations that are appropriate to describe conditions under which the accumulation of earnings and profits of those insurers described in paragraph (2) of subdivision (a) do not have the substantial purpose of avoidance of taxes on, according to, or measured by income, of this state or any other state. (g) If this section or any portion of this section is held invalid, or the application of this section to any person or circumstance is held invalid, that invalidity shall not affect other provisions of the act adding this section, or the provisions of this section that are severable. (Added by renumbering Section 24900 by Stats. 2013, Ch. 76, Sec. 190. (AB 383) Effective January 1, 2014.)
  103. 24456.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    Section 306(f) of the Internal Revenue Code, relating to source of gain, 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24456. Section 306(f) of the Internal Revenue Code, relating to source of gain, shall not apply. (Added by Stats. 1991, Ch. 117, Sec. 82. Effective July 16, 1991.)
  104. 24457.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    A specified federal tax rule for real estate investment trusts 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24457. Section 312(k)(3)(B)(ii) of the Internal Revenue Code, relating to special rule for real estate investment trusts, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 104. (SB 711) Effective October 1, 2025.)
  105. 24458.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    IRS Notice 2008-83 does not apply for Part 11 taxes to any ownership 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24458. Internal Revenue Service Notice 2008-83, 2008-42 I.R.B. 905, issued on October 20, 2008, relating to the treatment of deductions under Section 382(h) of the Internal Revenue Code following an ownership change, shall not be applicable for purposes of taxes imposed under Part 11 (commencing with Section 23001) of Division 2, of this code with respect to any ownership change occurring at any time. (Added by Stats. 2009, Ch. 401, Sec. 1. (AB 11) Effective October 11, 2009.)
  106. 24459.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

    Verify source ↗

    This section says several specified federal tax rules 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24459. (a) Section 382(n) of the Internal Revenue Code, relating to special rule for certain ownership changes, shall not apply. (b) Section 382(d)(3) of the Internal Revenue Code, relating to application to carryforward of disallowed interest, shall not apply. (c) The amendments made by Section 13301(b)(3) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 382(k)(1) of the Internal Revenue Code, relating to loss corporation, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 105. (SB 711) Effective October 1, 2025. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)
  107. 24461.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    This section makes certain federal rules apply for liquidation-distribution gain and loss timing, except where otherwise provided, and excludes Section 633(e) transition 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24461. (a) For purposes of this part, the provisions of Section 633 of Public Law 99-514, relating to effective dates for recognition of gain and loss on distributions of property in liquidation, shall apply except as otherwise provided. (b) The provisions of Section 633(e) of Public Law 99-514, relating to other transition rules, shall not apply. (c) The amendments to Section 633 of Public Law 99-514 made by Section 1006(g)(1) to 1006(g)(8), inclusive, of Public Law 100-647, relating to effective dates for recognition of gain and loss on distributions of property in liquidation, are declaratory of existing law and shall be applied in the same manner and for the same periods as specified in Public Law 100-647. (Added by Stats. 1991, Ch. 117, Sec. 82. Effective July 16, 1991.)
  108. 24465.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    This section changes how gain is recognized or deferred when property is transferred to an insurer in certain corporate 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24465. (a) (1) If, in connection with any exchange described in Section 332, 351, 354, 356, or 361 of the Internal Revenue Code, a taxpayer transfers property to an insurer, the insurer shall not, for purposes of determining the extent to which gain shall be recognized on that transfer, be considered to be a corporation for purposes of this part. (2) Paragraph (1) shall not apply to any of the following types of transactions, unless that transaction has the effect (directly or indirectly) of transferring appreciated property from a taxpayer subject to tax under this part (or a member of the taxpayer’s combined reporting group) to an insurer: (A) An exchange or transfer pursuant to Section 368(a)(2)(D) or Section 368(a)(2)(E) of the Internal Revenue Code. (B) A transfer of stock in an 80 percent-owned insurer for the purpose of filing a consolidated tax return or for financial or regulatory reporting. (C) A transfer or exchange of publicly owned stock of the parent corporation. (3) If a transaction described in paragraph (2) would qualify under that paragraph but for the fact that the transaction has the effect (directly or indirectly) of transferring appreciated property from a taxpayer subject to tax under this part (or a member of the taxpayer’s combined reporting group) to an insurer, then, if the property is used in the active trade or business of the insurer, subdivision (b) shall be deemed to apply to that transfer. (4) For purposes of this subdivision, “appreciated property” means property whose fair market value, as of the date of the transfer subject to this section, exceeds its adjusted basis as of that date. (b) (1) Except as provided in subdivision (c), or as otherwise provided by regulations prescribed by the Franchise Tax Board, if property subject to paragraph (1) of subdivision (a) or to subdivision (g) is transferred to an insurer for use in the active conduct of a trade or business of the insurer, then any gain otherwise required to be recognized under that subdivision shall be deferred until the date that the property is no longer owned by an insurer in the taxpayer’s commonly controlled group (or a member of the taxpayer’s combined reporting group), or the property is no longer used in the active conduct of the insurer’s trade or business (or the trade or business of another member in the taxpayer’s combined reporting group), or the holder of the property is no longer held by an insurer in the commonly controlled group of the transferor (or a member of the taxpayer’s combined reporting group). (2) Any of the events described in paragraph (1) shall be treated as a disposition of the property under this subdivision, irrespective of whether any other provision in this part or in the Internal Revenue Code would otherwise permit nonrecognition treatment of the transaction described in this subdivision. (3) Notwithstanding paragraph (2) of this subdivision, an insurer that becomes a member of the taxpayer’s commonly controlled group or a corporation that becomes a member of the taxpayer’s combined reporting group, as a result of a transaction of which a transfer referred to in this subdivision is a part, shall be treated as a member of the taxpayer’s commonly controlled group or a member of the taxpayer’s combined reporting group at the time of the transfer for purposes of this subdivision. (4) For purposes of this subdivision, stock of an insurance subsidiary constitutes property used in the active trade or business of the insurer. (5) If the deferred gain required to be taken into account under this subdivision is business income (as defined by subdivision (a) of Section 25120), the gain shall be apportioned using the apportionment percentage for the taxable year that the gain is required to be taken into account under this subdivision. Except as provided in regulations under Section 25137, for purposes of the sales factor for that taxable year, the transaction giving rise to that gain shall be treated as a sale occurring in the taxable year the gain is taken into account. The amount of any gain required to be recognized under this subdivision upon any disposition described in this subdivision shall not exceed the lesser of the deferred gain or the gain realized in the transaction in which gain is required to be recognized under this subdivision. (6) For purposes of computing the amount of gain required to be recognized under this subdivision, appropriate adjustments may be made, pursuant to regulations issued by the Franchise Tax Board, to the basis of stock to reflect the disallowance of any expenses under paragraph (2) of subdivision (b) of Section 24425. (c) The Franchise Tax Board may prescribe regulations providing for an annual reporting requirement in the form of a statement or other form, to be attached to the transferor taxpayer’s return, regarding the current ownership of any property for which any gains were previously deferred pursuant to subdivision (b). If the transferor taxpayer fails to provide any information required by the Franchise Tax Board pursuant to the preceding sentence, the Franchise Tax Board may, in lieu of the year described by subdivision (b), require that the transferor taxpayer take those gains into account in the first taxable year in which the current ownership of the property is not reported. The preceding sentence shall not apply so long as the property is still owned by the transferee and the failure to provide the information was due to reasonable cause and not willful neglect. Notwithstanding any other provision of law, if a taxpayer fails to satisfy the reporting requirements of this subdivision, then a notice of proposed deficiency assessment resulting from adjustments attributable to gains previously deferred pursuant to subdivision (b) with respect to which the reporting requirements were not satisfied may be mailed to the taxpayer within four years from the date on which the reporting requirements are satisfied by the taxpayer. (d) Subdivision (b) shall not apply to any property described by Section 367(a)(3)(B) of the Internal Revenue Code as it read on January 1, 2015. (e) Except as provided by regulations prescribed by the Franchise Tax Board, a transfer by a taxpayer of an interest in a partnership to an insurer in a transaction described in subdivision (a) shall be treated as a transfer to that insurer of the taxpayer’s pro rata share of the assets of the partnership. (f) For purposes of this section, any distribution described by Section 355 of the Internal Revenue Code (or so much of Section 356 of the Internal Revenue Code as it relates to Section 355 of the Internal Revenue Code) shall be treated as an exchange under this section, whether or not the distribution is an exchange. This subdivision shall not apply to any distribution in which either of the following applies: (1) The distributing corporation is an insurer. (2) The distributee is a person other than an insurer. (g) For purposes of this part, any transfer of property to an insurer as a contribution to capital of that insurer by one or more persons who, immediately after the transfer, own (within the meaning of Section 318 of the Internal Revenue Code) stock possessing at least 80 percent of the total combined voting power of all classes of stock of that insurer that are entitled to vote shall be treated as an exchange of that property for stock of the insurer equal in value to the fair market value of the property transferred. (h) (1) In the case of any distribution described in Section 355 of the Internal Revenue Code (or so much of Section 356 of the Internal Revenue Code as it relates to Section 355 of the Internal Revenue Code) by a taxpayer to an insurer, to the extent provided in regulations prescribed by the Franchise Tax Board, gain shall be recognized under principles similar to the principles of this section. (2) In the case of any liquidation to which Section 332 of the Internal Revenue Code applies, except as provided in regulations prescribed by the Franchise Tax Board, both of the following shall apply: (A) Sections 337(a) and 337(b)(1) of the Internal Revenue Code shall not apply, where the 80-percent distributee is an insurer. (B) Where the distributor is an insurer, the distributee shall treat the distribution as a distribution from the insurer’s earnings and profits, to the extent thereof. (3) For purposes of the preceding paragraph, the deemed distribution from earnings and profits shall be treated as a dividend eligible for a deduction, to the extent otherwise provided in Section 24410, as if actually distributed as a dividend. (i) For purposes of this section, the following definitions shall apply: (1) An insurer is any insurer within the meaning of Section 28 of Article XIII of the California Constitution, whether or not the insurer is engaged in business in California. (2) The phrase “commonly controlled group” shall have the same meaning as that phrase has under Section 25105. (3) The phrase “combined reporting group” means those corporations whose income is required to be included in the same combined report pursuant to Section 25101 or 25110. (j) The Franchise Tax Board may prescribe any regulations that may be appropriate to carry out the purpose of this section, which purpose is to prevent the removal of gain inherent in property at the time of a transfer from taxation under this part. Those regulations may provide for appropriate adjustments to the amount of deferred income described in subdivision (b) to avoid the double inclusion of income for situations, including but not limited to, the property transferred to an insurer member of the commonly controlled group is later acquired by a noninsurer member of the taxpayer’s combined reporting group. (k) Upon an adequate showing by a taxpayer that a transaction referred to in subdivision (a) or (h) would not violate the purposes of this section to prevent the removal of gain inherent in property at the time of a transfer from taxation under this part, the Franchise Tax Board may grant relief from the application of this section. In an appeal filed with the State Board of Equalization, or an action filed under Section 19382 or 19385, the State Board of Equalization or the court, as the case may be, shall have jurisdiction to grant that relief only upon a specific finding that the transfer did not remove gain inherent in property at the time of transfer from taxation under this part. (l) This section applies to transactions entered into on or after June 23, 2004, or transactions entered into after June 23, 2004, pursuant to a binding written contract in existence on June 23, 2004. For purposes of this subdivision, transactions entered into on or after June 23, 2004, that were given final approval by a regulatory insurance commissioner before June 23, 2004, shall be considered a transaction entered into before June 23, 2004, pursuant to a binding written contract in existence on June 23, 2004. (Amended by Stats. 2025, Ch. 231, Sec. 107. (SB 711) Effective October 1, 2025.)
  109. 24471.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    An acquiring corporation must account for certain items for tax-credit purposes when Section 381 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24471. Section 381(c) of the Internal Revenue Code, relating to items of the distributor or transferor corporation, is modified to provide that, in lieu of paragraph (24), relating to credit under Section 38, and paragraph (25), relating to credit under Section 53, the acquiring corporation shall take into account (to the extent proper to carry out the purposes of Section 381 of the Internal Revenue Code) the items required to be taken into account for purposes of each credit allowable under this part with respect to the distributor or transferor corporation. (Repealed and added by Stats. 1991, Ch. 117, Sec. 82. Effective July 16, 1991.)
  110. 24471.5.

    ## 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    Section 381(c)(20) of the Internal Revenue Code, about carryforward of disallowed business interest, 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24471.5. Section 381(c)(20) of the Internal Revenue Code, relating to carryforward of disallowed business interest, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 108. (SB 711) Effective October 1, 2025.)
  111. 24472.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    This section says certain 1993 federal tax-code amendments apply to discharges on or after January 1, 1996, and to taxable years beginning on or after that date.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24472. The amendments to Section 382 of the Internal Revenue Code made by Section 13226 of the Revenue Reconciliation Act of 1993 (P.L. 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. (Amended by Stats. 2001, Ch. 543, Sec. 39. Effective January 1, 2002.)
  112. 24473.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    A qualifying transfer of a mutual water company’s assets to a community services district is not subject to the taxes imposed by this part if the listed 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24473. Notwithstanding any other provision of law, the contribution or other transfer of the assets of a mutual water company established prior to September 26, 1977, that is tax exempt under Section 501(c)(12) of the Internal Revenue Code, but is a taxable entity under California Law, including its lands, easements, rights, and obligations to act as sole agent of the stockholders in exercising the riparian rights of the stockholders, and rights relating to the ownership, operation, and maintenance of a water system and facilities serving the customers of the company, to a community services district formed pursuant to Part 1 (commencing with Section 61100) of Division 3 of Title 6 of the Government Code, is not a transfer subject to taxes imposed by this part if all of the following requirements are met: (a) The consideration for the transfer of all or substantially all of the assets is the assumption by the district of the company’s liability to provide service to the company’s stockholders. (b) The legal or beneficial title to all or substantially all of the company’s assets is vested in the district on or before January 1, 2008. (c) For the one-year period immediately prior to commencement of the transfer and continuing until the transfer is completed, 85 percent or more of the company’s income consists of amounts collected from stockholders for the sole purpose of meeting losses and expenses. (Added by Stats. 2002, Ch. 1108, Sec. 1. Effective September 29, 2002.)
  113. 24481.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. )

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    This section modifies Internal Revenue Code Section 383 so its special limits on certain excess credits also apply to credits under Chapter 3.5 and to the minimum tax credit under Section 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 8. Corporate Distributions and Adjustments [24451 - 24481] ( Chapter 8 repealed and added by Stats. 1991, Ch. 117, Sec. 82. ) ## 24481. Section 383 of the Internal Revenue Code, relating to special limitations on certain excess credits, etc., is modified to apply to credits allowable under Chapter 3.5 (commencing with Section 23601), and the minimum tax credit allowable under Section 23453. (Repealed and added by Stats. 1991, Ch. 117, Sec. 82. Effective July 16, 1991.)
  114. 24601.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 1. Adoption of Subchapter D of the Internal Revenue Code Relating to Deferred Compensation, etc. [24601 - 24602] ( Article 1 added by Stats. 1992, Ch. 698, Sec. 22. )

