text: For purposes of this part, the term “exchanged basis property” has the same meaning given that term by Section 7701(a)(44) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

history: (History: Added by Stats. 1987, Ch. 1138, Sec. 7. Effective September 25, 1987. Applicable to taxable years beginning on or after January 1, 1987, by Sec. 189 of Ch. 1138.)


kind: section

code: RTC

text: For purposes of this part, the term “nonrecognition transaction” has the same meaning given that term by Section 7701(a)(45) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

history: (History: Added by Stats. 1987, Ch. 1138, Sec. 8. Effective September 25, 1987. Applicable to taxable years beginning on or after January 1, 1987, by Sec. 189 of Ch. 1138.)

division: 2. OTHER TAXES

part: 10. PERSONAL INCOME TAX

chapter: 1. General Provisions and Definitions

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 1. General Provisions and Definitions


text: For purposes of this part, in determining the amount of gain or loss (or deemed gain or loss) with respect to any property, Section 7701(g) of the Internal Revenue Code, relating to nonrecourse indebtedness, applies, except as otherwise provided.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 5. Effective January 1, 2004.)


text:
For purposes of this part:

(a) Section 7702 of the Internal Revenue Code, relating to life insurance contracts, shall apply, except as otherwise provided.

(b) Section 7702A of the Internal Revenue Code, relating to modified endowment contract defined, shall apply, except as otherwise provided.

(c) (1) Section 7702B of the Internal Revenue Code, relating to treatment of qualified long-term care insurance, shall apply, except as otherwise provided.

(2) The amendments made by Section 844 of the Pension Protection Act of 2006 (Public Law 109-280) to Section 7702B of the Internal Revenue Code shall not apply.

history: (History: Amended by Stats. 2010, Ch. 14, Sec. 2. (SB 401) Effective January 1, 2011.)


text: Section 7701(a)(46) of the Internal Revenue Code, relating to determination of whether there is a collective bargaining agreement, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 877, Sec. 2. Effective October 6, 1993.)


text: Section 7701(e) of the Internal Revenue Code, relating to treatment of certain contracts for providing services, etc., shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 877, Sec. 3. Effective October 6, 1993.)


text: For purposes of this part, the term “domestic building and loan association” has the same meaning given that term by Section 7701(a)(19) of the Internal Revenue Code.

history: (History: Added by Stats. 1987, Ch. 1138, Sec. 9. Effective September 25, 1987. Applicable to taxable years beginning on or after January 1, 1987, by Sec. 189 of Ch. 1138.)


text: Section 7701(h) of the Internal Revenue Code, relating to motor vehicle operating leases, applies, except as otherwise provided.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 6. Effective January 1, 2004.)


text:
(a) For the purposes of this part, except as otherwise provided, the determination of whether an individual is an employee shall be governed by Article 1.5 (commencing with Section 2775) of Chapter 2 of Division 3 of the Labor Code.

(b) Section 7701(a)(20) of the Internal Revenue Code, relating to definition of “employee,” applies, except as otherwise provided.

history: (History: Amended by Stats. 2021, Ch. 124, Sec. 38. (AB 938) Effective January 1, 2022.)


text: Section 7701(k) of the Internal Revenue Code, relating to treatment of certain amounts paid to charity, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 877, Sec. 6. Effective October 6, 1993.)


text:
(a) Section 7701(n) of the Internal Revenue Code, relating to convention or association of churches, shall apply, except as otherwise provided.

(b) The phrase “this part” shall be substituted for “this title” in Section 7701(n) of the Internal Revenue Code.

history: (History: Added by Stats. 2010, Ch. 14, Sec. 3. (SB 401) Effective January 1, 2011.)


text: As used in this part, if the spouses therein referred to are divorced or their registered domestic partnership has been terminated, wherever appropriate to the meaning of this part, the term “spouse” shall be read “former spouse.”

history: (History: Amended by Stats. 2016, Ch. 50, Sec. 95. (SB 1005) Effective January 1, 2017.)


text: Section 7703 of the Internal Revenue Code, relating to determination of marital status, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 877, Sec. 7. Effective October 6, 1993.)


text:
(a) (1) For purposes of this part, the domestic partner of the taxpayer shall be treated as the spouse of the taxpayer for purposes of applying only Sections 105(b), 106(a), 162(l), 162(n), and 213(a) of the Internal Revenue Code and for purposes of determining whether an individual is the taxpayer’s “dependent” or “member of their family” as these terms are used in those sections.

(2) This subdivision shall apply to each taxable year beginning on or after January 1, 2002.

(b) (1) Except as otherwise provided, the domestic partner or former domestic partner of a taxpayer shall be treated as the spouse or former spouse of that taxpayer for purposes of applying provisions of this part, Part 10.2 (commencing with Section 18401), Part 10.7 (commencing with Section 21001), and Part 11 (commencing with Section 23001), and for purposes of applying provisions of the Internal Revenue Code that are applicable for purposes of this part, Part 10.2, Part 10.7, or Part 11.

(2) A domestic partner shall not be treated as the spouse of a taxpayer as required by paragraph (1) in the following circumstances:

(A) Where the treatment would result in the classification of a business entity for purposes of this part, Part 10.2, or Part 11 that would be different than the classification of that business entity for federal income tax purposes.

(B) Where the treatment required by paragraph (1) would result in disqualification for federal income tax purposes of a plan that otherwise qualifies under Section 401(a) of the Internal Revenue Code.

(C) Where the treatment would result in a tax-favored account that would not be qualified as a tax-favored account for federal income tax purposes. For purposes of this subparagraph, “tax-favored account” means an individual account, plan, or arrangement that is exempt from income tax under Chapter 1 of the Internal Revenue Code, including an individual retirement account, as described in Section 408 of the Internal Revenue Code, an Archer MSA, as described in Section 220 of the Internal Revenue Code, a qualified tuition program, as described in Section 529 of the Internal Revenue Code, and a Coverdell education savings account, as described in Section 530 of the Internal Revenue Code.

(3) The amendments made by the act adding this subdivision shall be operative for each taxable year beginning on or after January 1, 2007.

