text:
(a) (1) There shall be allowed as a credit against the “net tax,” defined in Section 17039, a state low-income housing tax credit in an amount equal to the amount determined in subdivision (c), computed in accordance with Section 42 of the Internal Revenue Code, relating to low-income housing credit, except as otherwise provided in this section.

(2) “Taxpayer,” for purposes of this section, means the sole owner in the case of an individual, the partners in the case of a partnership, and the shareholders in the case of an “S” corporation.

(3) “Housing sponsor,” for purposes of this section, means the sole owner in the case of an individual, the partnership in the case of a partnership, and the “S” corporation in the case of an “S” corporation.

(b) (1) The amount of the credit allocated to any housing sponsor shall be authorized by the California Tax Credit Allocation Committee, or any successor thereof, based on a project’s need for the credit for economic feasibility in accordance with the requirements of this section.

(A) The low-income housing project shall be located in California and shall meet either of the following requirements:

(i) Except for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code, that are allocated credits solely under the set-aside described in subdivision (c) of Section 50199.20 of the Health and Safety Code, the project’s housing sponsor has been allocated by the California Tax Credit Allocation Committee a credit for federal income tax purposes under Section 42 of the Internal Revenue Code, relating to low-income housing credit.

(ii) It qualifies for a credit under Section 42(h)(4)(B) of the Internal Revenue Code, relating to special rule where 50 percent or more of building is financed with tax-exempt bonds subject to volume cap.

(B) The California Tax Credit Allocation Committee shall not require fees for the credit under this section in addition to those fees required for applications for the tax credit pursuant to Section 42 of the Internal Revenue Code, relating to low-income housing credit. The committee may require a fee if the application for the credit under this section is submitted in a calendar year after the year the application is submitted for the federal tax credit.

(C) (i) For a project that receives a preliminary reservation of the state low-income housing tax credit, allowed pursuant to subdivision (a), on or after January 1, 2009, the credit shall be allocated to the partners of a partnership owning the project in accordance with the partnership agreement, regardless of how the federal low-income housing tax credit with respect to the project is allocated to the partners, or whether the allocation of the credit under the terms of the agreement has substantial economic effect, within the meaning of Section 704(b) of the Internal Revenue Code, relating to determination of distributive share.

(ii) To the extent the allocation of the credit to a partner under this section lacks substantial economic effect, any loss or deduction otherwise allowable under this part that is attributable to the sale or other disposition of that partner’s partnership interest made prior to the expiration of the federal credit shall not be allowed in the taxable year in which the sale or other disposition occurs, but shall instead be deferred until and treated as if it occurred in the first taxable year immediately following the taxable year in which the federal credit period expires for the project described in clause (i).

(iii) This subparagraph shall not apply to a project that receives a preliminary reservation of state low-income housing tax credits under the set-aside described in subdivision (c) of Section 50199.20 of the Health and Safety Code unless the project also receives a preliminary reservation of federal low-income housing tax credits.

(2) (A) The California Tax Credit Allocation Committee shall certify to the housing sponsor the amount of tax credit under this section allocated to the housing sponsor for each credit period.

(B) In the case of a partnership or an “S” corporation, the housing sponsor shall provide a copy of the California Tax Credit Allocation Committee certification to the taxpayer.

(C) (i) A taxpayer shall be eligible to claim the credit commencing in the taxable year the building is placed in service and the federal credit period commences, notwithstanding that the certification pursuant to subparagraph (A) has not been issued by the California Tax Credit Allocation Committee, provided that the housing sponsor has filed a taxpayer certification with the California Tax Credit Allocation Committee and delivered a copy to the taxpayer. The amount of credit claimed by the taxpayer shall not exceed the pro rata share with respect to the amount of credit that the taxpayer purchased or is allocated per the partnership agreement, as applicable, of the lesser of either of the following:

(I) The applicable percentages for each of the four credit years, as specified in subdivision (c), multiplied by the qualified basis of the building set forth in the preliminary reservation.

(II) The amount of credit the project is eligible for as stated in the taxpayer certification.

(ii) The California Tax Credit Allocation Committee may, but is not required to, review the taxpayer certification and other information provided by the housing sponsor to confirm both of the following:

(I) The calculations set forth in the taxpayer certification.

(II) The amount of credits allocated to the project is consistent with applicable California Tax Credit Allocation Committee rules and regulations for the purposes of making the certification required pursuant to subparagraph (A).

(iii) If the California Tax Credit Allocation Committee issues a certification pursuant to subparagraph (A) that is inconsistent with the taxpayer certification upon which a credit has been claimed, the taxpayer shall amend any previously filed tax returns to reflect the credit amount certified by the California Tax Credit Allocation Committee pursuant to subparagraph (A).

(iv) For purposes of this subparagraph, “taxpayer certification” means a certified statement from the certified public accountant of the housing sponsor. The taxpayer certification shall contain the amount of the credit the project is eligible for, the taxable year the building is placed in service, and the taxable year in which the federal credit period for the building has commenced.

(v) The taxpayer shall, upon request, provide a copy of the taxpayer certification pursuant to clause (iv) or the California Tax Credit Allocation Committee’s certification pursuant to subparagraph (A), as applicable, to the Franchise Tax Board.

(vi) In the case of a failure to provide a copy of the taxpayer certification pursuant to clause (iv) or the California Tax Credit Allocation Committee’s certification pursuant to subparagraph (A), if the Franchise Tax Board so requires, no credit under this section shall be allowed for that taxable year until a copy of that certification is provided.

(vii) The changes made to this subparagraph by the act adding this clause shall apply for taxable years beginning on or after January 1, 2023.

(D) All elections made by the taxpayer pursuant to Section 42 of the Internal Revenue Code, relating to low-income housing credit, apply to this section.

(E) (i) Except as described in clause (ii) or (iii), for buildings located in designated difficult development areas (DDAs) or qualified census tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas, credits may be allocated under this section in the amounts prescribed in subdivision (c), provided that the amount of credit allocated under Section 42 of the Internal Revenue Code, relating to low-income housing credit, is computed on 100 percent of the qualified basis of the building.