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    This section says specified federal deferred-compensation rules apply in California, subject to other 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 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 1. Adoption of Subchapter D of the Internal Revenue Code Relating to Deferred Compensation, etc. [24601 - 24602] ( Article 1 added by Stats. 1992, Ch. 698, Sec. 22. ) ## 24601. (a) Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to deferred compensation, etc., shall apply, except as otherwise provided. (b) Notwithstanding the date specified in paragraph (1) of subdivision (a) of Section 23051.5, Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to pension, profitsharing, stock bonus plans, etc., and Part III of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to rules relating to minimum funding standards and benefit limitations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes. (Amended by Stats. 2025, Ch. 231, Sec. 109. (SB 711) Effective October 1, 2025.)
  115. 24602.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 1. Adoption of Subchapter D of the Internal Revenue Code Relating to Deferred Compensation, etc. [24601 - 24602] ( Article 1 added by Stats. 1992, Ch. 698, Sec. 22. )

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    This section gives special California tax treatment to certain California qualified stock options that meet the stated 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 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 1. Adoption of Subchapter D of the Internal Revenue Code Relating to Deferred Compensation, etc. [24601 - 24602] ( Article 1 added by Stats. 1992, Ch. 698, Sec. 22. ) ## 24602. (a) In addition to the application of Part II (commencing with Section 421) of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to certain stock options, paragraphs (1), (2), and (3) of Section 421(a) of the Internal Revenue Code shall also apply to any California qualified stock option that is granted to an individual whose earned income from the corporation granting the California qualified stock option for the taxable year in which that option is exercised does not exceed forty thousand dollars ($40,000). In the event that the option does not meet the necessary qualifications, the option shall be treated as a nonqualified stock option. (b) For purposes of this section, “California qualified stock option” means a stock option that is issued and exercised pursuant to this section and that is designated by the corporation issuing the option as a California qualified stock option at the time the option is granted. (c) (1) This section shall apply only to those stock options that are issued on or after January 1, 1997, and before January 1, 2002, by a corporation to its employee and are exercised by the employee, while employed by the corporation that issued those stock options (or within three months thereof, or within one year thereof if permanently and totally disabled as defined in Section 22(e)(3) of the Internal Revenue Code), during the taxable year with respect to any class of shares, or combination thereof, issued by the corporation, to the extent that the number of shares transferable by the exercise of the options does not exceed a total of 1,000 and have a combined fair market value of less than one hundred thousand dollars ($100,000). The combined fair market value of any stock shall be determined as of the time the option with respect to that stock is granted. (2) Paragraph (1) shall be applied by taking options into account in the order in which they were granted. (d) In the case of a California qualified stock option, no amount shall be included in the gross income of the employee until the time of the disposition of the option (or the stock acquired upon exercise of the option). No deduction shall be allowed under Section 162 of the Internal Revenue Code to the employer on the grant or exercise of a California qualified stock option. (e) Subdivision (d) shall not apply to any stock option for which an election has been made under Section 83(b) of the Internal Revenue Code, relating to election to include in gross income in year of transfer. (Amended by Stats. 2000, Ch. 862, Sec. 172. Effective January 1, 2001.)
  116. 24611.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 2. Exceptions to Part I of Subchapter D of the Internal Revenue Code, Relating to Pension, Profit-Sharing, Stock Bonus Plans, etc. [24611 - 24612] ( Article 2 repealed and added by Stats. 1992, Ch. 698, Sec. 22. )

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    This section makes three tax-related federal code changes 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 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 2. Exceptions to Part I of Subchapter D of the Internal Revenue Code, Relating to Pension, Profit-Sharing, Stock Bonus Plans, etc. [24611 - 24612] ( Article 2 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## 24611. (a) Section 404(k) of the Internal Revenue Code, relating to dividends paid deduction, shall apply to taxable years beginning on or after January 1, 1995. (b) For taxable years beginning on or after January 1, 1998, Section 404(a)(9) of the Internal Revenue Code, relating to certain contributions to employee ownership plans, is modified to provide that Section 404(a)(9) of the Internal Revenue Code shall not apply to an “S corporation.” (c) For taxable years beginning on or after January l, 1998, Section 404(k)(1) of the Internal Revenue Code, relating to deduction for dividends on certain employer securities, is modified to provide that the phrase “a corporation” shall read “a C corporation.” (Amended by Stats. 2000, Ch. 862, Sec. 173. Effective January 1, 2001.)
  117. 24612.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 2. Exceptions to Part I of Subchapter D of the Internal Revenue Code, Relating to Pension, Profit-Sharing, Stock Bonus Plans, etc. [24611 - 24612] ( Article 2 repealed and added by Stats. 1992, Ch. 698, Sec. 22. )

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    This section says certain Internal Revenue Code provisions on liability for funding tax 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 12. Deferred Compensation, Etc. [24601 - 24612] ( Chapter 12 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## ARTICLE 2. Exceptions to Part I of Subchapter D of the Internal Revenue Code, Relating to Pension, Profit-Sharing, Stock Bonus Plans, etc. [24611 - 24612] ( Article 2 repealed and added by Stats. 1992, Ch. 698, Sec. 22. ) ## 24612. Sections 413(b)(6) and 413(c)(5) of the Internal Revenue Code, relating to liability for funding tax, shall not apply. (Added by Stats. 1992, Ch. 698, Sec. 22. Effective September 15, 1992.)
  118. 24631.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section says how a taxpayer’s income is computed for different taxable years and defines key accounting-period terms.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24631. (a) (1) For taxable years beginning prior to January 1, 2000, income shall be computed on the basis of the taxpayer’s income year. (2) For taxable years beginning on or after January 1, 2000 (other than the first taxable year beginning on or after that date), income shall be computed on the basis of the taxpayer’s taxable year. (3) As provided in paragraph (1) of subdivision (f) of Section 23151, paragraph (1) of subdivision (f) of Section 23181, and paragraph (1) of subdivision (c) of Section 23183, for the first taxable year beginning on or after January 1, 2000, income shall be computed on the basis of both the preceding income year and the current taxable year. (b) For purposes of this part, the term “income year” or “taxable year” (as applicable) means— (1) The taxpayer’s annual accounting period, if it is a calendar year or a fiscal year; (2) The calendar year, if subsection (g) applies; or (3) The period for which the return is made, if a return is made for a period of less than 12 months. (c) For purposes of this part, the term “annual accounting period” means the annual period on the basis of which the taxpayer regularly computes its income in keeping its books. (d) For purposes of this part, the term “calendar year” means a period of 12 months ending on December 31st. (e) For purposes of this part, the term “fiscal year” means a period of 12 months ending on the last day of any month other than December. In the case of any taxpayer who has made the election provided by subsection (f), the term means the annual period (varying from 52 to 53 weeks) so elected. (f) (1) A taxpayer who, in keeping its books, regularly computes its income on the basis of an annual period which varies from 52 to 53 weeks and ends always on the same day of the week and ends always— (A) On whatever date such same day of the week last occurs in a calendar month, or (B) On whatever date such same day of the week falls which is nearest to the last day of a calendar month, may (in accordance with the regulations prescribed under paragraph (3)) elect to compute its income for purposes of this part on the basis of such annual period. This paragraph shall apply to taxable years ending after December 31, 1954. (2) (A) In any case in which the effective date or the applicability of any provision of this part is expressed in terms of taxable years beginning or ending with reference to a specified date which is the first or last day of a month, a taxable year described in paragraph (1) shall be treated— (i) As beginning with the first day of the calendar month beginning nearest to the first day of such taxable year, or (ii) As ending with the last day of the calendar month ending nearest to the last day of such taxable year, as the case may be. (B) In the case of a change from or to a taxable year described in paragraph (1)— (i) If such change results in a short period (within the meaning of Section 24634) of 359 days or more, or less than seven days, Section 24636 shall not apply; (ii) If such change results in a short period of less than seven days, such short period shall, for purposes of this part, be added to and deemed a part of the following taxable year; and (iii) If such change results in a short period to which Section 24634 applies, the income for such short period shall be placed on an annual basis for purposes of such subsection by multiplying such income by 365 and dividing the result by the number of days in a short period, and the tax shall be the same part of the tax computed on the annual basis as the number of days in the short period is of 365 days. (3) The Franchise Tax Board shall prescribe such regulations as it deems necessary for the application of this subsection. (g) Except as provided in Section 24634 (relating to returns for periods of less than 12 months), the taxpayer’s taxable year shall be the calendar year if— (1) The taxpayer keeps no books; (2) The taxpayer does not have an annual accounting period; or (3) The taxpayer has an annual accounting period, but such period does not qualify as a fiscal year. (Amended by Stats. 2000, Ch. 862, Sec. 174. Effective January 1, 2001.)
  119. 24632.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    A taxpayer’s taxable year must match the taxable year used for federal income tax purposes, unless the Franchise Tax Board initiates or approves a different year, or Section 24634 requires 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24632. The taxable year of a taxpayer may not be different than the taxable year used for purposes of the Internal Revenue Code, unless initiated or approved by the Franchise Tax Board, or otherwise required under Section 24634. (Amended by Stats. 2000, Ch. 862, Sec. 175. Effective January 1, 2001.)
  120. 24633.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    A taxpayer’s new accounting period counts as its taxable year only if the Franchise Tax Board approves the 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24633. If a taxpayer changes its annual accounting period, the new accounting period shall become the taxpayer’s taxable year only if the change is approved by the Franchise Tax Board. For purposes of this part, if a taxpayer to whom Section 24631(g) applies adopts an annual accounting period (as defined in Section 24631(c)) other than a calendar year, the taxpayer shall be treated as having changed its annual accounting period. (Amended by Stats. 2000, Ch. 862, Sec. 176. Effective January 1, 2001.)
  121. 24633.5.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section spreads certain income from a short taxable year over four years, unless the taxpayer elects to include it all at once or the federal-treatment condition is not 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24633.5. (a) In the case of any “S corporation” or personal service corporation required to change its accounting period by the federal Tax Reform Act of 1986 (Public Law 99-514) as modified by Section 10206 of Public Law 100-203 and Section 1008(e) of Public Law 100-647, that change shall be treated as initiated by the “S corporation” or personal service corporation with the consent of the Franchise Tax Board. (b) With respect to any beneficiary, partner, or shareholder which is required to include the items from more than one taxable year of the trust, partnership, or corporation in any one taxable year, any income in excess of expenses for the short taxable year resulting from the change described in subdivision (a) or subdivision (a) of Section 17551.5 shall be taken into account ratably in each of the first four taxable years beginning after December 31, 1986, unless the beneficiary, partner, or shareholder elects to include all that income in the beneficiary’s, partner’s, or shareholder’s taxable year with or within which the trust’s, partnership’s, or corporation’s short taxable year ends. (c) The spreading of income over four years, as allowed by subdivision (b), shall not apply unless the taxpayer receives similar treatment for federal income tax purposes. (d) For taxable years beginning on or after January 1, 1987, each of the following shall apply: (1) The adjusted basis of any partner’s interest in a partnership or shareholder’s stock in an “S corporation” shall be determined as if all of the income to be taken into account ratably in the four taxable years referred to in subdivision (b) were included in gross income for the first of those taxable years. (2) If any interest in a partnership or stock in an “S corporation” is disposed of before the last taxable year in the spread period, all amounts which would be included in the gross income of the partner or shareholder for subsequent taxable years in the spread period under subdivision (b) and attributable to the interest or stock disposed of shall be included in gross income for the taxable year in which the disposition occurs. For purposes of the preceding sentence, the term “spread period” means the period consisting of the four taxable years referred to in subdivision (b). (Amended by Stats. 2000, Ch. 862, Sec. 177. Effective January 1, 2001.)
  122. 24634.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    A taxpayer must file a return for a short period in specified situations, including certain accounting-period changes, partial-year existence, tax-jeopardy terminations, or when a federal short-period return is required.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24634. (a) A return for a period of less than 12 months (referred to in this article as “short period”) shall be made under any of the following circumstances: (1) When the taxpayer, with the approval of the Franchise Tax Board, changes its annual accounting period. In such a case, the return shall be made for the short period beginning on the day after the close of the former taxable year and ending at the close of the day before the day designated as the first day of the new taxable year. (2) When the taxpayer is in existence during only part of what would otherwise be its taxable year, except if the taxpayer’s existence terminates as a result of a reorganization described in Section 368(a)(1)(F) of the Internal Revenue Code. (3) When the Franchise Tax Board terminates the taxpayer’s taxable year under Sections 19081 and 19082 (relating to tax in jeopardy). (4) When the taxpayer is required to make a federal return for a period of less than 12 months. (b) This section shall apply whether or not a federal return is required to be filed for a period of less than 12 months. (c) If a return is required to be filed under this section for a period of less than 12 months, that period shall be deemed to be a taxable year. (Amended by Stats. 2000, Ch. 862, Sec. 178. Effective January 1, 2001.)
  123. 24636.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section sets the tax method for short-period returns when a taxpayer changes accounting 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24636. (a) If a separate return is made by a taxpayer subject to the tax imposed by Chapter 2, under Section 24634 on account of a change in the accounting period the net income, computed on the basis of the period for which the separate return is made, referred to in this section as “the short period,” shall be placed on an annual basis by multiplying the amount thereof by 12, and dividing by the number of months in the short period. The Franchise Tax Board shall compute the amount of a tax on the income placed on such annual basis, and shall allow the offset provided for in Article 3 of Chapter 2, from such tax. The tax due under this section, which shall not be subject of offset, shall be such part of the tax, less the offset allowed, computed on such annual basis as the number of months in the short period is of 12 months. (b) If a taxpayer subject to the tax imposed by Chapter 2 establishes the amount of its net income for the period of 12 months beginning with the first day of the short period, computed as if such 12-month period were a taxable year, under the law applicable to such year, then the tax for the short period shall be reduced to an amount which is such part of the tax computed on the net income for such 12-month period as the net income computed on the basis of the short period is of the net income for the 12-month period. The taxpayer (other than a taxpayer to which the next sentence applies) shall compute the tax and file its return without the application of this section. If the taxpayer has disposed of substantially all its assets prior to the end of such 12-month period, then in lieu of the net income for such 12-month period there shall be used for the purposes of this section the net income for the 12-month period ending with the last day of the short period. The tax computed under this section shall in no case be less than the tax computed on the net income for the short period without placing such net income on an annual basis. The benefits of this section shall not be allowed unless the taxpayer, at such time as regulations prescribed hereunder require (but not after the time prescribed for the filing of the return for the first taxable year which ends on or after 12 months after the beginning of the short period), makes application therefor in accordance with such regulations. Such application, in case the return was filed without regard to this section, shall be considered a claim for credit or refund with respect to the amount by which the tax is reduced under this section. The Franchise Tax Board shall prescribe such regulations as it may deem necessary for the application of this section. (c) In the case of a taxpayer required to file a short period return pursuant to Section 24634, the alternative minimum tax shall be determined in accordance with Section 443(d) of the Internal Revenue Code. (Amended by Stats. 2000, Ch. 862, Sec. 179. Effective January 1, 2001.)
  124. 24637.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. )