(c) For purposes of this section, the term “domestic partner” means an individual partner in a domestic partner relationship within the meaning of Section 297 of the Family Code.

history: (History: Amended by Stats. 2007, Ch. 426, Sec. 1. Effective October 10, 2007. Applicable to taxable years beginning on or after January 1, 2007, pursuant to paragraph (3) of new subdivision (b).)


text: The term “military or naval forces of the United States” and the term “armed forces of the United States” each includes all regular and reserve components of the uniformed services which are subject to the jurisdicition of the Secretary of Defense, the Secretary of the Army, the Secretary of the Navy, or the Secretary of the Air Force, and each term also includes the Coast Guard. The members of such forces include commissioned officers and personnel below the grade of commissioned officers in such forces.

history: (History: Added by Stats. 1955, Ch. 939.)


text: The term “counsel for the Franchise Tax Board,” and “Franchise Tax Counsel” as used in this part, means attorney or attorneys appointed or employed by the Franchise Tax Board and acting subject to the approval and under the supervision of the Attorney General.


text: The term “Personal Income Tax Law of 1954,” means Part 10 of Division 2 of the Revenue and Taxation Code as enacted by the Statutes 1943, Chapter 659, and as subsequently amended, including all amendments enacted prior to January 1, 1955.


text:
(a) (1) Unless otherwise specifically provided, the terms “Internal Revenue Code,” “Internal Revenue Code of 1954,” or “Internal Revenue Code of 1986,” for purposes of this part, mean Title 26 of the United States Code, including all amendments thereto as enacted on the specified date for the applicable taxable year as follows:Taxable Year

Specified Date of Internal Revenue Code Sections

(A) For taxable years beginning on or afterJanuary 1, 1983, and on or before December31, 1983January 15, 1983(B) For taxable years beginning on or afterJanuary 1, 1984, and on or before December31, 1984January 1, 1984(C) For taxable years beginning on or afterJanuary 1, 1985, and on or before December31, 1985January 1, 1985(D) For taxable years beginning on or afterJanuary 1, 1986, and on or before December31, 1986January 1, 1986(E) For taxable years beginning on or afterJanuary 1, 1987, and on or before December31, 1988January 1, 1987(F) For taxable years beginning on or afterJanuary 1, 1989, and on or before December31, 1989January 1, 1989(G) For taxable years beginning on or afterJanuary 1, 1990, and on or before December31, 1990January 1, 1990(H) For taxable years beginning on or afterJanuary 1, 1991, and on or before December31, 1991January 1, 1991(I) For taxable years beginning on or afterJanuary 1, 1992, and on or before December31, 1992January 1, 1992(J) For taxable years beginning on or afterJanuary 1, 1993, and on or before December31, 1996January 1, 1993(K) For taxable years beginning on or afterJanuary 1, 1997, and on or before December31, 1997January 1, 1997(L) For taxable years beginning on or afterJanuary 1, 1998, and on or before December31, 2001January 1, 1998(M) For taxable years beginning on or afterJanuary 1, 2002, and on or before December31, 2004January 1, 2001(N) For taxable years beginning on or afterJanuary 1, 2005, and on or before December31, 2009January 1, 2005(O) For taxable years beginning on or afterJanuary 1, 2010, and on or before December31, 2014January 1, 2009(P) For taxable years beginning on or afterJanuary 1, 2015, and on or before December 31, 2024January 1, 2015(Q) For taxable years beginning on or after January 1, 2025January 1, 2025(2) (A) Unless otherwise specifically provided, for federal laws enacted on or after January 1, 1987, and on or before the specified date for the taxable year, uncodified provisions that relate to provisions of the Internal Revenue Code that are incorporated for purposes of this part shall be applicable to the same taxable years as the incorporated provisions.

(B) In the case where Section 901 of the Economic Growth and Tax Relief Act of 2001 (Public Law 107-16) applies to any provision of the Internal Revenue Code that is incorporated for purposes of this part, Section 901 of the Economic Growth and Tax Relief Act of 2001 shall apply for purposes of this part in the same manner and to the same taxable years as it applies for federal income tax purposes.

(3) Subtitle G (Tax Technical Corrections) and Part I of Subtitle H (Repeal of Expired or Obsolete Provisions) of the Revenue Reconciliation Act of 1990 (Public Law 101-508) modified numerous provisions of the Internal Revenue Code and provisions of prior federal acts, some of which are incorporated by reference into this part. Unless otherwise provided, the provisions described in the preceding sentence, to the extent that they modify provisions that are incorporated into this part, are declaratory of existing law and shall be applied in the same manner and for the same periods as specified in the Revenue Reconciliation Act of 1990.

(b) Unless otherwise specifically provided, when applying any provision of the Internal Revenue Code for purposes of this part, a reference to any of the following is not applicable for purposes of this part:

(1) Except as provided in Chapter 4.5 (commencing with Section 23800) of Part 11 of Division 2, an electing small business corporation, as defined in Section 1361(b) of the Internal Revenue Code.

(2) Domestic international sales corporations (DISC), as defined in Section 992(a) of the Internal Revenue Code.

(3) A personal holding company, as defined in Section 542 of the Internal Revenue Code.

(4) A foreign personal holding company, as defined in Section 552 of the Internal Revenue Code.

(5) A foreign investment company, as defined in Section 1246(b) of the Internal Revenue Code.

(6) A foreign trust, as defined in Section 679 of the Internal Revenue Code.

(7) Foreign income taxes and foreign income tax credits.

(8) Section 911 of the Internal Revenue Code, relating to citizens or residents of the United States living abroad.

(9) A foreign corporation, except that Section 367 of the Internal Revenue Code shall be applicable.

(10) Federal tax credits and carryovers of federal tax credits.

(11) Nonresident aliens.

(12) Deduction for personal exemptions, as provided in Section 151 of the Internal Revenue Code.

(13) The tax on generation-skipping transfers imposed by Section 2601 of the Internal Revenue Code.

(14) The tax, relating to estates, imposed by Section 2001 or 2101 of the Internal Revenue Code.

(c) (1) The provisions contained in Sections 41 to 44, inclusive, and Section 172 of the Tax Reform Act of 1984 (Public Law 98-369), relating to treatment of debt instruments, is not applicable for taxable years beginning before January 1, 1987.

(2) The provisions contained in Public Law 99-121, relating to the treatment of debt instruments, is not applicable for taxable years beginning before January 1, 1987.

(3) For each taxable year beginning on or after January 1, 1987, the provisions referred to by paragraphs (1) and (2) shall be applicable for purposes of this part in the same manner and with respect to the same obligations as the federal provisions, except as otherwise provided in this part.