(ii) Notwithstanding clause (i), the California Tax Credit Allocation Committee may allocate the credit for buildings located in DDAs or QCTs that are restricted to having 50 percent of the building’s occupants be special needs households, as defined in the California Code of Regulations by the California Tax Credit Allocation Committee, or receiving an allocation pursuant to subparagraph (B) of paragraph (1) of subdivision (g), even if the taxpayer receives federal credits pursuant to Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas, provided that the credit allowed under this section shall not exceed 30 percent of the eligible basis of the building.

(iii) On and after January 1, 2018, notwithstanding clause (i), the California Tax Credit Allocation Committee may allocate the credit pursuant to paragraph (7) of subdivision (c) even if the taxpayer receives federal credits, pursuant to Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas.

(F) (i) The California Tax Credit Allocation Committee may allocate a credit under this section in exchange for a credit allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue Code, relating to increase in credit for buildings in high-cost areas, in amounts up to 30 percent of the eligible basis of a building if the credits allowed under Section 42 of the Internal Revenue Code, relating to low-income housing credit, are reduced by an equivalent amount.

(ii) An equivalent amount shall be determined by the California Tax Credit Allocation Committee based upon the relative amount required to produce an equivalent state tax credit to the taxpayer.

(c) Section 42(b) of the Internal Revenue Code, relating to applicable percentage: 70 percent present value credit for certain new buildings; 30 percent present value credit for certain other buildings, shall be modified as follows:

(1) In the case of any qualified low-income building placed in service by the housing sponsor during 1987, the term “applicable percentage” means 9 percent for each of the first three years and 3 percent for the fourth year for new buildings (whether or not the building is federally subsidized) and for existing buildings.

(2) In the case of any qualified low-income building that receives an allocation after 1989 and is a new building not federally subsidized, the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed by the Secretary of the Treasury for new buildings that are not federally subsidized for the taxable year, determined in accordance with the requirements of Section 42(b)(2) of the Internal Revenue Code, relating to temporary minimum credit rate for nonfederally subsidized new buildings, in lieu of the percentage prescribed in Section 42(b)(1)(A) of the Internal Revenue Code.

(B) For the fourth year, the difference between 30 percent and the sum of the applicable percentages for the first three years.

(3) In the case of any qualified low-income building that is a new building that is federally subsidized and receiving an allocation pursuant to subparagraph (B) of paragraph (1) of subdivision (g), the term “applicable percentage” means for the first three years, 9 percent of the qualified basis of the building, and for the fourth year, 3 percent of the qualified basis of the building.

(4) In the case of any qualified low-income building that receives an allocation after 1989 pursuant to subparagraph (A) of paragraph (1) of subdivision (g) and that is a new building that is federally subsidized or that is an existing building that is “at risk of conversion,” the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed by the Secretary of the Treasury for new buildings that are federally subsidized for the taxable year.

(B) For the fourth year, the difference between 13 percent and the sum of the applicable percentages for the first three years.

(5) In the case of any qualified low-income building that meets all of the requirements of subparagraphs (A) through (D), inclusive, the term “applicable percentage” means 30 percent for each of the first three years and 5 percent for the fourth year. A qualified low-income building receiving an allocation under this paragraph is ineligible to also receive an allocation under paragraph (3).

(A) The qualified low-income building is at least 15 years old.

(B) The qualified low-income building is either:

(i) Serving households of very low income or extremely low income such that the average maximum household income as restricted, pursuant to an existing regulatory agreement with a federal, state, county, local, or other governmental agency, is not more than 45 percent of the area median gross income, as determined under Section 42 of the Internal Revenue Code, relating to low-income housing credit, adjusted by household size, and a tax credit regulatory agreement is entered into for a period of not less than 55 years restricting the average targeted household income to no more than 45 percent of the area median income.

(ii) Financed under Section 514 or 521 of the National Housing Act of 1949 (42 U.S.C. Sec. 1485).

(C) The qualified low-income building would have insufficient credits under paragraphs (2) and (3) to complete substantial rehabilitation due to a low appraised value.

(D) The qualified low-income building will complete the substantial rehabilitation in connection with the credit allocation herein.

(6) For purposes of this section, the term “at risk of conversion,” with respect to an existing property, means a property that satisfies all of the following criteria:

(A) The property is a multifamily rental housing development in which at least 50 percent of the units receive governmental assistance pursuant to any of the following:

(i) New construction, substantial rehabilitation, moderate rehabilitation, property disposition, and loan management set-aside programs, or any other program providing project-based assistance pursuant to Section 8 of the United States Housing Act of 1937, Section 1437f of Title 42 of the United States Code, as amended.

(ii) The Below-Market-Interest-Rate Program pursuant to Section 221(d)(3) of the National Housing Act, Sections 1715l(d)(3) and (5) of Title 12 of the United States Code.

(iii) Section 236 of the National Housing Act, Section 1715z-1 of Title 12 of the United States Code.

(iv) Programs for rent supplement assistance pursuant to Section 101 of the Housing and Urban Development Act of 1965, Section 1701s of Title 12 of the United States Code, as amended.

(v) Programs under Sections 514, 515, 516, 533, and 538 of the Housing Act of 1949 (Public Law 81-171), as amended.

(vi) The low-income housing credit program set forth in Section 42 of the Internal Revenue Code, relating to low-income housing credit, this section, and Sections 12206 and 23610.5.

(vii) Programs for loans or grants administered by the Department of Housing and Community Development.

(viii) Section 202 of the Housing Act of 1959 (12 U.S.C. Sec. 1701q), as amended.

(ix) Section 142(d) of the Internal Revenue Code or its predecessors.

(x) Section 147 of the Internal Revenue Code, as enacted by the Tax Reform Act of 1986 (Public Law 99-514), or as subsequently amended, including as amended by the Tax Cuts and Jobs Act of 2017 (Public Law 115-97) and all amendments enacted prior to the Tax Cuts and Jobs Act of 2017 (Public Law 115-97).

(xi) Title I of the Housing and Community Development Act of 1974, as amended.

(xii) Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990, as amended.

(xiii) Titles IV and V of the McKinney-Vento Homeless Assistance Act of 1987, as amended, including the Department of Housing and Urban Development’s Supportive Housing Program, Shelter Plus Care Program, and surplus federal property disposition program.

(xiv) The following assistance provided by counties and cities in exchange for restrictions on the maximum rents that may be charged for units within a multifamily rental housing development and on the maximum tenant income as a condition of eligibility for occupancy of the unit subject to the rent restriction, as reflected by a recorded agreement with a county or city:

(I) Loans or grants provided using tax increment financing pursuant to the Community Redevelopment Law (Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code).