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    For taxable years starting on or after January 1, 1987, Section 444 of the Internal Revenue Code applies, but Section 444(c)(1) does not.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Accounting Periods [24631 - 24637] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24637. For taxable years beginning on or after January 1, 1987, Section 444 of the Internal Revenue Code, relating to election of taxable year other than required taxable year, shall be applicable, except that Section 444(c)(1), relating to effect of election, shall not apply. (Amended by Stats. 2000, Ch. 862, Sec. 180. Effective January 1, 2001.)
  125. 24651.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. )

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    Taxpayers must compute income using their regular accounting method, unless a different method is allowed or the Franchise Tax Board requires another method; changing methods generally requires the Board’s consent.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24651. (a) Income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes its income in keeping its books. (b) If no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect income, the computation of income shall be made under such method as, in the opinion of the Franchise Tax Board, does clearly reflect income. (c) Subject to subdivisions (a) and (b) and Section 24654, a taxpayer may compute income under any of the following methods of accounting— (1) The cash receipts and disbursements method; (2) An accrual method; (3) Any other method permitted by this part; or (4) Any combination of the foregoing methods permitted under regulations prescribed by the Franchise Tax Board. (d) A taxpayer engaged in more than one trade or business may in computing income, use a different method of accounting for each trade or business. (e) Except as otherwise expressly provided in this part, a taxpayer who changes the method of accounting on the basis of which it regularly computes its income in keeping its books shall, before computing its income under the new method, secure the consent of the Franchise Tax Board. (f) If the taxpayer does not file with the Franchise Tax Board a request to change the method of accounting, the absence of the consent of the Franchise Tax Board to a change in the method of accounting shall not be taken into account for either of the following: (1) To prevent the imposition of any penalty, or the addition of any amount to tax, under this part. (2) To diminish the amount of that penalty or addition to tax. (Amended by Stats. 1987, Ch. 1139, Sec. 159. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)
  126. 24652.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section applies Internal Revenue Code rules on accounting for farming corporations, with special treatment for certain changes in accounting method and a limited taxpayer election for 2018–2019 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24652. (a) Section 447 of the Internal Revenue Code, relating to method of accounting for corporations engaged in farming, shall apply, except as otherwise provided. (b) (1) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 447 of the Internal Revenue Code, relating to method of accounting for corporations engaged in farming, shall apply, except as otherwise provided. (2) (A) Any change in method of accounting made pursuant to this subdivision shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board. (B) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to this subdivision. (C) Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision to taxable years beginning on or after January 1, 2018, and before January 1, 2019. (Amended by Stats. 2019, Ch. 39, Sec. 29. (AB 91) Effective July 1, 2019.)
  127. 24652.5.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. )

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    For certain corporations changing accounting methods, the section bars new suspense accounts under IRC Section 447(i) and requires existing suspense accounts to be reduced and included 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24652.5. (a) (1) Section 447(i)(3) of the Internal Revenue Code, relating to reduction in account if farming business contracts, shall not apply. (2) Section 447(i)(4) of the Internal Revenue Code, relating to income inclusions, shall not apply. (3) (A) No suspense account may be established under Section 447(i) of the Internal Revenue Code, relating to suspense account for family corporations, by any corporation required by Section 447 of the Internal Revenue Code, relating to method of accounting for corporations engaged in farming, to change its method of accounting for any income year ending after June 8, 1997. (B) (i) Each suspense account under Section 447(i) of the Internal Revenue Code shall be reduced (but not below zero) for each income year beginning after June 8, 1997, by an amount equal to the lesser of: (I) The applicable portion of the account. (II) Fifty percent of the net income of the corporation for the income year, or, if the corporation has no net income for that year, the amount of any net operating loss (as defined in Section 172 of the Internal Revenue Code and as modified for purposes of this part) for that income year. For purposes of the preceding sentence, the amount of net income and net operating loss shall be determined without regard to this paragraph. (ii) The amount of the applicable portion for any income year shall be reduced (but not below zero) by the amount of any reduction required for the income year under any other provision of Section 447(i) of the Internal Revenue Code. (iii) Any reduction in a suspense account under this paragraph shall be included in gross income for the income year of the reduction. (C) For purposes of subparagraph (B), the term “applicable portion” means, for any income year, the amount which would ratably reduce the amount in the account (after taking into account prior reductions) to zero over the period consisting of that income year and the remaining income years in those first 20 income years. (D) Any amount in the account as of the close of that 20th year referred to in subparagraph (C) shall be treated as the applicable portion for each succeeding year thereafter to the extent not reduced under this paragraph for any prior income year after the 20th year. (b) This section shall apply to income years ending on or after December 31, 1997. (c) This section shall not apply to income years beginning on or after January 1, 1998. (Amended (as added by Stats. 1998, Ch. 7) by Stats. 1998, Ch. 322, Sec. 89. Effective August 20, 1998.)
  128. 24652.6.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section lets a taxpayer elect to apply the section to certain older suspense accounts, and it says related accounting-method changes are treated as initiated by the taxpayer with the Franchise Tax Board’s consent.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24652.6. (a) For taxable years beginning on or after January 1, 2019, amendments made by Section 13102(e)(2) of the Tax Cuts and Jobs Act (Public Law 115-97), relating to preservation of suspense account rules with respect to any existing suspense accounts, shall apply to any suspense account existing as of the effective date of the act adding this subdivision that was not otherwise precluded by Section 24652.5. (b) (1) Any change in method of accounting made pursuant to this section shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board. (2) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to this section. (3) Notwithstanding paragraph (2), a taxpayer may elect to apply the provisions of this section to suspense accounts established before the effective date of the act adding this section. (Added by Stats. 2019, Ch. 39, Sec. 30. (AB 91) Effective July 1, 2019.)
  129. 24654.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section says California follows Section 448 of the Internal Revenue Code on limits for using the cash method of accounting, with specific exceptions and date-based 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Methods of Accounting [24651 - 24654] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24654. (a) Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, shall apply, except as otherwise provided. (b) For purposes of applying Section 448 of the Internal Revenue Code, Sections 801(d)(2), 801(d)(3), and 801(d)(5) of the Tax Reform Act of 1986 (Public Law 99-514), as modified by Section 1008(a) of Public Law 100-647, shall apply to each taxable year beginning on or after January 1, 1987. (c) (1) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, shall apply, except as otherwise provided. (2) (A) Any change in method of accounting made pursuant to this subdivision shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board. (B) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to this subdivision. (C) Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision to taxable years beginning on or after January 1, 2018, and before January 1, 2019. (Amended by Stats. 2019, Ch. 39, Sec. 31. (AB 91) Effective July 1, 2019.)
  130. 24661.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 451 of the Internal Revenue Code applies to the general rule for taxable year of inclusion, 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24661. Section 451 of the Internal Revenue Code, relating to the general rule for taxable year of inclusion, shall apply, except as otherwise provided. (Amended by Stats. 1994, Ch. 1243, Sec. 66. Effective September 30, 1994.)
  131. 24661.3.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Options to affect when certain production flexibility contract payments are included in income must be disregarded when determining 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24661.3. (a) (1) The options under Sections 112(d)(2) and 112(d)(3) of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. Sec. 7212(d)(2) and (3)), as in effect on October 12, 1998, shall be disregarded in determining the taxable year for which any payment under a production flexibility contract under Subtitle B of Title I of that act (as so in effect) is properly includable in gross income for purposes of this part, Part 10 (commencing with Section 17001), or Part 10.2 (commencing with Section 18401). (2) In order to provide farmers with the same tax treatment for all payments in years beginning before January 1, 2002, with respect to production flexibility contract payments as provided under federal law as modified by Public Law 105-277, this subdivision shall apply to taxable years ending after December 31, 1995. (b) Any option to accelerate the receipt of any payment under a production flexibility contract entered into on or after January 1, 2002, that is payable under the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. Sec. 7200 et seq.) as in effect on December 17, 1999, shall be disregarded in determining the taxable year for which that payment is properly includable in gross income for purposes of this part, Part 10 (commencing with Section 17001), or Part 10.2 (commencing with Section 18401). (Added by Stats. 2002, Ch. 35, Sec. 54. Effective May 8, 2002.)
  132. 24661.4.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 451(b) of the Internal Revenue Code does not apply to specified credit card fees.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24661.4. Section 451(b) of the Internal Revenue Code, relating to inclusion not later than for financial accounting purposes, shall not apply to specified credit card fees, as defined in Treasury Regulations Section 1.451-3(j)(2). (Added by Stats. 2025, Ch. 231, Sec. 110. (SB 711) Effective October 1, 2025.)
  133. 24661.5.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section changes a referenced federal tax rule by replacing one phrase with another.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24661.5. Section 451(g)(3) of the Internal Revenue Code, relating to special election rule, is modified by substituting the phrase “subdivision (b) of Section 24949.1” in lieu of the phrase “section 1033(e)(2)” contained therein. (Amended by Stats. 2025, Ch. 231, Sec. 111. (SB 711) Effective October 1, 2025.)
  134. 24661.6.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 451(k) of the Internal Revenue Code 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24661.6. Section 451(k) of the Internal Revenue Code, relating to special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 112. (SB 711) Effective October 1, 2025.)
  135. 24667.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section incorporates specified federal tax rules on installment sales and related provisions, and sets when those rules apply to certain taxable years and 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24667. (a) (1) Sections 453, 453A, and 453B of the Internal Revenue Code, relating to installment method, special rules for nondealers, and gain or loss on disposition of installment obligations, respectively, shall apply, except as otherwise provided. (2) Sections 811(c)(4), 811(c)(6), and 811(c)(7) of Public Law 99-514, as modified by Section 1008(f) of Public Law 100-647, shall apply to each taxable year beginning on or after January 1, 1988. (3) Section 812 of Public Law 99-514, relating to the disallowance of use of the installment method for certain obligations, as modified by Section 1008(g) of Public Law 100-647, shall apply to each taxable year beginning on or after January 1, 1988. (b) For purposes of subdivision (a), any references in the Internal Revenue Code to sections that have not been incorporated into this part by reference shall be deemed to refer to the corresponding section, if any, of this part. (c) In the case of any taxpayer who made sales under a revolving credit plan and was on the installment method under former Section 24667 or 24668 for the taxpayer’s last taxable year beginning before January 1, 1988, the provisions of this section shall be treated as a change in method of accounting for the first taxable year beginning after December 31, 1987, and all of the following shall apply: (1) That change shall be treated as initiated by taxpayer. (2) That change shall be treated as having been made with the consent of the Franchise Tax Board. (3) The period for taking into account adjustments under Article 6 (commencing with Section 24721) by reason of that change shall not exceed four years. (d) The repeal of Section 453C of the Internal Revenue Code by Section 10202(a) of Public Law 100-203, relating to repeal of the proportionate disallowance of the installment method, shall apply to dispositions on or after January 1, 1990, in taxable years beginning on or after January 1, 1990. (e) (1) In the case of any installment obligations to which Section 453(l)(2)(B) of the Internal Revenue Code applies, in lieu of the provisions of Section 453(l)(3)(A) of the Internal Revenue Code, the “tax” (as defined by subdivision (a) of Section 23036) for any taxable year for which payment is received on that obligation shall be increased by the amount of interest determined in the manner provided under Section 453(l)(3)(B) of the Internal Revenue Code. (2) Sections 10202 and 10204 of Public Law 100-203, are modified to provide for each of the following: (A) Section 10202 shall apply to dispositions in taxable years beginning on or after January 1, 1990. (B) Section 10204 shall apply to costs incurred in taxable years beginning on or after January 1, 1990. (C) Any adjustments required by Section 481 of the Internal Revenue Code shall be included in gross income as follows: (i) Fifty percent in the first taxable year beginning on or after January 1, 1990. (ii) Fifty percent in the second taxable year beginning on or after January 1, 1990. (f) (1) The amendments to Section 453A of the Internal Revenue Code made by Section 2004 of Public Law 100-647, relating to special rules for nondealers, shall apply to each taxable year beginning on or after January 1, 1990. (2) In the case of any installment obligation to which Section 453A of the Internal Revenue Code applies and which is outstanding as of the close of the taxable year, in lieu of the provisions of Section 453A(c)(1) of the Internal Revenue Code, the “tax” (as defined by subdivision (a) of Section 23036) for the taxable year shall be increased by the amount of interest determined in the manner provided under Section 453A(c)(2) of the Internal Revenue Code. (3) The provisions of Section 453A(c)(3)(B) of the Internal Revenue Code, relating to the maximum rate used in calculating the deferred tax liability, are modified to refer to the maximum rate of tax imposed under Section 23151, 23186, or 23802, whichever applies, in lieu of the maximum rate of tax imposed under Section 1 or 11 of the Internal Revenue Code. (Amended by Stats. 2002, Ch. 807, Sec. 19. Effective September 23, 2002.)
  136. 24668.1.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A taxpayer whose property is taken through requisition or condemnation may choose to have the related income handled under Section 24667 if the compensation arrangement meets the stated 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24668.1. Any taxpayer who disposes of property as a result of the exercise of the power of requisition or condemnation may, at his or her election, have the income derived from that disposition taken into account pursuant to Section 24667, if the taxpayer and the acquiring entity have, in conformity with Section 1263.015 of the Code of Civil Procedure or Section 15854.1 of the Government Code, contracted for the payment of compensation for the acquisition in a manner which satisfies the requirements of Section 24667. (Added by Stats. 1982, Ch. 1368, Sec. 4.)
  137. 24670.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section says certain Internal Revenue Code amendments 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24670. The amendments to Section 453B(e) of the Internal Revenue Code as enacted by Section 13512(b)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to the repeal of the small life insurance company deduction, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 113. (SB 711) Effective October 1, 2025.)
  138. 24672.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section requires unreported income from a property sale or other disposition to be included in the taxpayer’s last taxable year if the taxpayer stops being subject to the relevant corporation tax chapters, with an exception for certain transfers of installment obligations.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24672. (a) Where a taxpayer reports income arising from the sale or other disposition of property as provided in this article, and the entire income therefrom has not been reported prior to the year that the taxpayer ceases to be subject to the tax imposed by Chapter 2 (commencing with Section 23101) or Chapter 3 (commencing with Section 23501), the unreported income shall be included in the measure of the tax for the last year in which the taxpayer is subject to the tax imposed by Chapter 2 (commencing with Section 23101) or Chapter 3 (commencing with Section 23501). (b) Subdivision (a) shall not be applicable where the installment obligation is transferred pursuant to a reorganization (as defined in Section 368(a) of the Internal Revenue Code) to another taxpayer that is a party to the reorganization (as defined in Section 368(b) of the Internal Revenue Code) subject to tax under the same chapter as the transferor, or is transferred to any exempt nonprofit cemetery corporation as defined in Section 23701c of this code. (c) The determination of any deficiency resulting from this section shall be made under Article 3 (commencing with Section 19032) of Chapter 4 of Part 10.2, but the period of limitation under that article, and the accrual of interest under Article 6 (commencing with Section 19101) of Chapter 4 of Part 10.2, shall commence on the date the taxpayer ceases to be subject to the tax imposed by Chapter 2 (commencing with Section 23101) or Chapter 3 (commencing with Section 23501). (Amended by Stats. 1996, Ch. 952, Sec. 51. Effective January 1, 1997.)
  139. 24673.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