(d) When applying the Internal Revenue Code for purposes of this part, regulations promulgated in final form or issued as temporary regulations by “the secretary” shall be applicable as regulations under this part to the extent that they do not conflict with this part or with regulations issued by the Franchise Tax Board.

(e) Whenever this part allows a taxpayer to make an election, the following rules shall apply:

(1) A proper election filed with the Internal Revenue Service in accordance with the Internal Revenue Code or regulations issued by “the secretary” shall be deemed to be a proper election for purposes of this part, unless otherwise provided in this part or in regulations issued by the Franchise Tax Board.

(2) A copy of that election shall be furnished to the Franchise Tax Board upon request.

(3) (A) Except as provided in subparagraph (B), in order to obtain treatment other than that elected for federal purposes, a separate election shall be filed at the time and in the manner required by the Franchise Tax Board.

(B) (i) If a taxpayer makes a proper election for federal income tax purposes prior to the time that taxpayer becomes subject to the tax imposed under this part or Part 11 (commencing with Section 23001), that taxpayer is deemed to have made the same election for purposes of the tax imposed by this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001), as applicable, and that taxpayer may not make a separate election for California tax purposes unless that separate election is expressly authorized by this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), or by regulations issued by the Franchise Tax Board.

(ii) If a taxpayer has not made a proper election for federal income tax purposes prior to the time that taxpayer becomes subject to tax under this part or Part 11 (commencing with Section 23001), that taxpayer may not make a separate California election for purposes of this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), unless that separate election is expressly authorized by this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), or by regulations issued by the Franchise Tax Board.

(iii) This subparagraph applies only to the extent that the provisions of the Internal Revenue Code or the regulation issued by “the secretary” authorizing an election for federal income tax purposes apply for purposes of this part, Part 10.2 (commencing with Section 18401) or Part 11 (commencing with Section 23001).

(f) Whenever this part allows or requires a taxpayer to file an application or seek consent, the rules set forth in subdivision (e) shall be applicable with respect to that application or consent.

(g) When applying the Internal Revenue Code for purposes of determining the statute of limitations under this part, any reference to a period of three years shall be modified to read four years for purposes of this part.

(h) When applying, for purposes of this part, any section of the Internal Revenue Code or any applicable regulation thereunder, all of the following shall apply:

(1) References to “adjusted gross income” shall mean the amount computed in accordance with Section 17072, except as provided in paragraph (2).

(2) (A) Except as provided in subparagraph (B), references to “adjusted gross income” for purposes of computing limitations based upon adjusted gross income, shall mean the amount required to be shown as adjusted gross income on the federal tax return for the same taxable year.

(B) In the case of registered domestic partners and former registered domestic partners, adjusted gross income, for the purposes of computing limitations based upon adjusted gross income, shall mean the adjusted gross income on a federal tax return computed as if the registered domestic partner or former registered domestic partner was treated as a spouse or former spouse, respectively, for federal income tax purposes, and used the same filing status that was used on the state tax return for the same taxable year.

(3) Any reference to “subtitle” or “chapter” shall mean this part.

(4) The provisions of Section 7806 of the Internal Revenue Code, relating to construction of title, shall apply.

(5) Any provision of the Internal Revenue Code that becomes operative on or after the specified date for that taxable year shall become operative on the same date for purposes of this part.

(6) Any provision of the Internal Revenue Code that becomes inoperative on or after the specified date for that taxable year shall become inoperative on the same date for purposes of this part.

(7) Due account shall be made for differences in federal and state terminology, effective dates, substitution of “Franchise Tax Board” for “secretary” when appropriate, and other obvious differences.

(8) Except as otherwise provided, any reference to Section 501 of the Internal Revenue Code shall be interpreted to also refer to Section 23701.

(i) Any reference to a specific provision of the Internal Revenue Code shall include modifications of that provision, if any, in this part.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 1. (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.)


text: This part applies to the taxable income of taxpayers received or accrued on or after January 1, 1935.

history: (History: Amended by Stats. 2019, Ch. 497, Sec. 258. (AB 991) Effective January 1, 2020.)


text: The provisions of this code insofar as they are substantially the same as existing statutory provisions relating to the same subject matter shall be construed as restatements and continuations thereof, and not as new enactments.


text: The repeal of any provision of the Personal Income Tax Law shall not affect any act done or any right accruing or accrued, or any suit or proceeding had or commenced in any civil cause, before such repeal; but all rights and liabilities under such law shall continue, and may be enforced in the same manner, as if such repeal had not been made.

history: (History: Amended by Stats. 1991, Ch. 117, Sec. 9. Effective July 16, 1991.)


text:
(a) The enactment of the act adding this section to the code shall not deprive any taxpayer of any carryover of a credit, excess contribution, or loss to which that taxpayer was entitled under this part, including all amendments enacted prior to January 1, 1987.

(b) The carryover of the credit, excess contribution, or loss shall be allowed to be carried forward under the act adding this section to the code for the same period of time as the taxpayer would have been entitled to carry that item forward under prior law.

(c) For purposes of applying the provisions of the act adding this section to the code, the basis or recomputed basis of any asset acquired prior to January 1, 1987, shall be determined under the law at the time the asset was acquired and any adjustments to basis shall be computed as follows:

(1) Any adjustments to basis for taxable years beginning prior to January 1, 1987, shall be computed under applicable provisions of this part, including all amendments enacted prior to January 1, 1987; and

(2) Any adjustments to basis for taxable years beginning on or after January 1, 1987, shall be computed under the applicable provisions of the act adding this section to the code.

history: (History: Added by Stats. 1987, Ch. 1138, Sec. 14. Effective September 25, 1987. Applicable to taxable years beginning on or after January 1, 1987, by Sec. 189 of Ch. 1138.)


text: For the purpose of applying the Personal Income Tax Law of 1954 or the Personal Income Tax Law as herein enacted to any period, any reference in either such law to another provision of the Personal Income Tax Law of 1954 or the Personal Income Tax Law as herein enacted which is not then applicable to such period shall be deemed a reference to the corresponding provision of the other law which is then applicable to such period.