(II) Local housing trust funds, as referred to in Section 50843 of the Health and Safety Code.

(III) The sale or lease of public property at or below market rates.

(IV) The granting of density bonuses, or concessions or incentives, including fee waivers, parking variances, or amendments to general plans, zoning, or redevelopment project area plans, pursuant to Chapter 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code.

(B) As used in subparagraph (A), “government assistance” shall not include the use of tenant-based housing choice vouchers under subsection (o) of Section 1437f of Title 42 of the United States Code, excluding paragraph (13) relating to project-based assistance. Restrictions shall not include any rent control or rent stabilization ordinance imposed by a county or city.

(C) If the development is subject to restrictions on rent and income levels, 50 percent of the units are also restricted to initial occupancy by lower income households, as defined in Section 50079.5 of the Health and Safety Code.

(D) The restrictions on rent and income levels, excluding any restrictions recorded pursuant to paragraph (2) of subdivision (e) of Section 65863.11 or Section 65863.13 of the Government Code or in connection with interim or acquisition financing, will terminate or the federally insured mortgage or rent subsidy contract on the property is eligible for prepayment or termination any time within five years before or after the date of application to the California Tax Credit Allocation Committee.

(E) The entity acquiring the property enters into a regulatory agreement that requires the property to be operated in accordance with the requirements of Section 42 of the Internal Revenue Code and any further requirements added by the California Tax Credit Allocation Committee to implement the low-income housing tax credit established by Section 42 of the Internal Revenue Code (26 U.S.C. Sec. 42), this section, and Sections 12206 and 23610.5 pursuant to Chapter 3.6 (commencing with Section 50199.4) of Part 1 of Division 31 of the Health and Safety Code.

(F) The property satisfies the requirements of Section 42(e) of the Internal Revenue Code, relating to rehabilitation expenditures treated as separate new building, except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not apply.

(7) On and after January 1, 2018, in the case of any qualified low-income building that is (A) farmworker housing, as defined by paragraph (2) of subdivision (h) of Section 50199.7 of the Health and Safety Code, and (B) is federally subsidized, the term “applicable percentage” means for each of the first three years, 20 percent of the qualified basis of the building, and for the fourth year, 15 percent of the qualified basis of the building.

(d) The term “qualified low-income housing project” as defined in Section 42(c)(2) of the Internal Revenue Code, relating to qualified low-income building, is modified by adding the following requirements:

(1) The taxpayer shall be entitled to receive a cash distribution from the operations of the project, after funding required reserves, that, at the election of the taxpayer, is equal to:

(A) An amount not to exceed 8 percent of the lesser of:

(i) The owner equity, which shall include the amount of the capital contributions actually paid to the housing sponsor and shall not include any amounts until they are paid on an investor note.

(ii) Twenty percent of the adjusted basis of the building as of the close of the first taxable year of the credit period.

(B) The amount of the cashflow from those units in the building that are not low-income units. For purposes of computing cashflow under this subparagraph, operating costs shall be allocated to the low-income units using the “floor space fraction,” as defined in Section 42 of the Internal Revenue Code, relating to low-income housing credit.

(C) Any amount allowed to be distributed under subparagraph (A) that is not available for distribution during the first 5 years of the compliance period may be accumulated and distributed any time during the first 15 years of the compliance period but not thereafter.

(2) The limitation on return shall apply in the aggregate to the partners if the housing sponsor is a partnership and in the aggregate to the shareholders if the housing sponsor is an “S” corporation.

(3) The housing sponsor shall apply any cash available for distribution in excess of the amount eligible to be distributed under paragraph (1) to reduce the rent on rent-restricted units or to increase the number of rent-restricted units subject to the tests of Section 42(g)(1) of the Internal Revenue Code, relating to in general.

(e) The provisions of Section 42(f) of the Internal Revenue Code, relating to definition and special rules relating to credit period, shall be modified as follows:

(1) The term “credit period” as defined in Section 42(f)(1) of the Internal Revenue Code, relating to credit period defined, is modified by substituting “four taxable years” for “10 taxable years.”

(2) The special rule for the first taxable year of the credit period under Section 42(f)(2) of the Internal Revenue Code, relating to special rules for 1st year of credit period, shall not apply to the tax credit under this section.

(3) Section 42(f)(3) of the Internal Revenue Code, relating to determination of applicable percentage with respect to increases in qualified basis after 1st year of credit period, is modified to read:

If, as of the close of any taxable year in the compliance period, after the first year of the credit period, the qualified basis of any building exceeds the qualified basis of that building as of the close of the first year of the credit period, the housing sponsor, to the extent of its tax credit allocation, shall be eligible for a credit on the excess in an amount equal to the applicable percentage determined pursuant to subdivision (c) for the four-year period beginning with the taxable year in which the increase in qualified basis occurs.

(f) The provisions of Section 42(h) of the Internal Revenue Code, relating to limitation on aggregate credit allowable with respect to projects located in a state, shall be modified as follows:

(1) Section 42(h)(2) of the Internal Revenue Code, relating to allocated credit amount to apply to all taxable years ending during or after credit allocation year, does not apply and instead the following provisions apply:

The total amount for the four-year credit period of the housing credit dollars allocated in a calendar year to any building shall reduce the aggregate housing credit dollar amount of the California Tax Credit Allocation Committee for the calendar year in which the allocation is made.

(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I), (7), and (8) of Section 42(h) of the Internal Revenue Code, relating to limitation on aggregate credit allowable with respect to projects located in a state, do not apply to this section.

(g) The aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to this section, Section 12206, and Section 23610.5 shall be an amount equal to the sum of all the following:

(1) (A) Seventy million dollars ($70,000,000) for the 2001 calendar year, and, for the 2002 calendar year and each calendar year thereafter, seventy million dollars ($70,000,000) increased by the percentage, if any, by which the Consumer Price Index for the preceding calendar year exceeds the Consumer Price Index for the 2001 calendar year. For the purposes of this paragraph, the term “Consumer Price Index” means the last Consumer Price Index for All Urban Consumers published by the federal Department of Labor.