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    The Franchise Tax Board may require certain corporations to report contract income using percentage of completion if the contract in California will take more than a year, unless the corporation provides bond or other security.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24673. Where a corporation subject to the tax imposed by Chapter 2 is engaged in the performance of a contract in this State which will require more than a year to complete, the Franchise Tax Board may require that the income from the contract be reported on the basis of percentage of completion unless the corporation furnishes bond or other security guaranteeing the payment of a tax measured by the income received on the completion of the contract even though the corporation is not doing business in this State in the year subsequent to the year of completion. (Added by Stats. 1955, Ch. 938.)
  140. 24673.2.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section applies federal long-term contract accounting rules, with specified state-law adjustments and timing rules for certain contracts and 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24673.2. (a) Section 460 of the Internal Revenue Code, relating to special rules for long-term contracts, shall apply, except as otherwise provided. (b) (1) Section 804(d) of Public Law 99-514, relating to the effective date of modifications in the method of accounting for long-term contracts, shall apply to taxable years beginning on or after January 1, 1987. (2) In the case of a contract entered into after February 28, 1986, during a taxable year beginning before January 1, 1987, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between state and federal law for the taxable year in which the contract began. (c) (1) The amendments to Section 460 of the Internal Revenue Code made by Section 10203 of Public Law 100-203, relating to a reduction in the percentage of items taken into account under the completed contract method, shall apply to each taxable year beginning on or after January 1, 1990. (2) In the case of a contract entered into after October 13, 1987, during a taxable year beginning before January 1, 1990, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between state and federal law for each taxable year beginning prior to January 1, 1990. (d) (1) The amendments to Section 460 of the Internal Revenue Code made by Section 5041 of Public Law 100-647, relating to a reduction in the percentage of items taken into account under the completed contract method, shall apply to each taxable year beginning on or after January 1, 1990. (2) In the case of a contract entered into after June 20, 1988, during a taxable year beginning before January 1, 1990, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between state and federal law for each taxable year beginning prior to January 1, 1990. (e) (1) The amendments to Section 460 of the Internal Revenue Code made by Section 7621 of Public Law 101-239, relating to the repeal of the completed contract method of accounting for long-term contracts, shall apply to each taxable year beginning on or after January 1, 1990. (2) In the case of a contract entered into after July 10, 1989, during a taxable year beginning on or before January 1, 1990, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between state and federal law for each taxable year beginning prior to January 1, 1990. (f) For purposes of applying paragraphs (2) to (6), inclusive, of Section 460(b) of the Internal Revenue Code, relating to the look-back method, any adjustment to income computed under paragraph (2) of subdivision (b), (c), (d), or (e) shall be deemed to have been reported in the taxable year from which the adjustment arose, rather than the taxable year in which the contract was completed. (g) (1) For contracts entered into on or after the effective date of the act adding this subdivision, the amendments made by Section 13102(d) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 460 of the Internal Revenue Code, relating to special rules for long-term contracts, shall apply, except as otherwise provided. (2) For contracts entered into on or after the effective date of the act adding this subdivision, the amendments made by Section 13102(e)(3) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to exemption from percentage completion for long-term contracts, shall apply, expect as otherwise provided. (3) (A) Any change in method of accounting made pursuant to this paragraph shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board. (B) Section 13102(e)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) does not apply to this subdivision. (C) Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision, where otherwise allowed, to contracts entered into on or after January 1, 2018, in taxable years ending after January 1, 2018. (h) The amendments to Section 460(c)(6)(B)(ii) of the Internal Revenue Code made by Section 143(a)(2) and Section 143(b)(6)(I) of Public Law 114-113, relating to the special rule for federal long-term contracts, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 114. (SB 711) Effective October 1, 2025.)
  141. 24674.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A taxpayer may elect to treat certain increases in redemption price as income in the taxable year, and that election generally applies to all similar obligations and later years unless the Franchise Tax Board allows a different method.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24674. (a) If, in the case of a taxpayer owning any non-interest-bearing obligation issued at a discount and redeemable for fixed amounts increasing at stated intervals the increase in the redemption price of such obligation occurring in the taxable year does not (under the method of accounting used in computing its income) constitute income to it in such year, such taxpayer may, at its election made in its return for any taxable year, treat such increase as income received in such taxable year. If any such election is made with respect to any such obligation, it shall apply also to all such obligations owned by the taxpayer at the beginning of the first taxable year to which it applies and to all such obligations thereafter acquired by it and shall be binding for all subsequent taxable years, unless on application by the taxpayer the Franchise Tax Board permits it, subject to such conditions as the Franchise Tax Board deems necessary, to change to a different method. (b) In the case of any obligation— (1) Of the United States; or (2) Of a state, a territory, or a possession of the United States, or any political subdivision of any of the foregoing, or of the District of Columbia, which is issued on a discount basis and payable without interest at a fixed maturity date not exceeding one year from the date of issue, the amount of discount at which such obligation is originally sold shall not be considered to accrue until the date on which such obligation is paid at maturity, sold, or otherwise disposed of. (Amended by Stats. 2000, Ch. 862, Sec. 184. Effective January 1, 2001.)
  142. 24675.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    If a taxpayer receives compensatory damages from a U.S. patent infringement award in a taxable year, the tax on that income cannot exceed a specified installment-based comparison amount.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24675. If an amount representing compensatory damages is received or accrued by a taxpayer during a taxable year as the result of an award in a civil action for infringement of a patent issued by the United States, then the tax attributable to the inclusion of such amount in gross income for the taxable year shall not be greater than the aggregate of the increases in taxes which would have resulted if such amount had been included in gross income in equal installments for each month during which such infringement occurred. (Amended by Stats. 2000, Ch. 862, Sec. 185. Effective January 1, 2001.)
  143. 24676.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Prepaid subscription income must generally be included in gross income over the taxable years while the related delivery liability exists, with special rules when the liability ends or the taxpayer stops being subject to net-income 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24676. (a) Prepaid subscription income to which this section applies shall be included in gross income for the taxable years during which the liability described in subsection (d)(2) exists. (b) In the case of any prepaid subscription income to which this section applies— (1) If the liability described in subsection (d)(2) ends, then so much of such income as was not includable in gross income under subsection (a) for preceding taxable years shall be included in gross income for the taxable year in which the liability ends. (2) If the taxpayer ceases to be subject to tax measured by net income imposed under Chapter 2 (commencing at Section 23101) or Chapter 3 (commencing at Section 23501) of this part, then so much of such income as was not includable in gross income under subsection (a) for preceding taxable years shall be included in the measure of tax for the last year in which the taxpayer is subject to the tax measured by net income imposed under Chapter 2 or Chapter 3 of this part. (c) (1) This section shall apply to prepaid subscription income if and only if the taxpayer makes an election under this section with respect to the trade or business in connection with which such income is received. The election shall be made in such manner as the Franchise Tax Board may by regulations prescribe. No election may be made with respect to a trade or business if in computing net income the cash receipts and disbursements method of accounting is used with respect to such trade or business. (2) An election made under this section shall apply to all prepaid subscription income received in connection with the trade or business with respect to which the taxpayer has made the election; except that the taxpayer may, to the extent permitted under regulations prescribed by the Franchise Tax Board, include in gross income for the taxable year of receipt the entire amount of any prepaid subscription income if the liability from which it arose is to end within 12 months after the date of receipt. An election made under this section shall not apply to any prepaid subscription income received before the first taxable year for which the election is made. (3) (A) A taxpayer may, with the consent of the Franchise Tax Board, make an election under this section at any time. (B) A taxpayer may, without the consent of the Franchise Tax Board, make an election under this section for his first taxable year (i) which begins after December 31, 1960, and (ii) in which it receives prepaid subscription income in the trade or business. Such election shall be made not later than the time prescribed by law for filing the return for the taxable year (including extensions thereof) with respect to which such election is made. (4) An election under this section shall be effective for the taxable year with respect to which it is first made and for all subsequent taxable years, unless the taxpayer secures the consent of the Franchise Tax Board to the revocation of such election. For purposes of this part, the computation of net income under an election made under this section shall be treated as a method of accounting. (d) For purposes of this section— (1) The term “prepaid subscription income” means any amount (includable in gross income) which is received in connection with, and is directly attributable to, a liability which extends beyond the close of the taxable year in which such amount is received, and which is income from a subscription to a newspaper, magazine, or other periodical. (2) The term “liability” means a liability to furnish or deliver a newspaper, magazine, or other periodical. (3) Prepaid subscription income shall be treated as received during the taxable year for which it is includable in gross income under Section 24661 (without regard to this section). (e) Notwithstanding the provisions of this section, any taxpayer who has, for taxable years prior to the first taxable year to which this section applies, reported his income under an established and consistent method or practice of accounting for prepaid subscription income (to which this section would apply if an election were made) may continue to report his income for taxable years to which this part applies in accordance with such method or practice. (Amended by Stats. 2000, Ch. 862, Sec. 186. Effective January 1, 2001.)
  144. 24676.5.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A taxpayer on the accrual method may elect not to include certain returned-sale income in gross income, if the sale is a qualified sale and the return occurs before the merchandise return period ends.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24676.5. (a) A taxpayer who is on an accrual method of accounting may elect not to include in the gross income for the taxable year the income attributable to the qualified sale of any magazine, paperback, or record which is returned to the taxpayer before the close of the merchandise return period. (b) For purposes of this section— (1) The term “magazine” includes any other periodical. (2) The term “paperback” means any book which has a flexible outer cover and the pages of which are affixed directly to such outer cover. Such term does not include a magazine. (3) The term “record” means a disc, tape, or similar object on which musical, spoken, or other sounds are recorded. (4) If a taxpayer makes qualified sales of more than one category of merchandise in connection with the same trade or business, this section shall be applied as if the qualified sales of each such category were made in connection with a separate trade or business. For purposes of the preceding sentence, magazines, paperbacks, and records shall each be treated as a separate category of merchandise. (5) A sale of a magazine, paperback, or record is a qualified sale if— (A) At the time of sale, the taxpayer has a legal obligation to adjust the sales price of such magazine, paperback, or record if it is not resold, and (B) The sales price of such magazine, paperback, or record is adjusted by the taxpayer because of a failure to resell it. (6) The amount excluded under this section with respect to any qualified sale shall be the lesser of— (A) The amount covered by the legal obligation described in paragraph (5)(A), or (B) The amount of the adjustment agreed to by the taxpayer before the close of the merchandise return period. (7) (A) Except as provided in subparagraph (B), the term “merchandise return period” means, with respect to any taxable year— (i) In the case of magazines, the period of 2 months and 15 days first occurring after the close of the taxable year, or (ii) In the case of paperbacks and records, the period of 4 months and 15 days first occurring after the close of the taxable year. (B) The taxpayer may select a shorter period than the applicable period set forth in subparagraph (A). (C) Any change in the merchandise return period shall be treated as a change in the method of accounting. (8) As prescribed by the Franchise Tax Board, the taxpayer may substitute, for the physical return of magazines, paperbacks, or records required by subdivision (a), certification or other evidence that the magazine, paperback, or record has not been resold and will not be resold if such evidence— (A) Is in the possession of the taxpayer at the close of the merchandise return period, and (B) Is satisfactory to the Franchise Tax Board. (9) A repurchase by the taxpayer shall be treated as an adjustment of the sales price rather than as a resale. (c) (1) This section shall apply to qualified sales of magazines, paperbacks, or records, as the case may be, if and only if the taxpayer makes an election under this section with respect to the trade or business in connection with which such sales are made. An election under this section may be made without the consent of the Franchise Tax Board. The election shall be made in such manner as the Franchise Tax Board may prescribe and shall be made for any taxable year not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). (2) An election made under this section shall apply to all qualified sales of magazines, paperbacks, or records, as the case may be, made in connection with the trade or business with respect to which the taxpayer has made the election. (3) An election under this section shall be effective for the taxable year for which it is made and for all subsequent taxable years, unless the taxpayer secures the consent of the Franchise Tax Board to the revocation of such election. (4) Except to the extent inconsistent with the provisions of this section, for purposes of this subtitle, the computation of taxable income under an election made under this section shall be treated as a method of accounting. (d) In applying Section 24723 with respect to any election under this section which applies to magazines, the period of taking into account any decrease in taxable income resulting from the application of subdivision (b) of Section 24721 shall be the taxable year for which the election is made and the four succeeding taxable years. (e) (1) In the case of any election under this section which applies to paperbacks or records, in lieu of applying Sections 24721 through 24725, the taxpayer shall establish a suspense account for the trade or business for the taxable year for which the election is made. (2) The opening balance of the account described in paragraph (1) for the first taxable year to which the election applies shall be the largest dollar amount of returned merchandise which would have been taken into account under this section for any of the three immediately preceding taxable years if this section had applied to such preceding three taxable years. This paragraph and paragraph (3) shall be applied by taking into account only amounts attributable to the trade or business for which such account is established. (3) At the close of each taxable year the suspense account shall be— (A) Reduced by the excess (if any) of— (i) The opening balance of the suspense account for the taxable year, over (ii) The amount excluded from gross income for the taxable year under subdivision (a), or (B) Increased (but not in excess of the initial opening balance) by the excess (if any) of— (i) The amount excluded from gross income for the taxable year under subdivision (a), over (ii) The opening balance of the account for the taxable year. (4) (A) In the case of any reduction under paragraph (3)(A) in the account for the taxable year, an amount equal to such reduction shall be excluded from gross income for such taxable year. (B) In the case of any increase under paragraph (3)(B) in the account for the taxable year, an amount equal to such increase shall be included in gross income for such taxable year. If the initial opening balance exceeds the dollar amount of returned merchandise which would have been taken into account under subdivision (a) for the taxable year preceding the first taxable year for which the election is effective if this section had applied to such preceding taxable year, then an amount equal to the amount of such excess shall be included in gross income for such first taxable year. (5) The application of this subdivision with respect to a taxpayer which is a party to any transaction with respect to which there is nonrecognition of gain or loss to any party to the transaction by reason of Chapter 8 shall be determined as prescribed by the Franchise Tax Board. (6) The amendments to this section made by the 1979–80 Regular Session of the Legislature shall apply to taxable years beginning on or after October 1, 1979. (Amended by Stats. 2000, Ch. 862, Sec. 187. Effective January 1, 2001.)
  145. 24677.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    A corporation may claim certain tax treatment for damage awards tied to breach of contract or fiduciary duty, and subdivision (a) applies only if the damage amount is at least $3,000.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24677. (a) If an amount representing damages is received or accrued by a corporation during a taxable year as a result of an award in a civil action for breach of contract or breach of a fiduciary duty or relationship, then the tax attributable to the inclusion in gross income for the taxable year of that part of the amount that would have been received or accrued by the corporation in a prior taxable year or years but for the breach of contract, or breach of a fiduciary duty or relationship, shall not be greater than the aggregate of the increases in taxes that would have resulted had that part been included in gross income for that prior taxable year or years. (b) A corporation in computing the tax shall be entitled to deduct all credits and deductions for depletion, depreciation, and other items to which it would have been entitled, had the income been received or accrued by the corporation in the year during which it would have received or accrued it, except for the breach of contract or for the breach of fiduciary duty or relationship. The credits, deductions, or other items referred to in the prior sentence, attributable to property, shall be allowed only with respect to that part of the award which represents the corporation’s share of income from the actual operation of the property. (c) Subdivision (a) shall not apply unless the amount representing damage is three thousand dollars ($3,000) or more. (Amended by Stats. 2000, Ch. 862, Sec. 188. Effective January 1, 2001.)
  146. 24678.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    If a corporation receives damages from certain antitrust-related civil actions, the tax attributable to including that amount in gross income for the taxable year cannot be greater than the tax increases that would have resulted from spreading the amount over the injury 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24678. (a) If an amount representing damages is received or accrued during a taxable year as a result of an award in, or settlement of, a civil action brought under Section 4 of the act entitled “An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,” approved October 15, 1914 (commonly known as the Clayton Act), for injuries sustained by a corporation in its business or property by reason of anything forbidden in the antitrust laws, then the tax attributable to the inclusion of that amount in gross income for the taxable year shall not be greater than the aggregate of the increases in taxes which would have resulted if that amount had been included in gross income in equal installments for each month during the period in which the injuries were sustained by the corporation. (b) This section shall apply to taxable years ending after June 23, 1961, but only with respect to amounts received or accrued after that date as a result of awards or settlements made after that date. (Amended by Stats. 2000, Ch. 862, Sec. 189. Effective January 1, 2001.)
  147. 24679.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For certain corporation tax rules, ignore a part of a month unless it is more than half a month; if it is, treat it as a full month.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Year of Inclusion [24661 - 24679] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24679. For purposes of Sections 24675 through 24678, a fractional part of a month shall be disregarded unless it amounts to more than half a month, in which case it should be considered as a month. (Added by Stats. 1961, Ch. 846.)
  148. 24681.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 461 of the Internal Revenue Code applies to the general rule for the taxable year of deduction, 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24681. Section 461 of the Internal Revenue Code, relating to the general rule for taxable year of deduction, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 68. Effective October 6, 1993.)
  149. 24682.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 464 of the Internal Revenue Code applies to deductions for certain farming expenses, 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24682. Section 464 of the Internal Revenue Code, relating to limitations on deductions for certain farming expenses, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 69. Effective October 6, 1993.)
  150. 24685.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section requires certain taxpayers to treat a change in accounting method as initiated by them and with Franchise Tax Board consent, and to spread related adjustments over two taxable years, or a shorter ratable period if the adjustment period is under two 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24685. (a) In the case of any taxpayer who elected to have former Section 24685 apply for that taxpayer’s last taxable year beginning prior to January 1, 1990, and who is required to change its method of accounting by reason of the amendments made by the act adding this section, each of the following shall apply: (1) The change shall be treated as initiated by the taxpayer. (2) The change shall be treated as having been made with the consent of the Franchise Tax Board. (3) The net amount of adjustments required by Chapter 13 (commencing with Section 24631) to be taken into account by the taxpayer: (A) Shall be reduced by the balance in the suspense account, under former Section 24685 as of the close of the last taxable year beginning before January 1, 1990, and (B) Shall be taken into account over the two taxable year period beginning with the taxable year following that last taxable year, as follows: The percentage to be In the case of the: taken into account is: 1st Year 50 2nd Year 50 (b) Notwithstanding subparagraph (B) of paragraph (3) of subdivision (a), if the period during which the adjustments are required to be taken into account under Chapter 13 (commencing with Section 24631) is less than two years, those adjustments shall be taken into account ratably over the shorter period. (Amended by Stats. 2000, Ch. 862, Sec. 190. Effective January 1, 2001.)
  151. 24685.5.