text: Any provision of this part which refers to the application of any portion of this part to a prior period (or which depends upon the application to a prior period of any portion of this part) shall, when appropriate and consistent with the purpose of such provision, be deemed to refer to (or depend upon the application of) the corresponding provision of Part 10 of Division 2 of the Revenue and Taxation Code or of such other Personal Income Tax Laws as were applicable to the prior period.


text: Division, part, chapter, article, section and subsection headings contained herein shall not be deemed to govern, limit, modify, or in any manner affect the scope, meaning, or intent of the provisions of this part.


text: If any chapter, article, section, subsection, clause, sentence or phrase of this part which is reasonably separable from the remaining portions of this part, or the application thereof to any person, taxpayer or circumstance, is for any reason determined unconstitutional, such determination shall not affect the remainder of this part, nor, will the application of any such provision to other persons, taxpayers or circumstances, be affected thereby.


text:
Unless otherwise specifically provided therein, the provisions of any act:

(a) That affect the imposition or computation of taxes, additions to tax, penalties, or the allowance of credits against the tax, shall be applied to taxable years beginning on or after January 1 of the year in which the act takes effect.

(b) That otherwise affect the provisions of this part shall be applied on and after the date the act takes effect.

history: (History: Amended (as amended by Stats. 1993, Ch. 31) by Stats. 1993, Ch. 877, Sec. 7.1. Effective October 6, 1993. Operative January 1, 1994, by Sec. 102 of Ch. 877.)


text: The term “withholding agent” means any person required to deduct and withhold any tax under Section 18662.

history: (History: Amended by Stats. 1993, Ch. 31, Sec. 2. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)


text: Unless expressly otherwise provided in this part, any notice may be given by first class mail postage prepaid.

history: (History: Added by Stats. 1972, Ch. 1237.)


text:
Provisions in other codes or general law statutes which are related to this part include all of the following:

(a) Chapter 20.6 (commencing with Section 9891) of Division 3 of the Business and Professions Code, relating to tax preparers.

(b) Part 10.2 (commencing with Section 18401), relating to the administration of franchise and income tax laws.

(c) Part 10.5 (commencing with Section 20501), relating to the Property Tax Assistance and Postponement Law.

(d) Part 10.7 (commencing with Section 21001), relating to the Taxpayers’ Bill of Rights.

(e) Part 11 (commencing with Section 23001), relating to the Corporation Tax Law.

(f) Sections 15700 to 15702.1, inclusive, of the Government Code, relating to the Franchise Tax Board.

(g) Article 8 (commencing with Section 7464.5) of Chapter 10.5 of Division 3 of the Business and Professions Code.

history: (History: Amended November 3, 2020, by initiative Proposition 22, Sec. 2. Effective December 16, 2020.)


text:
(a) For purposes of this part, unless expressly otherwise provided, for taxable years beginning before January 1, 1984, references to the California Consumer Price Index shall mean the California Consumer Price Index for All Urban Consumers (old series).

(b) For taxable years beginning on or after January 1, 1984, references to the California Consumer Price Index shall mean the California Consumer Price Index for All Urban Consumers as modified for rental equivalence homeownership (new series).

history: (History: Amended by Stats. 1983, Ch. 323, Sec. 82.5. Effective July 1, 1983.)


text:
(a) Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term “net tax” means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the “net tax” shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against “net tax” in the following order:

(1) Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).

(2) Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062.

(3) Credits that contain both carryover and refundable provisions, except the credit described in paragraph (9).

(4) The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).

(5) (A) For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062.

(B) For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062, except the credit described in paragraph (7) and the credit described in paragraph (9).

(6) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).

(7) For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).

(8) For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).

(9) Credits that contain refundable provisions but do not contain carryover provisions.

(10) For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.

(11) For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.

(12) The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).

(b) The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.

(c) (1) Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:

(A) The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).

(B) The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).

(C) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).

(D) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).

(E) The credit allowed by Section 17052.12 (relating to research expenses).

(F) The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).

(G) The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).

(H) The credit allowed by Section 17052.25 (relating to the adoption costs credit).

(I) The credit allowed by Section 17053.5 (relating to the renter’s credit).

(J) The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).

(K) The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).

(L) The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).

(M) For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).

(N) The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).

(O) The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).

(P) The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).

(Q) The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).

(R) The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).

(S) The credit allowed by Section 17054 (relating to credits for personal exemption).

(T) The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(U) The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).

(V) The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).

(W) The credit allowed by Section 17058 (relating to low-income housing).

(X) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).

(Y) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).

(Z) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).

(AA) The credit allowed by Section 19002 (relating to tax withholding).

(AB) For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).

(AC) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).

(AD) For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).

(AE) For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).

(AF) For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).

(AG) For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.

(AH) For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).

(AI) For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).

(2) Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.

(d) Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.

(e) (1) Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayer’s respective share of the costs paid or incurred.

(2) In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partner’s distributive share.

(3) In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.

(f) Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.

(g) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).

(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayer’s “net tax,” as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayer’s regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayer’s regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.

(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).

(h) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayer’s first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.

(2) For purposes of this subdivision, “eligible pass-thru entity” means any partnership or “S” corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.

(3) This subdivision applies to credits that become inoperative on or after January 1, 2002.

(i) The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:

(1) The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.

(2) The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.

(j) The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:

(1) The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.

(2) The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.

(3) The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.

history: (History: Amended by Stats. 2025, Ch. 119, Sec. 63. (SB 254) Effective September 19, 2025.)


text: Notwithstanding Section 17039 or any other provision in this part to the contrary, the credit allowed by Section 17053.30 (relating to natural heritage) may reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, but only after allowance of the credit allowed by Section 17063.

history: (History: Added by Stats. 2000, Ch. 113, Sec. 2. Effective July 10, 2000.)


text:
(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for each taxable year beginning on or after January 1, 2008, and before January 1, 2010, the total of all business credits otherwise allowable under any credit under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax” (as defined in Section 17039) below the applicable amount.

(b) For purposes of this section, “business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits:

(1) The credit allowed by Section 17052.6 (relating to credit for household and dependent care).

(2) The credit allowed by Section 17052.25 (relating to credit for adoption costs).

(3) The credit allowed by Section 17053.5 (relating to renter’s tax credit).

(4) The credit allowed by Section 17053.80 (relating to full time employment hiring credit).

(5) The credit allowed by Section 17054 (relating to credit for personal exemption).