(B) Five hundred million dollars ($500,000,000) for the 2020 calendar year, and up to five hundred million dollars ($500,000,000) for the 2021 calendar year and every year thereafter. Allocations shall only be available pursuant to this subparagraph in the 2021 calendar year and thereafter if the annual Budget Act, or if any bill providing for appropriations related to the Budget Act, specifies an amount to be available for allocation in that calendar year by the California Tax Credit Allocation Committee, and after the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee have adopted regulations, rules, or guidelines to align the programs of both committees with the objective of increasing production and containing costs as described in clause (iii). The California Tax Credit Allocation Committee shall accept applications for the 2021 calendar year not sooner than 30 days after these regulations, rules, or guidelines have been adopted. The California Debt Limit Allocation Committee shall not accept applications for the 2021 calendar year for bond allocations for an eligible project under this section prior to issuing, reviewing, and publishing a new tax-exempt private activity bond demand survey. A housing sponsor receiving a nonfederally subsidized allocation under subdivision (c) shall not be eligible for receipt of the housing credit allocated from the increased amount under this subparagraph. Except as provided in clause (vi), a housing sponsor receiving a nonfederally subsidized allocation under subdivision (c) shall remain eligible for receipt of the housing credit allocated from the credit ceiling amount under subparagraph (A).

(i) Eligible projects for allocations under this subparagraph include any new building, as defined in Section 42(i)(4) of the Internal Revenue Code, relating to newly constructed buildings, and the regulations promulgated thereunder, excluding rehabilitation expenditures under Section 42(e) of the Internal Revenue Code, relating to rehabilitation expenditures treated as separate new building, and is federally subsidized. Eligible projects for allocations under this subparagraph also include any retrofitting and repurposing of existing nonresidential structures, including, but not limited to, hotels and motels, that were converted to residential use within the previous five years from the date of the application.

(ii) Notwithstanding any other provision of this section, for allocations pursuant to this subparagraph for the 2020 calendar year, the California Tax Credit Allocation Committee shall consider projects located throughout the state and shall allocate housing credits, subject to the minimum federal requirements as set forth in Sections 42 and 142 of the Internal Revenue Code, the minimum requirements set forth in Sections 5033 and 5190 of the California Debt Limit Allocation Committee regulations, and the minimum set forth in Section 10326 of the Tax Credit Allocation Committee regulations, for projects that can begin construction within 180 days from award, subject to availability of funds.

(iii) (I) Notwithstanding any other provision of this section, for allocations pursuant to this subparagraph for the 2021 calendar year and thereafter, the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee shall develop and prescribe regulations, rules, or guidelines necessary to implement a new allocation methodology that is aimed at increasing production and containing costs, which would include a scoring system that maximizes the efficient use of public subsidy and benefit created through the private activity bond and low-income housing tax credit programs. The factors for determining the efficient use of public subsidy and benefit shall include, but not be limited to, all of the following:

(ia) The number and size of units developed including local incentives provided to increase density.

(ib) The proximity to amenities, jobs, and public transportation.

(ic) The location of the development.

(id) The delivery of housing affordable to very low and extremely low income households by the development.

(II) The efficient use of public subsidy and benefit criteria specified in this clause shall take into account the total state subsidy provided and prioritize cost containment and increased unit production. These regulations, rules, or guidelines developed pursuant to this subparagraph shall also consider updated definitions for at-risk preservation and new construction.

(III) For bond allocations for the 2021 calendar year to projects eligible for an allocation under this subparagraph, the California Debt Limit Allocation Committee may adopt emergency regulations.

(IV) The California Tax Credit Allocation Committee shall consider amending the regulations establishing a scoring system, as required by this clause, to also grant, for farmworker housing as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code, maximum points to farmworker housing projects under the housing needs category, and an initial five points in the category for site amenities beyond those required as additional thresholds.

(iv) Of the amount available pursuant to this subparagraph, and notwithstanding any other requirement of this section, the California Tax Credit Allocation Committee may allocate up to two hundred million dollars ($200,000,000) for housing financed by the California Housing Finance Agency under its Mixed-Income Program.

(v) (I) For the calendar years of 2024 to 2034, inclusive, of the amount available pursuant to this subparagraph, the lesser of 5 percent of that amount or twenty-five million dollars ($25,000,000) per calendar year shall be set aside for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code, and administered consistent with the credits available pursuant to paragraph (4).

(II) Any credits pursuant to this clause that remain unallocated following the conclusion of a funding round shall roll over to consecutive subsequent funding rounds in that calendar year with the exception that any credits that remain unallocated after the final funding round in that calendar year shall be added back to the aggregate amount of credits that may be allocated pursuant to this subparagraph.

(III) For the 2035 calendar year, and every year thereafter, of the amount available pursuant to this subparagraph, a portion of the amount allocated shall be set aside for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code. The amount set aside shall be determined by the Legislature upon consideration of the comprehensive strategy, or most recent update thereof, provided by the Department of Housing and Community Development pursuant to subdivision (c) of Section 50408.5 of the Health and Safety Code.

(vi) (I) For any calendar year in which the California Debt Limit Allocation Committee has declared a competition for the award of tax-exempt bond authority for qualified residential rental projects, the California Tax Credit Allocation Committee may allocate some or all of the credits allocated under this subparagraph, except for any credits allocated for housing financed by the California Housing Finance Agency under its Mixed-Income Program, for nonfederally subsidized buildings eligible for credits under Section 42 of the Internal Revenue Code, relating to low-income housing credit, and shall allocate the remainder of these credits for new buildings, as defined in Section 42(i)(4) of the Internal Revenue Code, relating to new buildings, that are federally subsidized and that can begin construction within a reasonable time, as determined by the California Tax Credit Allocation Committee.

(II) For any calendar year in which the California Debt Limit Allocation Committee has not declared a competition for the award of tax-exempt bond authority for qualified residential rental projects, projects receiving an award of credits pursuant to this subparagraph shall begin construction within a reasonable time, as determined by the California Tax Credit Allocation Committee.

(III) Notwithstanding subclauses (I) and (II), if credits available under this subparagraph remain unallocated after the final California Debt Limit Allocation Committee round for qualified residential rental projects in a given calendar year, the California Tax Credit Allocation Committee may allocate some or all of the remaining credits for nonfederally subsidized buildings eligible for credits under Section 42 of the Internal Revenue Code, relating to low-income housing credit.

(2) The unused housing credit ceiling, if any, for the preceding calendar years.