    ## 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section says a tax-law amendment applies to taxable years beginning on or after January 1, 2002, and sets how affected taxpayers must treat required accounting-method changes.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24685.5. (a) The amendment made by Section 7001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206) to Section 404(a)(11) of the Internal Revenue Code, regarding determinations relating to deferred compensation, shall apply to taxable years beginning on or after January 1, 2002. (b) In the case of any taxpayer required by enactment of this section to change its method of accounting, for that taxpayer’s first taxable year beginning on or after January 1, 2002, each of the following shall apply for purposes of this part, Part 10 (commencing with Section 17001), and Part 10.2 (commencing with Section 18401): (1) The change shall be treated as initiated by the taxpayer. (2) The change shall be treated as made with the consent of the Franchise Tax Board. (3) The net amount of the adjustments required to be taken into account by the taxpayer under Chapter 13 (commencing with Section 24631) shall be taken into account ratably over the three taxable year period beginning with that taxpayer’s first taxable year beginning on or after January 1, 2002. (Added by Stats. 2002, Ch. 35, Sec. 56. Effective May 8, 2002.)
  152. 24688.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 467 of the Internal Revenue Code applies here, except where 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24688. Section 467 of the Internal Revenue Code, relating to certain payments for the use of property or services, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 70. Effective October 6, 1993.)
  153. 24689.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 468 of the Internal Revenue Code applies here, except where 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24689. Section 468 of the Internal Revenue Code, relating to special rules for mining and solid waste reclamation and closing costs, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 71. Effective October 6, 1993.)
  154. 24690.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes the federal special rules for nuclear decommissioning costs apply, with exceptions, and changes how the Nuclear Decommissioning Reserve Fund is taxed.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24690. (a) The provisions of Section 468A of the Internal Revenue Code, relating to special rules for nuclear decommissioning costs, shall be applicable, except as otherwise provided. (b) The deduction allowed for the 1987 taxable year may include contributions to a fund that are required to bring the balance in that fund up to the balance it would have contained if allowable contributions had been made for the 1985 and 1986 taxable years. (c) The provisions of Section 468A(e)(2) of the Internal Revenue Code, which impose a tax upon the gross income of the Nuclear Decommissioning Reserve Fund, shall be modified for purposes of this part to provide that a tax shall be imposed upon the gross income of that fund for any taxable year at a rate equal to the rate in effect for that taxable year under Section 23501. The income tax imposed upon the gross income of the fund by this section is in lieu of any other tax imposed by this part or Part 10 (commencing with Section 17001) upon or measured by that income. (Amended by Stats. 2000, Ch. 862, Sec. 191. Effective January 1, 2001.)
  155. 24691.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 465 of the Internal Revenue Code 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24691. Section 465 of the Internal Revenue Code, relating to limitations of deductions to the amount at risk, shall apply. (Added by Stats. 1988, Ch. 11, Sec. 78. Effective February 19, 1988. Applicable to income years beginning on or after January 1, 1987, by Sec. 95 of Ch. 78.)
  156. 24692.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes Internal Revenue Code Section 469 apply in California, with specific exceptions and 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24692. (a) Section 469 of the Internal Revenue Code, relating to passive activity losses and credits limited, shall apply, except as otherwise provided. (b) Section 469(c)(7) of the Internal Revenue Code, relating to special rules for taxpayers in real property business, shall not apply. (c) Section 469(d)(2) of the Internal Revenue Code, relating to passive activity credits, is modified to refer to the following credits: (1) The credit for research expenses allowed by Section 23609. (2) The credit for clinical testing expenses allowed by Section 23609.5. (3) The credit for low-income housing allowed by Section 23610.5. (4) The credit for certain wages paid (targeted jobs) allowed by Section 23621. (d) Section 469(g)(1)(A) of the Internal Revenue Code is modified to provide that if all gain or loss realized on the disposition of the taxpayer’s entire interest in any passive activity (or former passive activity) is recognized, the excess of— (1) The sum of— (A) Any loss from that activity for that taxable year (determined after application of Section 469(b) of the Internal Revenue Code), plus (B) Any loss realized on that disposition, over (2) Net income or gain for the taxable year from all passive activities (determined without regard to losses described in paragraph (1)), shall be treated as a loss which is not from a passive activity. (e) (1) For purposes of applying Section 469(i) of the Internal Revenue Code, relating to the twenty-five thousand dollars ($25,000) offset for rental real estate activities, the dollar limitation specified in Section 469(i)(2) of the Internal Revenue Code, relating to dollar limitation, for the credit allowed under Section 23610.5, relating to low-income housing, shall not apply. (2) The amendments made to this subdivision by the act adding this paragraph shall apply to each taxable year beginning on or after January 1, 2020. (f) Section 502 of the Tax Reform Act of 1986 (Public Law 99-514) shall apply. (g) For each taxable year beginning on or after January 1, 1987, Section 10212 of Public Law 100-203, relating to treatment of publicly traded partnerships under Section 469 of the Internal Revenue Code, shall apply, except as otherwise provided. (h) The amendments to Section 469(k) of the Internal Revenue Code made by Section 2004 of Public Law 100-647, relating to separate application of section in case of publicly traded partnerships, shall apply to each taxable year beginning on or after January 1, 1990, except as otherwise provided. (Amended by Stats. 2019, Ch. 159, Sec. 27. (AB 101) Effective July 31, 2019.)
  157. 24693.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Designated settlement funds are subject to a tax on gross income at the rate in effect for the taxable year under Section 23501, 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24693. (a) Section 468B of the Internal Revenue Code, relating to special rules for designated settlement funds, shall apply, except as otherwise provided. (b) Section 468B(b) of the Internal Revenue Code, which imposes a tax upon the designated settlement fund, shall be modified for purposes of this part to provide that a tax shall be imposed upon the gross income of the fund at a rate equal to the rate in effect for the taxable year under Section 23501. The income tax imposed upon the gross income of the fund by this section is in lieu of any other tax imposed by this part or Part 10 (commencing with Section 17001) upon or measured by that income. (Amended by Stats. 1993, Ch. 877, Sec. 73. Effective October 6, 1993.)
  158. 24694.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 470 of the Internal Revenue Code applies here, unless another rule in this provision 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 4. Year of Deduction [24681 - 24694] ( Article 4 added by Stats. 1955, Ch. 938. ) ## 24694. Section 470 of the Internal Revenue Code, relating to limitation on deductions allocable to property used by governments or other tax-exempt entities, shall apply, except as otherwise provided. (Added by Stats. 2005, Ch. 691, Sec. 71. Effective October 7, 2005.)
  159. 24701.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 5. Inventories [24701 - 24710] ( Article 5 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes federal inventory rules apply, with stated exceptions, and lets a taxpayer elect to apply subdivision (b) to 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 5. Inventories [24701 - 24710] ( Article 5 added by Stats. 1955, Ch. 938. ) ## 24701. (a) Section 471 of the Internal Revenue Code, relating to the general rule for inventories, shall apply, except as otherwise provided. (b) (1) For taxable years beginning on or after January 1, 2019, amendments made by Section 13102(c) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 471 of the Internal Revenue Code, relating to the general rule for inventories, shall apply, except as otherwise provided. (2) (A) Any change in method of accounting made pursuant to this subdivision shall be treated for purposes of applying Section 24721, as initiated by the taxpayer and made with the consent of the Franchise Tax Board. (B) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to this subdivision. (C) Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision to taxable years beginning on or after January 1, 2018, and before January 1, 2019. (c) Section 472 of the Internal Revenue Code, relating to last-in, first-out inventories, shall apply, except as otherwise provided. (Amended by Stats. 2019, Ch. 39, Sec. 33. (AB 91) Effective July 1, 2019.)
  160. 24708.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 5. Inventories [24701 - 24710] ( Article 5 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 474 of the Internal Revenue Code applies here, except where 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 5. Inventories [24701 - 24710] ( Article 5 added by Stats. 1955, Ch. 938. ) ## 24708. Section 474 of the Internal Revenue Code, relating to simplified dollar-value LIFO method for certain small businesses, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 75. Effective October 6, 1993.)
  161. 24710.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 5. Inventories [24701 - 24710] ( Article 5 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section applies federal mark-to-market rules to certain California taxpayers and limits separate state elections in several 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 5. Inventories [24701 - 24710] ( Article 5 added by Stats. 1955, Ch. 938. ) ## 24710. (a) For each taxable year beginning on or after January 1, 1997, Section 475 of the Internal Revenue Code, relating to mark to market accounting method for securities dealers, shall apply, except as otherwise provided. (b) Section 13233(c)(2)(C) of the Revenue Reconciliation Act of 1993 (Public Law 103-66), relating to the effective date for changes in the mark to market accounting method for securities dealers, is modified to provide that the amount taken into account under Section 481 of the Internal Revenue Code of 1986 shall be taken into account ratably over the five-taxable-year period beginning with the first taxable year beginning on or after January 1, 1997. (c) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 475(e) of the Internal Revenue Code, relating to election of mark to market for dealers in commodities, to have Section 475 of the Internal Revenue Code apply, Section 475 of the Internal Revenue Code shall apply to that dealer in commodities for state purposes, a separate election for state purposes 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. (2) If a taxpayer fails to make, or has not previously made, an election for federal purposes under Section 475(e) of the Internal Revenue Code, relating to election of mark to market for dealers in commodities, to have Section 475 of the Internal Revenue Code apply, an election under Section 475(e) of the Internal Revenue Code shall not be allowed for state purposes, Section 475 of the Internal Revenue Code shall not apply to that dealer in commodities for state purposes, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5. (d) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 475(f)(1) of the Internal Revenue Code, relating to election of mark to market for traders in securities, to have Section 475 of the Internal Revenue Code apply to a trade or business, Section 475 of the Internal Revenue Code shall apply to that trader in securities for state purposes with respect to that trade or business, a separate election for state purposes with respect to that trade or business 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. (2) If a taxpayer fails to make, or has not previously made, an election for federal purposes under Section 475(f)(1) of the Internal Revenue Code, relating to election of mark to market for traders in securities, to have Section 475 of the Internal Revenue Code apply to a trade or business, an election under Section 475(f)(1) of the Internal Revenue Code shall not be allowed for state purposes with respect to that trade or business, Section 475 of the Internal Revenue Code shall not apply to that trader in securities for state purposes with respect to that trade or business, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5. (e) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 475(f)(2) of the Internal Revenue Code, relating to election of mark to market for traders in commodities, to have Section 475 of the Internal Revenue Code apply to a trade or business, Section 475 of the Internal Revenue Code shall apply to that trader in commodities for state purposes with respect to that trade or business, a separate election for state purposes with respect to that trade or business shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5, and the federal election with respect to that trade or business shall be binding for purposes of this part. (2) If a taxpayer fails to make, or has not previously made, an election for federal purposes under Section 475(f)(2) of the Internal Revenue Code, relating to election of mark to market for traders in commodities, to have Section 475 of the Internal Revenue Code apply to a trade or business, an election under Section 475(f)(2) of the Internal Revenue Code shall not be allowed for state purposes with respect to that trade or business, Section 475 of the Internal Revenue Code shall not apply to that trader in commodities for state purposes with respect to that trade or business, and a separate election for state purposes with respect to that trade or business shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5. (f) (1) An election under Section 475(e) or (f) of the Internal Revenue Code made for federal purposes with respect to a taxable year beginning before January 1, 1998, shall be treated as having been made for state purposes with respect to the first taxable year beginning on or after January 1, 1998. (2) Section 1001(d)(4)(B) of the Taxpayer Relief Act of 1997 (Public Law 105-34), relating to the effective date for election of mark to market by securities traders and traders and dealers in commodities, is modified to provide that the requirement for timely identification shall be treated as timely made for state purposes if that identification is treated as timely made for federal purposes, and the amount taken into account under Section 481 of the Internal Revenue Code of 1986 shall be taken into account ratably over the four-taxable-year period beginning with the first taxable year beginning on or after January 1, 1998. (g) In the case of any taxpayer required to change its method of accounting by the enactment of the act amending this subdivision, incorporating by reference to the amendments made by Section 7003 of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206) to Section 475 of the Internal Revenue Code, each of the following shall apply for purposes of this part, Part 10 (commencing with Section 17001), or Part 10.2 (commencing with Section 18401): (1) The change shall be treated as initiated by the taxpayer. (2) The change shall be treated as made with the consent of the Franchise Tax Board. (3) The taxpayer shall not be required to change its method of accounting until the first taxable year beginning on or after January 1, 2002. (4) The net amount of the adjustments required to be taken into account by the taxpayer under Chapter 13 (commencing with Section 24631) shall be taken into account ratably over the three taxable year period beginning with that taxpayer’s first taxable year beginning on or after January 1, 2002. (Amended by Stats. 2002, Ch. 35, Sec. 57. Effective May 8, 2002.)
  162. 24721.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 6. Adjustments Required by Changes in Method [24721 - 24726] ( Article 6 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section makes Internal Revenue Code Section 481 apply, except as otherwise provided, and says Section 481(d) 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 6. Adjustments Required by Changes in Method [24721 - 24726] ( Article 6 added by Stats. 1955, Ch. 938. ) ## 24721. (a) Section 481 of the Internal Revenue Code, relating to adjustments required by changes in method of accounting, shall apply, except as otherwise provided. (b) Section 481(d) of the Internal Revenue Code, relating to adjustments attributable to conversion from “S” corporation to “C” corporation, shall not apply. (Amended by Stats. 2025, Ch. 231, Sec. 115. (SB 711) Effective October 1, 2025.)
  163. 24725.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 6. Adjustments Required by Changes in Method [24721 - 24726] ( Article 6 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 24725 says Internal Revenue Code Section 482 applies here, except where Article 1.5 (starting with Section 25110 of Chapter 17) 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 6. Adjustments Required by Changes in Method [24721 - 24726] ( Article 6 added by Stats. 1955, Ch. 938. ) ## 24725. The provisions of Section 482 of the Internal Revenue Code, relating to allocation of income and deductions among taxpayers, shall be applicable, except as provided in Article 1.5 (commencing with Section 25110) of Chapter 17. (Amended by Stats. 1992, Ch. 1295, Sec. 35. Effective January 1, 1993.)
  164. 24726.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 6. Adjustments Required by Changes in Method [24721 - 24726] ( Article 6 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Section 483 of the Internal Revenue Code applies here, 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 13. Accounting Periods and Methods of Accounting [24631 - 24726] ( Chapter 13 added by Stats. 1955, Ch. 938. ) ## ARTICLE 6. Adjustments Required by Changes in Method [24721 - 24726] ( Article 6 added by Stats. 1955, Ch. 938. ) ## 24726. Section 483 of the Internal Revenue Code, relating to interest on certain deferred payments, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 77. Effective October 6, 1993.)
  165. 24831.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14. Natural Resources [24831- 24831.] ( Chapter 14 repealed and added by Stats. 1987, Ch. 1139, Sec. 197. )