(6) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(7) The credit allowed by Section 17054.7 (relating to credit for senior head of household).

(8) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).

(c) For purposes of this section, the “applicable amount” shall be equal to 50 percent of the “net tax” (as defined in Section 17039) before application of any credits.

(d) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part.

(e) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit (or any portion thereof) was not allowed.

(f) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401) the credits listed in subdivision (b) shall be required to be applied before any business credits, as limited by subdivision (a), are applied.

(g) The provisions of this section shall not apply to a taxpayer with net business income of less than five hundred thousand dollars ($500,000) for the taxable year. For purposes of this subdivision, business income means:

(1) Income from a trade or business, whether conducted by the taxpayer or by a pasthrough entity owned directly or indirectly by the taxpayer. For purposes of this paragraph, the term “passthrough entity” means a partnership or an “S” corporation.

(2) Income from rental activity.

(3) Income attributable to a farming business.

history: (History: Amended by Stats. 2009, 3rd Ex. Sess., Ch. 17, Sec. 2. Effective February 20, 2009.)


text:
(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2022, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than five million dollars ($5,000,000).

(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2022, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000).

(c) For purposes of this section, “business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits:

(1) The credit allowed by Section 17052 (relating to credit for earned income).

(2) The credit allowed by Section 17052.1 (relating to credit for young child).

(3) The credit allowed by Section 17052.6 (relating to credit for household and dependent care).

(4) The credit allowed by Section 17052.25 (relating to credit for adoption costs).

(5) The credit allowed by Section 17053.5 (relating to renter’s tax credit).

(6) The credit allowed by Section 17054 (relating to credit for personal exemption).

(7) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(8) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household).

(9) The credit allowed by Section 17058 (relating to credit for low-income housing).

(10) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).

(d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 23685, 23695, or 23698 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five-million-dollar ($5,000,000) limitation set forth in subdivision (a) or (b).

(e) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part.

(f) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed.

(g) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied.

(h) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

(i) 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.

history: (History: Amended by Stats. 2022, Ch. 3, Sec. 7. (SB 113) Effective February 9, 2022.)


text:
(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2024, and before January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than five million dollars ($5,000,000).

(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2024, and before January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000).

(c) For purposes of this section, “business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits:

(1) The credit allowed by Section 17052 (relating to credit for earned income).

(2) The credit allowed by Section 17052.1 (relating to credit for young child).

(3) The credit allowed by Section 17052.2 (relating to credit for foster youth).

(4) The credit allowed by Section 17052.6 (relating to credit for household and dependent care).

(5) The credit allowed by Section 17052.10 or 17052.11 (relating to the elective tax under the Small Business Relief Act).

(6) The credit allowed by Section 17052.25 (relating to credit for adoption costs).

(7) The credit allowed by Section 17053.5 (relating to renter’s tax credit).

(8) The credit allowed by Section 17054 (relating to credit for personal exemption).

(9) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(10) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household).

(11) The credit allowed by Section 17058 (relating to credit for low-income housing).

(12) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).

(d) Any annual refundable credit amount included in an election pursuant to Section 17039.5 is not included in the limitation set forth in subdivision (a) or (b).

(e) Notwithstanding the operative date in subdivision (a), for taxable years beginning on or after January 1, 2027, if an election is made pursuant to subdivision (k) of Section 17053.98.1, both the credit allowed against the “net tax” under clause (i) of subparagraph (A) of paragraph (3) of subdivision (k) of Section 17053.98.1 and the annual refundable amount calculated under subdivision (k) of Section 17053.98.1 shall not be included in the limitation set forth in subdivisions (a) and (b).

(f) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, or 23698.1 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five-million-dollar ($5,000,000) limitation set forth in subdivision (a) or (b).

(g) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part.

(h) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed.

(i) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied.

(j) For taxpayers that make the election under subdivision (k) of Section 17053.98.1, any amount of refundable credits pursuant to that subdivision over the five-million-dollar ($5,000,000) limitation under this section shall be allowed in the first taxable year beginning on or after January 1, 2027.

(k) If a taxpayer makes the election under both Section 17039.5 and subdivision (k) of Section 17053.98.1 with respect to the credit amount under Section 17053.98.1, the total amount of credit allowed pursuant to both elections shall not exceed the credit amount allowed under subdivision (a) of Section 17053.98.1.

(l) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

(m) The amendments made to this section by Section 6 of Chapter 17 of the Statutes of 2025 shall be operative for taxable years beginning on or after January 1, 2026.

(n) The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2027.

history: (History: Amended by Stats. 2026, Ch. 23, Sec. 22. (SB 122) Effective June 29, 2026. Operative as prescribed by its own provisions.)


text:
(a) (1) For taxable years beginning on or after January 1, 2024, and before January 1, 2030, a taxpayer may make an election to receive an annual refundable credit amount of qualified credits for each taxable year to be allowed pursuant to paragraph (2).

(2) In each taxable year of the refundable period, the annual refundable credit amount shall be allowed as a credit against the “net tax” computed under this part for the taxable year, and the excess, if any, shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account to the taxpayer.

(b) For purposes of this section, the following definitions shall apply:

(1) “Annual refundable credit amount” means 20 percent of the credit amount for the taxable year.

(2) (A) “Credit amount” means the amount of the qualified credits that would have otherwise been available to reduce net tax in the taxable year of the election but for the limitation under Section 17039.4.

(B) In the case of a pass-thru entity, the “credit amount” refers to the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subparagraph, the term “pass-thru entity” means any partnership, “S” corporation, or limited liability company treated as a partnership.

(C) In the case of an assigned credit, the “credit amount” refers to the credit amount that was assigned to the taxpayer.

(D) In the case of taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, the “credit amount” refers to the credit amount of all members of the combined report.

(3) “Qualified credits” means the credits subject to the limitation under Section 17039.4.

(4) “Refundable period” means the first five consecutive taxable years beginning the third taxable year after the taxable year that the taxpayer makes an election under this section.

(c) No portion of the annual refundable credit amount can be assigned to another taxpayer.

(d) The following shall apply for purposes of the election pursuant to this section:

(1) The taxpayer may make an election for each taxable year beginning on or after January 1, 2024, and before January 1, 2030.

(2) Each election shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the election is made in the form and manner as prescribed by the Franchise Tax Board.