(3) The amount of housing credit ceiling returned in the calendar year. For purposes of this paragraph, the amount of housing credit dollar amount returned in the calendar year equals the housing credit dollar amount previously allocated to any project that does not become a qualified low-income housing project within the period required by this section or to any project with respect to which an allocation is canceled by mutual consent of the California Tax Credit Allocation Committee and the allocation recipient.

(4) Five hundred thousand dollars ($500,000) per calendar year for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code.

(5) The amount of any unallocated or returned credits under former Sections 17053.14, 23608.2, and 23608.3, as those sections read prior to January 1, 2009, until fully exhausted for projects to provide farmworker housing, as defined in subdivision (h) of Section 50199.7 of the Health and Safety Code.

(h) The term “compliance period” as defined in Section 42(i)(1) of the Internal Revenue Code, relating to compliance period, is modified to mean, with respect to any building, the period of 30 consecutive taxable years beginning with the first taxable year of the credit period with respect thereto.

(i) Section 42(j) of the Internal Revenue Code, relating to recapture of credit, shall not be applicable and the following requirements of this section shall be set forth in a regulatory agreement between the California Tax Credit Allocation Committee and the housing sponsor, and the regulatory agreement shall be subordinated, when required, to any lien or encumbrance of any banks or other institutional lenders to the project. The regulatory agreement entered into pursuant to subdivision (f) of Section 50199.14 of the Health and Safety Code shall apply, provided that the agreement includes all of the following provisions:

(1) A term not less than the compliance period.

(2) A requirement that the agreement be recorded in the official records of the county in which the qualified low-income housing project is located.

(3) A provision stating which state and local agencies can enforce the regulatory agreement in the event the housing sponsor fails to satisfy any of the requirements of this section.

(4) A provision that the regulatory agreement shall be deemed a contract enforceable by tenants as third-party beneficiaries thereto and that allows individuals, whether prospective, present, or former occupants of the building, who meet the income limitation applicable to the building, the right to enforce the regulatory agreement in any state court.

(5) A provision incorporating the requirements of Section 42 of the Internal Revenue Code, relating to low-income housing credit, as modified by this section.

(6) A requirement that the housing sponsor notify the California Tax Credit Allocation Committee or its designee if there is a determination by the Internal Revenue Service that the project is not in compliance with Section 42(g) of the Internal Revenue Code, relating to qualified low-income housing project.

(7) A requirement that the housing sponsor, as security for the performance of the housing sponsor’s obligations under the regulatory agreement, assign the housing sponsor’s interest in rents that it receives from the project, provided that until there is a default under the regulatory agreement, the housing sponsor is entitled to collect and retain the rents.

(8) A provision that the remedies available in the event of a default under the regulatory agreement that is not cured within a reasonable cure period include, but are not limited to, allowing any of the parties designated to enforce the regulatory agreement to collect all rents with respect to the project; taking possession of the project and operating the project in accordance with the regulatory agreement until the enforcer determines the housing sponsor is in a position to operate the project in accordance with the regulatory agreement; applying to any court for specific performance; securing the appointment of a receiver to operate the project; or any other relief as may be appropriate.

(j) (1) The committee shall allocate the housing credit on a regular basis consisting of two or more periods in each calendar year during which applications may be filed and considered. The committee shall establish application filing deadlines, the maximum percentage of federal and state low-income housing tax credit ceiling that may be allocated by the committee in that period, and the approximate date on which allocations shall be made. If the enactment of federal or state law, the adoption of rules or regulations, or other similar events prevent the use of two allocation periods, the committee may reduce the number of periods and adjust the filing deadlines, maximum percentage of credit allocated, and the allocation dates.

(2) The committee shall adopt a qualified allocation plan, as provided in Section 42(m)(1) of the Internal Revenue Code, relating to plans for allocation of credit among projects. In adopting this plan, the committee shall comply with the provisions of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code, relating to qualified allocation plan and relating to certain selection criteria must be used, respectively.

(3) Notwithstanding Section 42(m) of the Internal Revenue Code, relating to responsibilities of housing credit agencies, the California Tax Credit Allocation Committee shall allocate housing credits in accordance with the qualified allocation plan and regulations, which shall include the following provisions:

(A) All housing sponsors, as defined by paragraph (3) of subdivision (a), shall demonstrate at the time the application is filed with the committee that the project meets the following threshold requirements:

(i) The housing sponsor shall demonstrate that there is a need and demand for low-income housing in the community or region for which it is proposed.

(ii) The project’s proposed financing, including tax credit proceeds, shall be sufficient to complete the project and that the proposed operating income shall be adequate to operate the project for the extended use period.

(iii) The project shall have enforceable financing commitments, either construction or permanent financing, for at least 50 percent of the total estimated financing of the project.

(iv) The housing sponsor shall have and maintain control of the site for the project.

(v) The housing sponsor shall demonstrate that the project complies with all applicable local land use and zoning ordinances.

(vi) The housing sponsor shall demonstrate that the project development team has the experience and the financial capacity to ensure project completion and operation for the extended use period.

(vii) The housing sponsor shall demonstrate the amount of tax credit that is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the extended use period, taking into account operating expenses, a supportable debt service, reserves, funds set aside for rental subsidies and required equity, and a development fee that does not exceed a specified percentage of the eligible basis of the project prior to inclusion of the development fee in the eligible basis, as determined by the committee.

(B) The committee shall give a preference to those projects satisfying all of the threshold requirements of subparagraph (A) if both of the following apply:

(i) The project serves the lowest income tenants at rents affordable to those tenants.

(ii) The project is obligated to serve qualified tenants for the longest period.

(C) In addition to the provisions of subparagraphs (A) and (B), the committee shall use the following criteria in allocating housing credits:

(i) Projects serving large families in which a substantial number, as defined by the committee, of all residential units are low-income units with three or more bedrooms.

(ii) Projects providing single-room occupancy units serving very low income tenants.

(iii) Existing projects that are “at risk of conversion,” as defined by paragraph (6) of subdivision (c).

(iv) Projects for which a public agency provides direct or indirect long-term financial support for at least 15 percent of the total project development costs or projects for which the owner’s equity constitutes at least 30 percent of the total project development costs.

(v) Projects that provide tenant amenities not generally available to residents of low-income housing projects.