    Verify source ↗

    This section makes the federal natural-resources rule apply, but removes specified federal depletion rules for certain oil shale, coal, and oil and gas well provisions for taxable years beginning on or after January 1, 2024.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14. Natural Resources [24831- 24831.] ( Chapter 14 repealed and added by Stats. 1987, Ch. 1139, Sec. 197. ) ## 24831. (a) Subchapter I of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to natural resources, shall apply, except as otherwise provided. (b) For taxable years beginning on or after January 1, 2024, Section 613(b)(2)(B) of the Internal Revenue Code, in the case of oil shale, shall not apply. (c) For taxable years beginning on or after January 1, 2024, Section 613(b)(4) of the Internal Revenue Code, relating to 10 percent, in the case of coal, shall not apply. (d) For taxable years beginning on or after January 1, 2024, Section 613A of the Internal Revenue Code, relating to limitations on percentage depletion in the case of oil and gas wells, shall not apply. (Amended by Stats. 2024, Ch. 34, Sec. 38. (SB 167) Effective June 27, 2024.)
  166. 24870.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

    Verify source ↗

    Subchapter M applies to regulated investment companies and real estate investment trusts, except where this part 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24870. Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to regulated investment companies and real estate investment trusts, shall apply, except as otherwise provided in this part. (Amended by Stats. 2015, Ch. 359, Sec. 37. (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.)
  167. 24871.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    Regulated investment companies are subject to certain California taxes, with net income treated as “investment company income,” and several federal tax provisions are modified or 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24871. (a) (1) Section 852(b)(1) of the Internal Revenue Code, relating to imposition of tax on regulated investment companies, shall not apply. (2) Every regulated investment company shall be subject to the taxes imposed under Chapter 2 (commencing with Section 23101) and Chapter 3 (commencing with Section 23501), except that its “net income” shall be equal to its “investment company income,” as defined in subdivision (b). (3) (A) Section 851(d)(2)(C)(i)(I) of the Internal Revenue Code is modified by substituting “$12,500” for “$50,000.” (B) Section 851(d)(2)(C)(i)(II) of the Internal Revenue Code is modified by substituting the phrase “the rate of tax specified in Section 23151” for the phrase “the highest rate of tax specified in section 11” contained therein. (C) Section 851(d)(2)(C)(iii) of the Internal Revenue Code, relating to administrative provisions, is modified by substituting the phrase “Article 3 of Part 10.2 (commencing with Section 19031), a tax imposed by this subparagraph shall be treated as a tax with respect to which the deficiency procedures of such article apply” for the phrase “subtitle F, a tax imposed by this subparagraph shall be treated as an excise tax with respect to which the deficiency procedures of such subtitle apply” contained therein. (D) Section 851(i)(2) of the Internal Revenue Code, relating to imposition of tax on failures, shall not apply. (b) “Investment company income” means investment company taxable income, as defined in Section 852(b)(2) of the Internal Revenue Code, modified as follows: (1) Section 852(b)(2)(A) of the Internal Revenue Code, relating to an exclusion for net capital gain, does not apply. (2) Section 852(b)(2)(B) of the Internal Revenue Code, relating to net operating losses, is modified to deny the deduction allowed under Sections 24416 and 24416.1, in lieu of denying the deduction allowed by Section 172 of the Internal Revenue Code. (3) In lieu of the provision of Section 852(b)(2)(C) of the Internal Revenue Code, relating to special deductions for corporations, no deduction shall be allowed under Sections 24402, 24406, 24410, and 25106. (4) The deduction for dividends paid, under Section 852(b)(2)(D) of the Internal Revenue Code, is modified to allow capital gain dividends and exempt interest dividends (to the extent that interest is included in gross income under this part) to be included in the computation of the deduction. (c) Section 852(b)(3)(A) of the Internal Revenue Code, relating to imposition of tax, shall not apply. (d) (1) Section 852(b)(5) of the Internal Revenue Code, relating to exempt-interest dividends, is modified by substituting the phrase “that, when held by an individual, the interest therefrom is exempt from taxation by this state” for the phrase “described in section 103(a)” contained therein. (2) Section 852(b)(5)(A)(iv)(V) of the Internal Revenue Code, relating to exempt interest, is modified by substituting the phrase “on obligations that, if held by an individual, is exempt from taxation by this state, over the amounts disallowed as deductions under subdivision (b) of Section 24360 or Section 24425” for the phrase “excludable from gross income under section 103(a) over the amounts disallowed as deductions under sections 265 and 171(a)(2)” contained therein. (3) Section 852(b)(5)(B) of the Internal Revenue Code, relating to treatment of exempt-interest dividends by shareholders, shall not apply. (e) Section 854 of the Internal Revenue Code, relating to limitations applicable to dividends received from regulated investment companies, is modified to refer to Sections 24402, 24406, 24410, and 25106, in lieu of Section 243 of the Internal Revenue Code. (f) Section 852(g)(1)(A) of the Internal Revenue Code is modified by substituting the phrase “subdivision (a) of Section 17145” for the phrase “the first sentence of subsection (b)(5)” contained therein. (Amended by Stats. 2015, Ch. 359, Sec. 38. (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.)
  168. 24872.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    This section sets special California tax rules for real estate investment 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24872. (a) A real estate investment trust shall be deemed to have satisfied the distribution requirements of Section 857(a)(1) of the Internal Revenue Code for purposes of this part if it satisfies the distribution requirements of Section 857(a)(1) of the Internal Revenue Code for federal purposes. (b) (1) Section 857(b)(1) of the Internal Revenue Code, relating to imposition of tax on real estate investment trusts, shall not apply. (2) Every real estate investment trust shall be subject to the taxes imposed under Chapter 2 (commencing with Section 23101) and Chapter 3 (commencing with Section 23501), except that its “net income” shall be equal to its “real estate investment trust income,” as defined in subdivision (c). (c) “Real estate investment trust income” means real estate investment company taxable income, as defined in Section 857(b)(2) of the Internal Revenue Code, modified as follows: (1) In lieu of Section 857(b)(2)(A) of the Internal Revenue Code, relating to special deductions for corporations, no deduction shall be allowed under Section 24402. (2) Section 857(b)(2)(D) of the Internal Revenue Code, relating to an exclusion for an amount equal to the net income from foreclosure property, shall not apply. (3) Section 857(b)(2)(E) of the Internal Revenue Code, relating to a deduction for an amount equal to the tax imposed in the case of failure to meet certain requirements for the taxable year, shall not apply. (4) Section 857(b)(2)(F) of the Internal Revenue Code, relating to an exclusion for an amount equal to any net income derived from prohibited transactions, shall not apply. (d) Section 857(b)(3) of the Internal Revenue Code, relating to an alternative tax in case of capital gains, shall not apply. (e) Section 857(b)(4)(A) of the Internal Revenue Code, relating to the imposition of tax on income from foreclosure property, shall not apply. (f) Section 857(b)(5) of the Internal Revenue Code, relating to the imposition of tax in case of failure to meet certain requirements, shall not apply. (g) Section 857(b)(6)(A) of the Internal Revenue Code, relating to the imposition of tax on income from prohibited transactions, shall not apply. (h) Section 857(b)(7) of the Internal Revenue Code, relating to income from redetermined rents, redetermined deductions, and excess interest, shall not apply. (i) Section 857(c) of the Internal Revenue Code, relating to restrictions applicable to dividends received from real estate investment trusts, is modified to refer to Sections 24402, 24406, 24410, and 25106, in lieu of Section 243 of the Internal Revenue Code. (j) The amendments to this section by Chapter 878 of the Statutes of 1993 are clarifications of legislative intent and shall apply to taxable years beginning on or after January 1, 1987. (Amended by Stats. 2005, Ch. 691, Sec. 73. Effective October 7, 2005.)
  169. 24872.4.

    ## 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    This section changes how certain REIT elections and revocations are treated for state tax purposes, and blocks separate state elections 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24872.4. (a) Section 856(d)(7)(C)(ii) of the Internal Revenue Code is modified by substituting the phrase “if received by an organization described in subdivision (b) of Section 17651 of Part 10 or Section 23731” for the phrase “if received by an organization described in section 511(a)(2).” (b) (1) An election under Section 856(e)(5) of the Internal Revenue Code for federal income tax purposes is treated for purposes of this part as an election made by the real estate investment trust under Section 856(e)(5) of the Internal Revenue Code for state purposes and a separate election under paragraph (3) of subdivision (e) of Section 23051.5 is not allowed. (2) Any revocation of an election under Section 856(e)(5) of the Internal Revenue Code for federal income tax purposes is treated for purposes of this part as a revocation of the election made by the real estate investment trust under Section 856(e)(5) of the Internal Revenue Code for state purposes and a separate election under paragraph (3) of subdivision (e) of Section 23051.5 is not allowed with respect to the property for any subsequent taxable year. (3) If the real estate investment trust fails to make an election under Section 856(e)(5) of the Internal Revenue Code for federal income tax purposes with respect to any property, that property may not be treated for purposes of this part as foreclosure property, an election under Section 856(e)(5) of the Internal Revenue Code for state purposes with respect to that property is not allowed, and a separate election under paragraph (3) of subdivision (e) of Section 23051.5 is not allowed with respect to that property. (Amended by Stats. 2003, Ch. 185, Sec. 38. Effective January 1, 2004.)
  170. 24872.6.