(e) (1) Any adjustment of an annual refundable credit amount shall be treated as a mathematical error appearing on the return. This includes, but is not limited to, all of the following:

(A) A valid election as required under this section was not made.

(B) The Franchise Tax Board determines that credit amount overstatements in any taxable year resulted in an overstatement in any carryover amount or an overstatement of any refundable credit amount.

(C) The Franchise Tax Board determines that the credit amount was overstated as a result of any subsequent adjustment in the amount of net tax, including, but not limited to, an audit adjustment or claim for refund.

(2) Any amount of tax due resulting from such disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.

(f) (1) The Franchise Tax Board may prescribe regulations necessary or appropriate to carry out the purposes of this section.

(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(g) This section shall remain in effect only until December 1, 2037, and as of that date is repealed.

history: (History: Amended by Stats. 2026, Ch. 23, Sec. 23. (SB 122) Effective June 29, 2026. Repealed as of December 1, 2037, by its own provisions.)


text:
(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than 70 percent or five million dollars ($5,000,000), whichever is greater.

(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than 70 percent or five million dollars ($5,000,000), whichever is greater.

(c) For purposes of this section, “business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits:

(1) The credit allowed by Section 17052 (relating to credit for earned income).

(2) The credit allowed by Section 17052.1 (relating to credit for young child).

(3) The credit allowed by Section 17052.2 (relating to credit for foster youth).

(4) The credit allowed by Section 17052.6 (relating to credit for household and dependent care).

(5) The credit allowed by Section 17052.10 or 17052.11 (relating to the elective tax under the Small Business Relief Act).

(6) The credit allowed by Section 17052.25 (relating to credit for adoption costs).

(7) The credit allowed by Section 17053.5 (relating to renter’s tax credit).

(8) The credit allowed by Section 17054 (relating to credit for personal exemption).

(9) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(10) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household).

(11) The credit allowed by Section 17058 (relating to credit for low-income housing).

(12) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).

(d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, or 23698.1 against qualified sales and use tax, as defined in Section 6902.5, are not included in the limitation set forth in subdivision (a) or (b).

(e) Any annual refundable credit amount included in an election pursuant to Section 17039.5 is not included in the limitation set forth in subdivision (a) or (b).

(f) If an election is made pursuant to subdivision (k) of Section 17053.98.1, both the credit allowed against the “net tax” under clause (i) of subparagraph (A) of paragraph (3) of subdivision (k) of Section 17053.98.1 and the annual refundable amount calculated under subdivision (k) of Section 17053.98.1 shall not be included in the limitation set forth in subdivisions (a) and (b) of this section.

(g) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part.

(h) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied.

(i) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

history: (History: Added by Stats. 2026, Ch. 23, Sec. 24. (SB 122) Effective June 29, 2026.)


text:
(a) (1) There shall be imposed for each taxable year upon the entire taxable income of every resident of this state who is not a part-year resident, except the head of a household as defined in Section 17042, taxes in the following amounts and at the following rates upon the amount of taxable income computed for the taxable year as if the resident were a resident of this state for the entire taxable year and for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions:If the taxable income is:The tax is:Not over $3,650 1% of the taxable incomeOver $3,650 but notover $8,650 $36.50 plus 2% of the excess over $3,650Over $8,650 but notover $13,650 $136.50 plus 4% of the excess over $8,650Over $13,650 but notover $18,950 $336.50 plus 6% of the excess over $13,650Over $18,950 but notover $23,950 $654.50 plus 8% of the excess over $18,950Over $23,950 $1,054.50 plus 9.3% of the excess over $23,950(2) For taxable years beginning on or after January 1, 2009, and before January 1, 2011, the percentages specified in the table in paragraph (1) shall be increased by adding 0.25 percent to each percentage.

(b) (1) There shall be imposed for each taxable year upon the taxable income of every nonresident or part-year resident, except the head of a household as defined in Section 17042, a tax as calculated in paragraph (2).

(2) The tax imposed under paragraph (1) shall be calculated by multiplying the “taxable income of a nonresident or part-year resident,” as defined in subdivision (i), by a rate (expressed as a percentage) equal to the tax computed under subdivision (a) on the entire taxable income of the nonresident or part-year resident as if the nonresident or part-year resident were a resident of this state for the taxable year and as if the nonresident or part-year resident were a resident of this state for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, divided by the amount of that income.

(c) (1) There shall be imposed for each taxable year upon the entire taxable income of every resident of this state who is not a part-year resident for that taxable year, when the resident is the head of a household, as defined in Section 17042, taxes in the following amounts and at the following rates upon the amount of taxable income computed for the taxable year as if the resident were a resident of the state for the entire taxable year and for all prior taxable years for carryover items, deferred income, suspended losses, or suspended deductions:If the taxable income is:The tax is:Not over $7,300 1% of the taxable incomeOver $7,300 but notover $17,300 $73 plus 2% of the excess over $7,300Over $17,300 but notover $22,300 $273 plus 4% of the excess over $17,300Over $22,300 but notover $27,600 $473 plus 6% of the excess over $22,300Over $27,600 but notover $32,600 $791 plus 8% of the excess over $27,600Over $32,600 $1,191 plus 9.3% of the excess over $32,600(2) For taxable years beginning on or after January 1, 2009, and before January 1, 2011, the percentages specified in the table in paragraph (1) shall be increased by adding 0.25 percent to each percentage.

(d) (1) There shall be imposed for each taxable year upon the taxable income of every nonresident or part-year resident when the nonresident or part-year resident is the head of a household, as defined in Section 17042, a tax as calculated in paragraph (2).

(2) The tax imposed under paragraph (1) shall be calculated by multiplying the “taxable income of a nonresident or part-year resident,” as defined in subdivision (i), by a rate (expressed as a percentage) equal to the tax computed under subdivision (c) on the entire taxable income of the nonresident or part-year resident as if the nonresident or part-year resident were a resident of this state for the taxable year and as if the nonresident or part-year resident were a resident of this state for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, divided by the amount of that income.

(e) There shall be imposed for each taxable year upon the taxable income of every estate, trust, or common trust fund taxes equal to the amount computed under subdivision (a) for an individual having the same amount of taxable income.

(f) The tax imposed by this part is not a surtax.

(g) (1) Section 1(g) of the Internal Revenue Code, relating to certain unearned income of children taxed as if parent’s income, shall apply, except as otherwise provided.