(4) For purposes of allocating credits pursuant to this section, the committee shall not give preference to any project by virtue of the date of submission of its application.

(D) Subparagraphs (B) and (C) shall not apply to projects receiving an allocation pursuant to subparagraph (B) of paragraph (1) of subdivision (g).

(k) Section 42(l) of the Internal Revenue Code, relating to certifications and other reports to secretary, shall be modified as follows:

The term “secretary” shall be replaced by the term “Franchise Tax Board.”

(l) In the case in which the credit allowed under this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding years, if necessary, until the credit has been exhausted.

(m) A project that received an allocation of a 1989 federal housing credit dollar amount shall be eligible to receive an allocation of a 1990 state housing credit dollar amount, subject to all of the following conditions:

(1) The project was not placed in service prior to 1990.

(2) To the extent the amendments made to this section by the Statutes of 1990 conflict with any provisions existing in this section prior to those amendments, the prior provisions of law shall prevail.

(3) Notwithstanding paragraph (2), a project applying for an allocation under this subdivision shall be subject to the requirements of paragraph (3) of subdivision (j).

(n) The credit period with respect to an allocation of credit in 1989 by the California Tax Credit Allocation Committee of which any amount is attributable to unallocated credit from 1987 or 1988 shall not begin until after December 31, 1989.

(o) The provisions of Section 11407(a) of Public Law 101-508, relating to the effective date of the extension of the low-income housing credit, apply to calendar years after 1989.

(p) The provisions of Section 11407(c) of Public Law 101-508, relating to election to accelerate credit, shall not apply.

(q) (1) (A) For a project that receives a preliminary reservation under this section beginning on or after January 1, 2016, a taxpayer may elect, in the manner prescribed by the California Tax Credit Allocation Committee, to sell all or any portion of any credit allowed, subject to subparagraph (B). The taxpayer may make the election to sell pursuant to this subdivision at any time before the California Tax Credit Allocation Committee allocates a final credit amount for the project pursuant to this section, at which point the election shall become irrevocable.

(B) A credit that a taxpayer elects to sell all or a portion of pursuant to this subdivision shall be sold for consideration that is not less than 80 percent of the amount of the credit.

(2) (A) The taxpayer that originally received the credit shall report to the California Tax Credit Allocation Committee within 10 days of the sale of the credit, in the form and manner specified by the California Tax Credit Allocation Committee, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party or parties to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the taxpayer for the sale of the credit.

(B) The California Tax Credit Allocation Committee shall provide an annual listing to the Franchise Tax Board, in a form and manner agreed upon by the California Tax Credit Allocation Committee and the Franchise Tax Board, of the taxpayers that have sold or purchased a credit pursuant to this subdivision.

(3) A credit may be sold pursuant to this subdivision to more than one unrelated party.

(4) Notwithstanding any other law, the taxpayer that originally received the credit that is sold pursuant to paragraph (1) shall remain solely liable for all obligations and liabilities imposed on the taxpayer by this section with respect to the credit, none of which shall apply to a party to whom the credit has been sold or subsequently transferred. Parties that purchase credits pursuant to paragraph (1) shall be entitled to utilize the purchased credits in the same manner in which the taxpayer that originally received the credit could utilize them.

(5) A taxpayer shall not sell a credit allowed by this section if the taxpayer was allowed the credit on any tax return of the taxpayer.

(r) The California Tax Credit Allocation Committee may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the California Tax Credit Allocation Committee pursuant to this section.

(s) The amendments to this section made by Chapter 1222 of the Statutes of 1993 apply only to taxable years beginning on or after January 1, 1994.

(t) This section shall remain in effect on and after December 1, 1990, for as long as Section 42 of the Internal Revenue Code, relating to low-income housing credit, remains in effect. Any unused credit may continue to be carried forward, as provided in subdivision (l), until the credit has been exhausted.

history: (History: Amended by Stats. 2025, Ch. 492, Sec. 2. (AB 480) Effective January 1, 2026. Section conditionally inoperative pursuant to subd. (t).)


kind: section

code: RTC

text:
(a) (1) For each taxable year beginning on and after January 1, 2014, and before January 1, 2035, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.

(2) The credit under this section shall be allocated by GO-Biz with respect to the 2013–14 fiscal year through and including the 2032–33 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:

(A) The number of jobs the taxpayer will create or retain in this state.

(B) The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.

(C) The amount of investment in this state by the taxpayer.

(D) The extent of unemployment or poverty in the area according to the United States Census in which the taxpayer’s project or business is proposed or located.

(E) The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.

(F) The incentives available to the taxpayer in other states.

(G) The duration of the proposed project and the duration the taxpayer commits to remain in this state.

(H) The overall economic impact in this state of the taxpayer’s project or business.

(I) The strategic importance of the taxpayer’s project or business to the state, region, or locality.

(J) The opportunity for future growth and expansion in this state by the taxpayer’s business.

(K) The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.

(L) For a credit allocated beginning with the 2018–19 fiscal year, the training opportunities offered by the taxpayer to its employees.

(3) The written agreement entered into pursuant to paragraph (2) shall include:

(A) Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.

(B) Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.

(C) Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.

(b) For purposes of this section:

(1) “Committee” means the California Competes Tax Credit Committee established pursuant to Section 18410.2.

(2) “GO-Biz” means the Governor’s Office of Business and Economic Development.

(c) For purposes of this section, GO-Biz shall do the following:

(1) Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.

(2) Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.

(3) Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.

(4) Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.

(5) Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.

(6) Post on its internet website all of the following:

(A) The name of each taxpayer allocated a credit pursuant to this section.

(B) The estimated amount of the investment by each taxpayer.

(C) The estimated number of jobs created or retained.

(D) The amount of the credit allocated to the taxpayer.

(E) The amount of the credit recaptured from the taxpayer, if applicable.

(F) The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.

(G) Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).

(7) Consider the extent to which the credit will influence the taxpayer’s ability, willingness, or both, to create jobs in this state that might not otherwise be created in the state by the taxpayer or any other taxpayer. GO-Biz may also consider other factors, including, but not limited to, the following:

(A) The financial solvency of the taxpayer and the taxpayer’s ability to finance its proposed expansion.

(B) The taxpayer’s current and prior compliance with federal and state laws.

(C) Current and prior litigation involving the taxpayer.

(D) The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.