    ## 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    A corporation, trust, or association that is or is not a federal REIT must be treated the same way for this part for the same 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24872.6. (a) A corporation, trust, or association that is a real estate investment trust for any taxable year for federal purposes under Part II (commencing with Section 856) of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code (as applicable for federal purposes for the taxable year) shall be a real estate investment trust for purposes of this part for the same taxable year. (b) A corporation, trust, or association that is not a real estate investment trust for any taxable year for federal purposes under Part II (commencing with Section 856) of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code (as applicable for federal purposes for the taxable year) shall not be a real estate investment trust for purposes of this part for the same taxable year. (c) (1) An election to be a real estate investment trust for federal purposes under Section 856(c)(1) of the Internal Revenue Code (as applicable for federal purposes for the taxable year) shall be treated, for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part, as an election to be a real estate investment trust for state purposes for the same taxable year and a separate election under paragraph (3) of subdivision (e) of Section 23051.5 shall not be allowed. (2) (A) The termination or revocation of an election described in paragraph (1) for federal purposes under Section 856(g) of the Internal Revenue Code (as applicable for federal purposes for the taxable year) shall be treated, for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part, as a termination or revocation, as the case may be, of an election described in paragraph (1) for state purposes and a separate termination or revocation of an election described in paragraph (1) under paragraph (3) of subdivision (e) of Section 23051.5 shall not be allowed. (B) Section 856(g)(5)(C) of the Internal Revenue Code shall not apply. (3) (A) Except as provided in subparagraph (B), this subdivision shall apply to any election to be a real estate investment trust that is effective for federal purposes for taxable years beginning on or after January 1, 2001. (B) Subparagraph (B) of paragraph (2) shall apply to taxable years beginning on or after January 1, 2005. (Amended by Stats. 2017, Ch. 176, Sec. 4. (AB 1719) Effective January 1, 2018.)
  171. 24872.7.

    ## 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    A real estate investment trust must pay a state penalty equal to the federal penalty when certain federal penalties are imposed, unless a reasonable-cause 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24872.7. (a) (1) (A) Whenever a penalty is imposed for federal purposes under Section 857(f)(2)(A) or (B) of the Internal Revenue Code, whichever is applicable, it shall be deemed that the real estate investment trust has failed to comply with the requirements of Section 857(f)(2)(A) or (B) of the Internal Revenue Code, whichever is applicable, for state purposes for that taxable year and a penalty equal to the penalty determined for federal purposes under Section 857(f)(2)(A) or (B) of the Internal Revenue Code, whichever is applicable, shall be imposed and shall be paid on notice and demand and in the same manner as tax. (B) No penalty shall be imposed under this paragraph if the Secretary of the Treasury, under Section 857(f)(2)(D) of the Internal Revenue Code, has determined that the failure to comply is due to reasonable cause and not to willful neglect. (2) (A) Whenever a penalty is imposed for federal purposes under Section 857(f)(2)(C) of the Internal Revenue Code it shall be deemed that the real estate investment trust has failed to comply with the requirements of Section 857(f)(2)(C) of the Internal Revenue Code for state purposes for that taxable year and an additional penalty equal to the penalty determined for federal purposes under Section 857(f)(2)(C) of the Internal Revenue Code shall be imposed and shall be paid on notice and demand and in the same manner as tax. (B) No penalty shall be imposed under this paragraph if the Secretary of the Treasury, under Section 857(f)(2)(D) of the Internal Revenue Code, has determined that the failure to comply is due to reasonable cause and not to willful neglect. (b) This section shall apply to taxable years beginning after August 5, 1997. (c) 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. 2000, Ch. 862, Sec. 198. Effective January 1, 2001.)
  172. 24873.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    Section 860F(a) 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24873. Section 860F(a) of the Internal Revenue Code, relating to the 100 percent tax on prohibited transactions, shall not apply. (Added by Stats. 1992, Ch. 698, Sec. 26. Effective September 15, 1992.)
  173. 24874.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    A REMIC is subject to the minimum franchise tax under Section 23153.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24874. A real estate mortgage investment conduit (REMIC) shall be subject to the minimum franchise tax imposed under Section 23153. (Added by Stats. 1992, Ch. 698, Sec. 26. Effective September 15, 1992.)
  174. 24875.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    A FASIT is subject to the minimum franchise tax under Section 23153, and those taxes are treated as subject to the deficiency procedures in Chapter 4 of Part 10.2.

    ## 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24875. (a) A financial asset securitization investment trust (FASIT) shall be subject to the minimum franchise tax imposed under Section 23153. (b) For purposes of Chapter 4 of Part 10.2 (commencing with Section 19001) the taxes imposed by this section shall be treated as taxes to which the deficiency procedures of that article apply. (Amended by Stats. 2011, Ch. 296, Sec. 286. (AB 1023) Effective January 1, 2012.)
  175. 24876.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. )

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    This section says two specified federal tax-code amendments 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 14.5. Regulated Investment Companies, Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and Financial Asset Securitization Investment Trusts [24870 - 24876] ( Heading of Chapter 14.5 amended by Stats. 1997, Ch. 611, Sec. 92. ) ## 24876. (a) The amendments made to Section 860E(a)(3)(B) of the Internal Revenue Code by Section 2303(a)(2)(C) of Public Law 116-136, relating to conforming amendments, shall not apply. (b) The amendments made to Section 860E(a)(4) of the Internal Revenue Code by Section 10101(a)(4)(B)(ii) of Public Law 117-169, relating to conforming adjustments, shall not apply. (Added by Stats. 2025, Ch. 231, Sec. 116. (SB 711) Effective October 1, 2025.)
  176. 24901.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. )

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    This section tells how to calculate gain or loss on the sale or other disposition of property, and how to compute the amount 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24901. (a) The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in Section 24911 for determining gain, and the loss shall be the excess of the adjusted basis provided in that section for determining loss over the amount realized. (b) The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. In determining the amount realized— (1) There shall not be taken into account any amount received as reimbursement for real property taxes which are treated under Section 24346 as imposed on the purchaser, and (2) There shall be taken into account amounts representing real property taxes which are treated under Section 24346 as imposed on the corporation if those taxes are to be paid by the purchaser. (c) In the case of a sale or exchange of property, the extent to which the gain or loss determined under this section shall be recognized for purposes of this part shall be determined under Section 24902. (d) Nothing in this section shall be construed to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which that payment is received. (e) (1) In determining gain or loss from the sale or other disposition of a term interest in property, that portion of the adjusted basis of that interest which is determined pursuant to Sections 24914 and 24915 (to the extent that the adjusted basis is a portion of the entire adjusted basis of the property) shall be disregarded. (2) For purposes of paragraph (1), the term “term interest in property” means— (A) A life interest in property, (B) An interest in property for a term of years, or (C) An income interest in a trust. (3) Paragraph (1) shall not apply to a sale or other disposition which is a part of a transaction in which the entire interest in property is transferred to any person or persons. (Amended by Stats. 1997, Ch. 605, Sec. 99. Effective January 1, 1998.)
  177. 24902.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. )

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    Except where this part provides אחרת, the full amount of gain or loss from a sale or exchange of property must be recognized.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24902. Except as otherwise provided in this part, on the sale or exchange of property the entire amount of the gain or loss, determined under Section 24901, shall be recognized. (Added by Stats. 1955, Ch. 938.)
  178. 24905.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. )

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    California tax law adopts Internal Revenue Code section 988 for certain foreign currency transactions, except where this section says otherwise, but excludes section 988(a)(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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24905. (a) Section 988 of the Internal Revenue Code, relating to treatment of certain foreign currency transactions, shall apply, except as otherwise provided. (b) Section 988(a)(3) of the Internal Revenue Code, relating to source, shall not apply. (Amended by Stats. 1993, Ch. 877, Sec. 79. Effective October 6, 1993.)
  179. 24905.5.

    ## 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    For taxable years beginning on or after January 1, 1997, the referenced federal amendments on mark-to-market accounting for securities dealers 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 1. Computation of Gain or Loss [24901 - 24905.5] ( Article 1 added by Stats. 1955, Ch. 938. ) ## 24905.5. For each taxable year beginning on or after January 1, 1997, the amendments made to Section 988 of the Internal Revenue Code by Section 13223 of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to mark to market accounting method for securities dealers, shall apply. (Amended by Stats. 2000, Ch. 862, Sec. 199. Effective January 1, 2001.)
  180. 24911.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section sets how to calculate the adjusted basis used to determine gain or loss when property is sold or otherwise disposed of.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24911. (a) The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis (determined under Section 24912) or other applicable sections of Chapter 15 (relating to gain or loss on disposition of property) and Chapter 8 (relating to corporate distributions and adjustments), adjusted as provided in Sections 24916 and 24917. (b) If a deduction is allowable under Section 24357 (relating to charitable contributions) by reason of a sale, then the adjusted basis for determining the gain from such sale shall be that portion of the adjusted basis which bears the same ratio to the adjusted basis as the amount realized bears to the fair market value of the property. (Amended by Stats. 1971, 1st Ex. Sess., Ch. 1.)
  181. 24912.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    Property basis is generally its cost, with specific exceptions, and real property basis excludes certain real property taxes treated as imposed on a corporation.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24912. The basis of property shall be the cost of the property, except as otherwise provided in Chapter 8 (commencing with Section 24451), relating to corporate distributions and adjustments, and this chapter. The cost of real property shall not include any amount in respect of real property taxes which are treated under Section 24346 as imposed on a corporation. (Amended by Stats. 1997, Ch. 605, Sec. 100. Effective January 1, 1998.)
  182. 24913.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    If property should have been included in the last inventory, its basis is the last inventory 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24913. If the property should have been included in the last inventory, the basis shall be the last inventory value thereof. (Added by Stats. 1955, Ch. 938.)
  183. 24914.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section sets the tax basis for property acquired by gift or certain trusts, and gives the Franchise Tax Board power to obtain missing facts and use fair market value if those facts cannot be found.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24914. (a) If the property was acquired by gift after December 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that if such basis (adjusted for the period before the date of the gift as provided in Sections 24916 and 24917) is greater than the fair market value of the property at the time of the gift, then for the purpose of determining loss the basis shall be such fair market value. If the facts necessary to determine the basis in the hands of the donor or the last preceding owner are unknown to the donee, the Franchise Tax Board shall, if possible, obtain such facts from such donor or last preceding owner, or any other person cognizant thereof. If the Franchise Tax Board finds it impossible to obtain such facts, the basis in the hands of such donor or last preceding owner shall be the fair market value of such property as found by the Franchise Tax Board as of the date or approximate date at which, according to the best information that the Franchise Tax Board is able to obtain, such property was acquired by such donor or last preceding owner. (b) If the property was acquired after December 31, 1920, by a transfer in trust (other than by a transfer in trust by a gift, bequest, or devise), the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer under the law applicable to the year in which the transfer was made. (Added by Stats. 1955, Ch. 938.)
  184. 24915.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

    Verify source ↗

    This section sets how to calculate the tax basis of property received by gift, including adjustments for federal gift tax 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24915. (a) If— (1) The property is acquired by gift on or after the date of the enactment of this section, the basis shall be the basis determined under Section 24914, increased (but not above the fair market value of the property at the time of the gift) by the amount of federal gift tax paid with respect to such gift, or (2) The property was acquired by gift before the date of the enactment of this section and has not been sold, exchanged, or otherwise disposed of before such date, the basis of the property shall be increased on such date by the amount of federal gift tax paid with respect to such gift, but such increase shall not exceed an amount equal to the amount by which the fair market value of the property at the time of the gift exceeded the basis of the property in the hands of the donor at the time of the gift. (b) For purposes of subsection (a), the amount of federal gift tax paid with respect to any gift is an amount which bears the same ratio to the amount of gift tax paid under Chapter 12 of Subtitle B of the Internal Revenue Code of 1954 with respect to all gifts made by the donor for the calendar year in which such gift is made as the amount of such gift bears to the taxable gifts (as defined in Section 2503(a) of the Internal Revenue Code of 1954 but computed without the deduction allowed by Section 2521 of the Internal Revenue Code of 1954) made by the donor during such calendar year. For purposes of the preceding sentence, the amount of any gift shall be the amount included with respect to such gift in determining (for the purposes of Section 2503(a) of the Internal Revenue Code of 1954) the total amount of gifts made during the calendar year, reduced by the amount of any deduction allowed with respect to such gift under Section 2522 of the Internal Revenue Code of 1954 (relating to charitable deduction) or under Section 2523 of the Internal Revenue Code of 1954 (relating to marital deduction). (c) For purposes of subsection (a), where the donor and his spouse elected, under Section 2513 of the Internal Revenue Code of 1954 to have the gift considered as made one-half by each, the amount of gift tax paid with respect to such gift under Chapter 12 of Subtitle B of the Internal Revenue Code of 1954 shall be the sum of the amounts of tax paid with respect to each half of such gift (computed in the manner provided in subsection (b)). (d) For purposes of Section 24917, an increase in basis under subsection (a) shall be treated as an adjustment under Section 24916. (e) With respect to any property acquired by gift before 1955, references in this section to any provision of this part shall be deemed to refer to the corresponding provision of the Federal Internal Revenue Code of 1939 or prior revenue laws which was effective for the year in which such gift was made. (Added by Stats. 1961, Ch. 846.)
  185. 24916.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section requires property basis adjustments for specified capital items and sets out several exceptions and special rules for depreciation, amortization, depletion, stock distributions, bonds, loaned property, and certain deferred expenses.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24916. Proper adjustment with regard to the property shall in all cases be made as follows: (a) For expenditures, receipts, losses, or other items properly chargeable to capital account. However, no adjustment shall be made for any of the following: (1) Sales or use tax paid or incurred in connection with the acquisition of property for which a tax credit is claimed pursuant to Section 23612.2. (2) Taxes or other carrying charges described in Section 24426, or for expenditures described in Sections 24364 and 24369 for which deductions have been taken in determining net income for the taxable year or any prior taxable year. (b) For exhaustion, wear and tear, obsolescence, amortization, and depletion: (1) In the case of corporations subject to the tax imposed by Chapter 2 (commencing with Section 23101), to the extent sustained prior to January 1, 1928, and to the extent allowed (but not less than the amount allowable) under this part, except that no deduction shall be made for amounts in excess of the amount which would have been allowable had depreciation not been computed on the basis of January 1, 1928, value and amounts in excess of the adjustments required by Section 113(b)(1)(B) of the Federal Revenue Act of 1938 for depletion prior to January 1, 1932. (2) In the case of a taxpayer subject to the tax imposed by Chapter 3 (commencing with Section 23501), to the extent sustained prior to January 1, 1937, and for periods thereafter to the extent allowed (but not less than the amount allowable) under the provisions of this part. (3) If a taxpayer has not claimed an amortization deduction for an emergency facility, the adjustment under paragraph (1) shall be made only to the extent ordinarily provided under Sections 24349 and 24372. (c) In the case of stock (to the extent not provided for in the foregoing subdivisions) for the amount of distributions previously made which, under the law applicable to the year in which the distribution was made, either were tax free or were applicable in reduction of basis (not including distributions made by a corporation, which was classified as a personal service corporation under the provisions of the Federal Revenue Act of 1918 or 1921, out of its earnings or profits which were taxable in accordance with the provisions of Section 218 of the Federal Revenue Act of 1918 or 1921). (d) (1) In the case of corporations subject to the tax imposed by Chapter 2 (commencing with Section 23101), in the case of any bond, as defined in Section 24363, to the extent of the deductions allowable pursuant to Section 24360 with respect thereto. (2) In the case of taxpayers subject to the tax imposed by Chapter 3 (commencing with Section 23501), in the case of any bond, as defined in Section 24363, the interest on which is wholly exempt from the tax imposed by this part, to the extent of the amortizable bond premium disallowable as a deduction pursuant to subdivision (b) of Section 24360, and in the case of any other bond, as defined in Section 24363, to the extent of the deductions allowable pursuant to subdivision (a) of Section 24360 (or the amount applied to reduce interest payments under paragraph (2) of subdivision (a) of Section 24363.5) with respect thereto. (3) In the case of property pledged to the Commodity Credit Corporation, to the extent of the amount received as a loan from the Commodity Credit Corporation and treated by the taxpayer as income for the year in which received pursuant to Section 24273, and to the extent of any deficiency on that loan with respect to which the taxpayer has been relieved from liability. (e) For amounts allowed as deductions as deferred expenses under Section 616(b) of the Internal Revenue Code, relating to certain expenditures in the development of mines, and resulting in a reduction of the taxpayer’s tax, but not less than the amounts allowable under that section for the taxable year and prior years. (f) For amounts allowable as deductions as deferred expenses under Section 617(a) of the Internal Revenue Code, relating to certain exploration expenditures, and resulting in a reduction of the taxpayer’s tax, but not less than the amounts allowable under that section for the taxable year and prior years. (g) For amounts allowed as deductions as deferred expenses under subdivision (a) of Section 24366, relating to research and experimental expenditures, and resulting in a reduction of the corporation’s taxes under this part, but not less than the amounts allowable under that section for the taxable year and prior years. (h) For amounts allowed as deductions under Sections 24356.2, 24356.3, and 24356.4. (i) (1) To the extent provided in Section 179A(e)(6)(A) of the Internal Revenue Code, relating to basis reduction for clean-fuel vehicles and certain refueling property. (2) This subdivision shall apply to property placed in service after June 30, 1993, without regard to taxable year. (j) In the case of property the acquisition of which resulted under Section 1044 of the Internal Revenue Code, relating to rollover of publicly traded securities gain into specialized small business investment companies, in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in Section 1044(d) of the Internal Revenue Code, relating to basis adjustments. (Amended by Stats. 2000, Ch. 862, Sec. 200. Effective January 1, 2001.)
  186. 24916.2.