(2) Section 1(g)(7)(B)(ii)(II) of the Internal Revenue Code is modified, for purposes of this part, by substituting “1 percent” for “10 percent.”

(h) For each taxable year beginning on or after January 1, 1988, the Franchise Tax Board shall recompute the income tax brackets prescribed in subdivisions (a) and (c). That computation shall be made as follows:

(1) The California Department of Industrial Relations shall transmit annually to the Franchise Tax Board the percentage change in the California Consumer Price Index for all items from June of the prior calendar year to June of the current calendar year, no later than August 1 of the current calendar year.

(2) The Franchise Tax Board shall do both of the following:

(A) Compute an inflation adjustment factor by adding 100 percent to the percentage change figure that is furnished pursuant to paragraph (1) and dividing the result by 100.

(B) Multiply the preceding taxable year income tax brackets by the inflation adjustment factor determined in subparagraph (A) and round off the resulting products to the nearest one dollar ($1).

(i) (1) For purposes of this part, the term “taxable income of a nonresident or part-year resident” includes each of the following:

(A) For any part of the taxable year during which the taxpayer was a resident of this state (as defined by Section 17014), all items of gross income and all deductions, regardless of source.

(B) For any part of the taxable year during which the taxpayer was not a resident of this state, gross income and deductions derived from sources within this state, determined in accordance with Article 9 of Chapter 3 (commencing with Section 17301) and Chapter 11 (commencing with Section 17951).

(2) For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1), the amount of any net operating loss sustained in any taxable year during any part of which the taxpayer was not a resident of this state shall be limited to the sum of the following:

(A) The amount of the loss attributable to the part of the taxable year in which the taxpayer was a resident.

(B) The amount of the loss which, during the part of the taxable year the taxpayer is not a resident, is attributable to California source income and deductions allowable in arriving at taxable income of a nonresident or part-year resident.

(3) For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1), any carryover items, deferred income, suspended losses, or suspended deductions shall only be includable or allowable to the extent that the carryover item, deferred income, suspended loss, or suspended deduction was derived from sources within this state, calculated as if the nonresident or part-year resident, for the portion of the year he or she was a nonresident, had been a nonresident for all prior years.

history: (History: Amended by Stats. 2010, Ch. 14, Sec. 5. (SB 401) Effective January 1, 2011. Note: This section was amended on June 8, 1982, by initiative Prop. 7.)

chapter: 2. Imposition of Tax

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 2. Imposition of Tax


text:
Notwithstanding any statute, ordinance, regulation, rule or decision to the contrary, no city, county, city and county, governmental subdivision, district, public and quasi-public corporation, municipal corporation, whether incorporated or not or whether chartered or not, shall levy or collect or cause to be levied or collected any tax upon the income, or any part thereof, of any person, resident or nonresident.

This section shall not be construed so as to prohibit the levy or collection of any otherwise authorized license tax upon a business measured by or according to gross receipts.

history: (History: Amended by Stats. 1965, Ch. 1319.)


text: Section 2(b) and (c) of the Internal Revenue Code, relating to definitions of head of household and certain married individuals living apart, respectively, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 877, Sec. 9. Effective October 6, 1993.)


text:
(a) For each taxable year beginning on or after January 1, 2005, in addition to any other taxes imposed by this part, an additional tax shall be imposed at the rate of 1 percent on that portion of a taxpayer’s taxable income in excess of one million dollars ($1,000,000).

(b) For purposes of applying Part 10.2 (commencing with Section 18401) of Division 2, the tax imposed under this section shall be treated as if imposed under Section 17041.

(c) The following shall not apply to the tax imposed by this section:

(1) The provisions of Section 17039, relating to the allowance of credits.

(2) The provisions of Section 17041, relating to filing status and recomputation of the income tax brackets.

(3) The provisions of Section 17045, relating to joint returns.

history: (History: Added November 2, 2004, by initiative Proposition 63, Sec. 12. Operative January 1, 2005, pursuant to Sec. 16 of Prop. 63.)


text:
In the case of a joint return of spouses under Section 18521, the tax imposed by Section 17041 shall be twice the tax which would be imposed if the taxable income were cut in one-half.

For purposes of this section, a return of a surviving spouse (as defined in Section 17046) shall be treated as a joint return of spouses.

history: (History: Amended by Stats. 2016, Ch. 50, Sec. 97. (SB 1005) Effective January 1, 2017.)


text: For purposes of this part, “surviving spouse” has the same meaning as that term is defined by Section 2(a) of the Internal Revenue Code.

history: (History: Amended by Stats. 1985, Ch. 106, Sec. 126.)


text:
(a) In lieu of the tax imposed under Section 17041, individuals with taxable income of such amounts as prescribed by the Franchise Tax Board, shall compute their taxes under tax tables prescribed by the Franchise Tax Board. The tax tables shall reflect the tax imposed under Section 17041 in income progressions of not less than one hundred dollars ($100), giving effect to the marital or other status of the individual. For purposes of this part, the tax imposed by this section shall be treated as tax imposed by Section 17041.

(b) Subdivision (a) shall not apply to any of the following:

(1) An individual to whom subdivision (b) of Section 17504 (relating to the tax on lump-sum distributions) applies for the taxable year.

(2) An individual making a return under Section 443(a)(1) of the Internal Revenue Code for a period of less than 12 months on account of a change in annual accounting period.

(3) An estate or trust.

history: (History: Amended by Stats. 1988, Ch. 1170, Sec. 1. Effective September 22, 1988.)


text:
(a) If an item of income was included in the gross income of an individual for a preceding taxable year or years because it appeared that the individual had an unrestricted right to that item, a deduction is allowable for the taxable year based on the repayment of the item by the individual during the taxable year, and the amount of that deduction exceeds three thousand dollars ($3,000), then the tax imposed by this part for the taxable year on that individual shall be the lesser of the following:

(1) The tax for the taxable year computed with that deduction.

(2) An amount equal to (A) the tax for the taxable year computed without that deduction, minus (B) the decrease in tax under this part for the preceding taxable year or years which would result solely from the exclusion of the item or portion thereof from the gross income required to be shown on the California return of that individual for the preceding taxable year or years.