(E) For allocation periods beginning with the 2023–24 fiscal year, the taxpayer’s willingness to relocate jobs into California from a state that has enacted a law that does any of the following:

(i) Voids or repeals, or has the effect of voiding or repealing, existing state protections against discrimination on the basis of sexual orientation, gender identity, or gender expression.

(ii) Authorizes or requires discrimination against same-sex couples or their families, or discrimination on the basis of sexual orientation, gender identity, or gender expression.

(iii) Creates an exemption to antidiscrimination laws in order to permit discrimination against same-sex couples or their families, or permits discrimination on the basis of sexual orientation, gender identity, or gender expression.

(iv) Denies or interferes with, or has the effect of denying or interfering with, a woman’s right to choose to bear a child or to choose and obtain an abortion, as provided by Article 2.5 (commencing with Section 123460) of Chapter 2 of Part 2 of Division 106 of the Health and Safety Code.

(F) For allocation periods beginning with the 2023–24 fiscal year, the taxpayer’s commitment to treating their workforce fairly and creating quality, full-time, wage and salary jobs in the state, evidence of which may include, but not be limited to, the following:

(i) Training, career ladder, apprenticeship, and preapprenticeship programs for nonsupervisorial employees.

(ii) Joint labor-management letter of support.

(iii) A high percentage of full-time wage and salary employees compared to part-time, temporary, and independent contractors.

(iv) Little to no history of a bad safety record, or resolved or pending litigation, violations, citations, fines, or penalties relating to any state or federal environmental and labor laws within the last 10 years.

(G) Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.

(8) (A) Implementation of subparagraphs (E) and (F) of paragraph (7) of this subdivision for the 2022–23 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the Governor’s Office of Business and Economic Development is hereby authorized to adopt emergency regulations to implement subparagraphs (E) and (F) of paragraph (7) of this subdivision during the 2022–23 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

(B) Nothing in this subdivision shall require the Governor’s Office of Business and Economic Development to approve emergency regulations.

(d) For purposes of this section, the Franchise Tax Board shall do all of the following:

(1) (A) Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.

(B) In the case of a taxpayer that is a “small business,” as defined in Section 17053.73, review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.

(2) Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.

(e) In the case where the credit allowed under this section exceeds the “net tax,” as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the “net tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.

(f) Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committee’s recapture determination occurred.

(g) (1) The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 23689 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):

(A) Thirty million dollars ($30,000,000) for the 2013–14 fiscal year, one hundred fifty million dollars ($150,000,000) for the 2014–15 fiscal year, two hundred million dollars ($200,000,000) for each fiscal year from 2015–16 to 2017–18, inclusive, one hundred eighty million dollars ($180,000,000) for each fiscal year from 2018–19 to 2020–21, inclusive, two hundred ninety million dollars ($290,000,000) for the 2021–22 fiscal year, and one hundred eighty million dollars ($180,000,000) for each fiscal year from 2022–23 to 2032–33, inclusive.

(B) The unallocated credit amount, if any, from the preceding fiscal year.

(C) The amount of any previously allocated credits that have been recaptured.

(D) The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the California Department of Tax and Fee Administration, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 23626, and 23689 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.

(i) The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or the Chairperson’s designee, may determine.

(ii) In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).

(E) (i) For the 2015–16 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.

(ii) If the amount available per fiscal year pursuant to this section and Section 23689 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 for the next fiscal year shall be reduced by the amount of that deficit.

(iii) It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 shall continue if the repeal dates of the credits allowed by this section and Section 23689 are removed or extended.

(2) (A) In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 2032–33 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 23689, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 2032–33 fiscal year.

(B) It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.

(3) Each fiscal year through the 2017–18 fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 23689 shall be reserved for small business, as defined in Section 17053.73 or 23626.

(4) Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.

(h) GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

(i) A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall comply with existing law on the date the agreement is executed.

(j) (1) The Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the 2034–35 fiscal year, inclusive.

(2) The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts.

(k) (1) Section 19542 shall apply to all information obtained by the Franchise Tax Board and GO-Biz for the purpose of administering the California Competes Tax Credit established under this section.

(2) Notwithstanding Section 19542 and paragraph (1), the Franchise Tax Board may disclose information to GO-Biz and GO-Biz may disclose information to the Franchise Tax Board for administration of the California Competes Tax Credit established under this section.

(l) This section shall remain in effect only until December 1, 2035, and as of that date is repealed.

history: (History: Amended by Stats. 2026, Ch. 85, Sec. 2. (SB 180) Effective July 13, 2026. Repealed as of December 1, 2035, by its own provisions.)

division: 2. OTHER TAXES

part: 10. PERSONAL INCOME TAX

chapter: 2. Imposition of Tax

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


text:
(a) In the case of a person entitled to a refund pursuant to Section 1176 of the Unemployment Insurance Code, there shall be a credit against the tax imposed under this part in the amount of such refund. If the tax due after deduction of any other credit under this part is less than the credit allowable pursuant to this section, the difference shall be a tax refund.

(b) If the Franchise Tax Board disallows the refund or credit provided for by this section, the Franchise Tax Board shall notify the claimant accordingly. The Franchise Tax Board’s action upon the credit or refund is final unless the claimant files a protest with the Director of Employment Development pursuant to Section 1176.5 of the Unemployment Insurance Code. None of the remedies provided by this part shall be available to such claimant.

history: (History: Amended by Stats. 1977, Ch. 1252.)


text:
(a) In addition to the other taxes imposed by this part, there is hereby imposed for each taxable year, a tax equal to the excess, if any, of:

(1) The tentative minimum tax for the taxable year, over

(2) The regular tax for the taxable year.

(b) For purposes of this chapter, each of the following applies:

(1) The tentative minimum tax shall be computed in accordance with Sections 55 to 59, inclusive, of the Internal Revenue Code, except as otherwise provided in this part.

(2) The regular tax shall be the amount of tax imposed by Section 17041 or 17048, before reduction for any credits against the tax, less any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560.

(3) (A) The provisions of Section 55(b)(1) of the Internal Revenue Code shall be modified to provide that the tentative minimum tax for the taxable year shall be equal to the following percent of so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount, before reduction for any credits against the tax:

(i) For any taxable year beginning on or after January 1, 1991, and before January 1, 1996, 8.5 percent.

(ii) For any taxable year beginning on or after January 1, 1996, and before January 1, 2009, 7 percent.