    ## 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

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    No adjustment is allowed for certain abandonment fees or tax recoupment fees under 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24916.2. Notwithstanding the provisions of Section 24916 no adjustment shall be made for (a) abandonment fees paid in respect of property on which the open-space easement is terminated under Section 51061 or 51093 of the Government Code or (b) tax recoupment fees paid under Section 51142 of the Government Code. (Amended by Stats. 1977, Ch. 853.)
  187. 24917.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

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    If a corporation’s property has a substituted basis, it must make the Section 24916 adjustments after first making similar adjustments for the prior holding period. The same rule applies to a series of substituted bases.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24917. Whenever it appears that the basis of property in the hands of the corporation is a substituted basis, then the adjustments provided in Section 24916 shall be made after first making in respect of that substituted basis proper adjustments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined. A similar rule shall be applied in the case of a series of substituted bases. (Amended by Stats. 1997, Ch. 605, Sec. 102. Effective January 1, 1998.)
  188. 24918.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

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    This section applies IRC Section 1017 on discharge of indebtedness, with a special rule for affiliated groups and unitary groups, and it applies certain 1993 amendments only for specified post-January 1, 1996 discharges and 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24918. (a) Section 1017 of the Internal Revenue Code, relating to discharge of indebtedness, shall apply, except as otherwise provided. References to affiliated groups which file a consolidated return under Section 1501 of the Internal Revenue Code shall be treated as meaning members of the same unitary group which file a combined report under Article 1 (commencing with Section 25101) of Chapter 17. (b) The amendments to Section 1017 of the Internal Revenue Code made by Section 13150 of the Revenue and 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. (Amended by Stats. 2000, Ch. 862, Sec. 201. Effective January 1, 2001.)
  189. 24919.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. )

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    A lessor may not increase or reduce the basis or adjusted basis of real property because of income that is excluded under Section 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 2. Basis for Computation of Gain or Loss [24911 - 24919] ( Article 2 added by Stats. 1955, Ch. 938. ) ## 24919. Neither the basis nor the adjusted basis of any portion of real property shall, in the case of the lessor of such property, be increased or diminished on account of income derived by the lessor in respect of such property and excludable from gross income under Section 24309 (relating to improvements by lessee on lessor’s property). If an amount representing any part of the value of real property attributable to buildings erected or other improvements made by a lessee in respect of such property was included in gross income of the lessor for any taxable year beginning before January 1, 1942, the basis of each portion of such property shall be properly adjusted for the amount so included in gross income. (Added by Stats. 1955, Ch. 938.)
  190. 24941.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    Section 1031 of the Internal Revenue Code applies to exchanges of property held for productive use or investment, except where 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24941. Section 1031 of the Internal Revenue Code, relating to exchange of property held for productive use or investment, shall apply, except as otherwise provided. (Amended by Stats. 1993, Ch. 877, Sec. 81. Effective October 6, 1993.)
  191. 24941.5.

    ## 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section says the referenced federal amendments apply to certain real-property exchanges, but only subject to the listed timing 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24941.5. (a) The amendments made by Section 13303(a) and (b) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 1031 of the Internal Revenue Code, relating to Exchange of real property held for productive use or investment, shall apply, subject to subdivision (b). (b) (1) This section shall apply to exchanges completed after January 10, 2019. (2) This section shall not apply to an exchange where the property to be disposed of by the taxpayer in the exchange is disposed of by that taxpayer on or before January 10, 2019, or where the property to be received by the taxpayer in the exchange is received by that taxpayer on or before January 10, 2019. (Repealed and added by Stats. 2019, Ch. 39, Sec. 35. (AB 91) Effective July 1, 2019.)
  192. 24942.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    A corporation generally does not recognize gain or loss when it receives money or other property for its stock, including treasury stock, or for certain option and securities futures contract events involving its 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24942. (a) No gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for stock (including treasury stock) of that corporation. No gain or loss shall be recognized by a corporation with respect to any lapse or acquisition of an option, or with respect to a securities futures contract (as defined in Section 1234B of the Internal Revenue Code, to buy or sell its stock (including treasury stock). (b) For basis of property acquired by a corporation in certain exchanges for its stock, see Sections 24552 to 24554, inclusive. (Amended by Stats. 2002, Ch. 35, Sec. 58. Effective May 8, 2002.)
  193. 24943.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section says no gain is recognized when property is compulsorily or involuntarily converted into similar property. If the property is converted into money, no gain is recognized only if the money is promptly and in good faith used to buy similar property, buy control of a corporation owning that property, or create a replacement fund, subject to the stated pre-1953 condition.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24943. If property (as a result of its destruction in whole or in part, theft, seizure, or requisition or condemnation or threat or imminence thereof) is compulsorily or involuntarily converted— (a) Into property similar or related in service or use to the property so converted, no gain shall be recognized. (b) Into money, and the disposition of the converted property occurred before January 1, 1953, no gain shall be recognized if such money is forthwith in good faith, under regulations prescribed by the Franchise Tax Board, expended in the acquisition of other property similar or related in service or use to the property so converted, or in the acquisition of control of a corporation owning such other property, or in the establishment of a replacement fund. If any part of the money is not so expended, the gain shall be recognized to the extent of the money which is not so expended (regardless of whether such money is received in one or more taxable years and regardless of whether or not the money which is not so expended constitutes gain). For purposes of this subsection and Section 24944, the term “disposition of the converted property” means the destruction, theft, seizure, requisition, or condemnation of the converted property, or the sale or exchange of such property under threat or imminence of requisition or condemnation. For purposes of this section and Section 24944, the term “control” means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. (Amended by Stats. 2000, Ch. 862, Sec. 202. Effective January 1, 2001.)
  194. 24944.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section generally requires gain to be recognized when property is involuntarily converted, but allows limited deferral if replacement property or qualifying stock is bought and the taxpayer elects the treatment.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24944. If property (as a result of its destruction in whole or in part, theft, seizure, or requisition or condemnation or threat or imminence thereof) is compulsorily or involuntarily converted into money or into property not similar or related in service or use to the converted property, and the disposition of the converted property (as defined in subdivision (b) of Section 24943) occurred after December 31, 1952, the gain (if any) shall be recognized except to the extent hereinafter provided in this section: (a) If the taxpayer during the period specified in subdivision (b), for the purpose of replacing the property so converted, purchases other property similar or related in service or use to the property so converted, or purchases stock in the acquisition of control of a corporation owning such other property, at the election of the taxpayer the gain shall be recognized only to the extent that the amount realized upon such conversion (regardless of whether such amount is received in one or more taxable years) exceeds the cost of such other property or such stock. Such election shall be made at such time and in such manner as the Franchise Tax Board may by regulations prescribe. For purposes of this subdivision— (1) No property or stock acquired before the disposition of the converted property shall be considered to have been acquired for the purpose of replacing such converted property unless held by the taxpayer on the date of such disposition; and (2) The taxpayer shall be considered to have purchased property or stock only if, but for the provisions of Section 24947, the unadjusted basis of such property or stock would be its cost within the meaning of Section 24912. (b) The period referred to in subdivision (a) shall be the period beginning with the date of the disposition of the converted property, or the earliest date of the threat or imminence of requisition or condemnation of the converted property, whichever is the earlier, and ending— (1) Two years after the close of the first taxable year in which any part of the gain upon the conversion is realized; or (2) Subject to such terms and conditions as may be specified by the Franchise Tax Board, at the close of such later date as the Franchise Tax Board may designate on application by the taxpayer. Such application shall be made at such time and in such manner as the Franchise Tax Board may by regulations prescribe. (c) For purposes of this section and Section 24943, replacement property “similar or related in service or use” shall include, in the case of a nonprofit water utility corporation, personal property used for the transmission or storage of water. (Amended by Stats. 2000, Ch. 862, Sec. 203. Effective January 1, 2001.)
  195. 24945.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    If the taxpayer made the Section 24944(a) election, the deficiency assessment period lasts at least four years from the Franchise Tax Board’s notice of replacement or intent not to replace, and the Board may assess before that period ends.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24945. If a taxpayer has made the election provided in Section 24944(a), then— (a) The statutory period for the assessment of any deficiency, for any taxable year in which any part of the gain on such conversion is realized, attributable to such gain shall not expire prior to the expiration of four years from the date the Franchise Tax Board is notified by the taxpayer (in such manner as the Franchise Tax Board may by regulations prescribe) of the replacement of the converted property or of an intention not to replace; and (b) Such deficiency may be assessed before the expiration of such four-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment. (Amended by Stats. 2000, Ch. 862, Sec. 204. Effective January 1, 2001.)
  196. 24946.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    If the taxpayer makes the Section 24944(a) election and the property or stock was bought before the last taxable year in which gain is realized, related deficiencies for earlier years may be assessed within the same assessment period that applies to the last 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24946. If the election provided in Section 24944(a) is made by the taxpayer and such other property or such stock was purchased before the beginning of the last taxable year in which any part of the gain upon such conversion is realized, any deficiency, to the extent resulting from such election, for any taxable year ending before such last taxable year may be assessed (notwithstanding the provisions of Section 19057 or the provisions of any other law or rule of law which would otherwise prevent such assessment) at any time before the expiration of the period within which a deficiency for such last taxable year may be assessed. (Amended by Stats. 2000, Ch. 862, Sec. 205. Effective January 1, 2001.)
  197. 24947.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    This section says Internal Revenue Code section 1033(b) applies here, with stated substitutions in subdivisions (b) through (d) and any other exceptions provided by 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24947. (a) Section 1033(b) of the Internal Revenue Code, relating to basis of property acquired through involuntary conversion, shall apply, except as otherwise provided. (b) Section 1033(b)(1) of the Internal Revenue Code is modified by substituting “subdivision (a) of Section 24943” in lieu of “subsection (a)(1).” (c) Section 1033(b)(2) of the Internal Revenue Code is modified by substituting “subdivision (b) of Section 24943” in lieu of “subsection (a)(2).” (d) Section 1033(b)(3) of the Internal Revenue Code is modified by substituting “subdivision (b) of Section 24943” in lieu of “subsection (a)(2)(E).” (Repealed and added by Stats. 1997, Ch. 611, Sec. 98. Effective October 3, 1997.)
  198. 24948.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    If property in an irrigation project is sold or otherwise disposed of to meet federal acreage-limitation rules, the transaction is treated as an involuntary conversion.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24948. For purposes of this part, if property lying within an irrigation project is sold or otherwise disposed of in order to conform to the acreage limitation provisions of federal reclamation laws, such sale or disposition shall be treated as an involuntary conversion to which Sections 24943 to 24949, inclusive, apply. (Added by Stats. 1961, Ch. 846.)
  199. 24949.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    If livestock are destroyed or sold or exchanged because of disease, the transaction is treated as an involuntary conversion under Sections 24943 to 24949.

    ## Revenue and Taxation Code - RTC ## DIVISION 2. OTHER TAXES [6001 - 61050] ( Heading of Division 2 amended by Stats. 1968, Ch. 279. ) ## PART 11. CORPORATION TAX LAW [23001 - 25141] ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. ) ## CHAPTER 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24949. For purposes of this part, if livestock are destroyed by or on account of disease, or are sold or exchanged because of disease, such destruction or such sale or exchange shall be treated as an involuntary conversion to which Sections 24943 to 24949, inclusive, apply. (Added by Stats. 1961, Ch. 846.)
  200. 24949.1.

    ## 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. )

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    Certain livestock sales or exchanges caused solely by drought, flood, or other weather-related conditions can be treated as involuntary conversions, and the replacement period may be extended 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 15. Gain or Loss on Disposition of Property [24901 - 24998] ( Chapter 15 added by Stats. 1955, Ch. 938. ) ## ARTICLE 3. Nontaxable Exchanges [24941 - 24956] ( Article 3 added by Stats. 1955, Ch. 938. ) ## 24949.1. (a) For purposes of this part, the sale or exchange of livestock (other than poultry) held by a taxpayer for draft, breeding, or dairy purposes in excess of the number the taxpayer would sell if he or she followed his or her usual business practices shall be treated as an involuntary conversion to which Sections 24943 to 24949, inclusive, apply if the livestock are sold or exchanged by the taxpayer solely on account of drought, flood, or other weather-related conditions. (b) (1) In the case of drought, flood, or other weather-related conditions described in subdivision (a) that result in the area being designated as eligible for assistance by the federal government, subdivision (b) of Section 24944 shall be applied with respect to any converted property by substituting “four years” for “two years.” (2) The Franchise Tax Board may extend the period for replacement under Sections 24943 to 24949, inclusive (after the application of paragraph (1)), for the additional time as the Franchise Tax Board determines appropriate if the weather-related conditions that resulted in the application of paragraph (1) continue for more than three years. (Amended by Stats. 2005, Ch. 691, Sec. 74. Effective October 7, 2005.)

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