(b) If the decrease in tax determined under subparagraph (B) of paragraph (2) of subdivision (a) for the preceding taxable year or years exceeds the tax imposed for the taxable year, computed without the deduction, that excess shall be considered to be a payment of tax on the last day prescribed for the payment of tax for the taxable year, and shall be refunded or credited in the same manner as if it were an overpayment for the taxable year.

(c) Subdivision (a) does not apply to any deduction allowable with respect to an item which was included in gross income by reason of the sale or other disposition of stock in trade of the taxpayer, or other property of a kind which would properly have been included in the inventory of the taxpayer if on hand at the close of the prior taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his or her trade or business.

(d) If the tax imposed by this part for the taxable year is the amount determined under paragraph (2) of subdivision (a), then the deduction referred to in subdivision (a) shall not be taken into account for any purpose of this part, or Part 10.2 (commencing with Section 18401), other than this section.

(e) For purposes of determining whether paragraph (1) or paragraph (2) of subdivision (a) applies, in any case where the exclusion referred to in subparagraph (B) of paragraph (2) of subdivision (a) results in a net operating loss or capital loss for the prior taxable year, or years, that loss shall, for purposes of computing the decrease in tax for the prior taxable year, or years, under subparagraph (B) of paragraph (2) of subdivision (a), be carried over to the same extent and in the same manner as is provided under Section 17276, 17276.1, 17276.2, 17276.4, 17276.5, or 17276.7, or Section 1212 of the Internal Revenue Code, as applicable for California purposes, except that no carryover beyond the taxable year shall be taken into account.

(f) For purposes of this part, the net operating loss or capital loss described in subdivision (e) shall, after the application of paragraph (1) or (2) of subdivision (a) for the taxable year, be taken into account under Section 17276, 17276.1, 17276.2, 17276.4, 17276.5, or 17276.7, or Section 1212 of the Internal Revenue Code, as applicable for California purposes, for taxable years after the taxable year to the same extent and in the same manner as either of the following:

(A) A net operating loss sustained for the taxable year, if paragraph (1) of subdivision (a) applied.

(B) A net operating loss or capital loss sustained for the prior taxable year, or years, if paragraph (2) of subdivision (a) applied.

(g) Regulations promulgated by the Secretary of the Treasury under Section 1341 of the Internal Revenue Code shall apply, except to the extent that those regulations conflict with this section, provisions of this part, or with regulations promulgated by the Franchise Tax Board.

history: (History: Amended by Stats. 2005, Ch. 349, Sec. 1. Effective January 1, 2006.)


text:
(a) (1) For each taxable year beginning on or after January 1, 2015, there shall be allowed against the “net tax,” as defined by Section 17039, an earned income tax credit in an amount equal to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.

(2) (A) The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.

(B) Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.

(C) The earned income tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.

(b) (1) In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children7.65%7.65%1 qualifying child34%34%2 qualifying children40%40%3 or more qualifying children45%45%(2) (A) In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$3,290$3,2901 qualifying child$4,940$4,9402 or more qualifying children$6,935$6,935(B) Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.

(c) (1) Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting “this state” for “the United States.”

(2) For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting “25 but not attained age 65” and inserting in lieu thereof the following: “18.”

(3) Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:

(A) Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting “plus” and inserting in lieu thereof the following: “and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.”

(B) Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.

(4) For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:

(A) Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting “plus” and inserting in lieu thereof the following: “and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.”

(B) Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.

(5) Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting “this state” for “the United States.”

(d) Section 32(i)(1) of the Internal Revenue Code is modified by substituting “$3,400” for “$2,200.”

(e) (1) In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(2) For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.

(3) For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.

(f) If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the taxpayer.

(g) (1) The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(2) (A) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.

(B) The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.

(h) Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.

(i) (1) For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:

(A) Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.

(B) Special Project Report requirements under Statewide Information Management Manual Section 30.

(C) Section 11.00 of the 2015 Budget Act.

(D) Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.

(2) The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.

(j) (1) In accordance with Section 41 of the Revenue and Taxation Code, the purpose of the California Earned Income Tax Credit is to reduce poverty among California’s poorest working families and individuals. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:

(A) The number of tax returns claiming the credit.

(B) The number of individuals represented on tax returns claiming the credit.

(C) The average credit amount on tax returns claiming the credit.

(D) The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.

(E) Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in “deep poverty” if the income of the family is less than 50 percent of the federal poverty threshold.

(2) The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.

(k) The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.

(l) The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.

(m) (1) For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children2.20%1.22%1 qualifying child3.10%2.29%2 qualifying children2.13%3.45%3 or more qualifying children2.12%3.49%

(2) For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:

In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$5,354$5,3541 qualifying child$9,484$9,4842 qualifying children$13,794$13,7943 or more qualifying children$13,875$13,875

(n) (1) For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children2.20%1.08%1 qualifying child3.10%2.00%2 qualifying children2.13%2.82%3 or more qualifying children2.12%2.85%

(2) For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:

In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$5,520$5,5201 qualifying child$9,778$9,7782 qualifying children$14,222$14,2223 or more qualifying children$14,305$14,305

(o) (1) For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children5.43%0.92%1 qualifying child6.33%2.88%2 qualifying children4.20%3.75%3 or more qualifying children4.15%3.78%

(2) For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:

In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$4,334$4,3341 qualifying child$9,381$9,3812 qualifying children$14,137$14,1373 or more qualifying children$14,302$14,302

(3) For taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, both of the following shall occur:

(A) The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(B) The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.

(4) (A) For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(B) For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the phaseout percentages for the prior taxable year, as recalculated under subparagraph (B) of paragraph (3), shall apply.

(p) For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:

(1) By deleting “(other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).”

(2) By substituting “federal individual taxpayer identification number or a social security number” for “social security number.”

(q) An eligible individual, eligible individual’s spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:

(1) Upon request of the Franchise Tax Board, provide:

(A) Identifying documents acceptable for purposes of obtaining a California driver’s license or identification card as authorized by subdivisions (a), (b), and (c) of Section 12801.9 of the Vehicle Code and related regulations adopted for purposes of establishing documents acceptable to prove identity.

(B) Identifying documents used to report earned income for the taxable year.

(2) Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.

(r) The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.

history: (History: Amended (as amended by Stats. 2022, Ch. 72, Sec. 1) by Stats. 2022, Ch. 482, Sec. 5. (AB 1766) Effective January 1, 2023.)