(iii) For taxable years beginning on and after January 1, 2009, and before January 1, 2011, 7.25 percent.

(iv) For any taxable year beginning on or after January 1, 2011, 7 percent.

(B) In the case of a nonresident or part-year resident, the tentative minimum tax shall be computed by multiplying the alternative minimum taxable income of the nonresident or part-year resident, as defined in subparagraph (C), by a rate (expressed as a percentage) equal to the tax computed under subdivision (b) on the alternative minimum 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) For purposes of this section, the term “alternative minimum taxable income of a nonresident or part-year resident” includes each of the following:

(i) For any period during which the taxpayer was a resident of this state (as defined by Section 17014), all items of alternative minimum taxable income (as modified for purposes of this chapter), regardless of source.

(ii) For any period during which the taxpayer was not a resident of this state, alternative minimum taxable income (as modified for purposes of this chapter) which were 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).

(iii) For purposes of computing “alternative minimum taxable income of a nonresident or part-year resident,” any carryover items, deferred income, suspended losses, or suspended deductions shall only be allowable to the extent that the carryover item, suspended loss, or suspended deduction was derived from sources within this state.

(4) The provisions of Section 55(b)(2) of the Internal Revenue Code, relating to alternative minimum taxable income, shall be modified to provide that alternative minimum taxable income shall not include the income, adjustments, and items of tax preference attributable to any trade or business of a qualified taxpayer.

(A) For purposes of this paragraph, “qualified taxpayer” means a taxpayer who meets both of the following:

(i) Is the owner of, or has an ownership interest in, a trade or business.

(ii) Has aggregate gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the taxable year from all trades or businesses of which the taxpayer is the owner or has an ownership interest, in the amount of that taxpayer’s proportionate interest in each trade or business.

(B) For purposes of this paragraph, “aggregate gross receipts, less returns and allowances” means the sum of the gross receipts of the trades or businesses that the taxpayer owns and the proportionate interest of the gross receipts of the trades or businesses that the taxpayer owns and of pass-through entities in which the taxpayer holds an interest.

(C) For purposes of this paragraph, “gross receipts, less returns and allowances” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (d) of Section 25120.

(D) For purposes of this paragraph, “proportionate interest” means:

(i) In the case of a pass-through entity that reports a profit for the taxable year, the taxpayer’s profit interest in the entity at the end of the taxpayer’s taxable year.

(ii) In the case of a pass-through entity that reports a loss for the taxable year, the taxpayer’s loss interest in the entity at the end of the taxpayer’s taxable year.

(iii) In the case of a pass-through entity that is sold or liquidates during the taxable year, the taxpayer’s capital account interest in the entity at the time of the sale or liquidation.

(E) (i) For purposes of this paragraph, “proportionate interest” includes an interest in a pass-through entity.

(ii) For purposes of this paragraph, “pass-through entity” means any of the following:

(I) A partnership, as defined by Section 17008.

(II) An “S” corporation, as provided in Chapter 4.5 (commencing with Section 23800) of Part 11.

(III) A regulated investment company, as provided in Section 24871.

(IV) A real estate investment trust, as provided in Section 24872.

(V) A real estate mortgage investment conduit, as provided in Section 24874.

(5) For taxable years beginning on or after January 1, 1998, Section 55(d)(1) of the Internal Revenue Code, relating to exemption amount for taxpayers other than corporations is modified, for purposes of this part, to provide the following exemption amounts in lieu of those contained therein:

(A) Fifty-seven thousand two hundred sixty dollars ($57,260) in the case of either of the following:

(i) A joint return.

(ii) A surviving spouse.

(B) Forty-two thousand nine hundred forty-five dollars ($42,945) in the case of an individual who is both of the following:

(i) Not a married individual.

(ii) Not a surviving spouse.

(C) Twenty-eight thousand six hundred thirty dollars ($28,630) in the case of either of the following:

(i) A married individual who files a separate return.

(ii) An estate or trust.

(6) For taxable years beginning on or after January 1, 1998, Section 55(d)(3) of the Internal Revenue Code, relating to phaseout of exemption amount, is modified, for purposes of this part, to provide the following phaseout of exemption amounts in lieu of those contained therein:

(A) Two hundred fourteen thousand seven hundred twenty-five dollars ($214,725) in the case of a taxpayer described in subparagraph (A) of paragraph (5).

(B) One hundred sixty-one thousand forty-four dollars ($161,044) in the case of a taxpayer described in subparagraph (B) of paragraph (5).

(C) One hundred seven thousand three hundred sixty-two dollars ($107,362) in the case of a taxpayer described in subparagraph (C) of paragraph (5).

(7) For each taxable year beginning on or after January 1, 1999, the Franchise Tax Board shall recompute the exemption amounts prescribed in paragraph (5) and the phaseout of exemption amounts prescribed in paragraph (6). Those computations shall be made as follows:

(A) 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.

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

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

(ii) Multiply the preceding taxable year exemption amounts and the phaseout of exemption amounts by the inflation adjustment factor determined in clause (i) and round off the resulting products to the nearest one dollar ($1).

(c) (1) Section 56(b)(1)(E) of the Internal Revenue Code, relating to standard deduction and deduction for personal exemptions not allowed, is modified, for purposes of this part, to deny the standard deduction allowed by Section 17073.5.

(2) Section 56(b)(3) of the Internal Revenue Code, relating to treatment of incentive stock options, shall be modified to additionally provide the following:

(A) Section 421 of the Internal Revenue Code does not apply to the transfer of stock acquired pursuant to the exercise of a California qualified stock option under Section 17502.

(B) Section 422(c)(2) of the Internal Revenue Code applies in any case in which the disposition and inclusion of a California qualified stock option for purposes of this chapter are within the same taxable year, and that section does not apply in any other case.

(C) The adjusted basis of any stock acquired by the exercise of a California qualified stock option shall be determined on the basis of the treatment prescribed by this paragraph.

(d) The provisions of Section 57(a)(5) of the Internal Revenue Code, relating to tax-exempt interest, shall not apply.

(e) The provisions of Section 59(a) of the Internal Revenue Code, relating to the alternative minimum tax foreign tax credit, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 5. (SB 711) Effective October 1, 2025.)

chapter: 2.1. Alternative Minimum Tax

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 2.1. Alternative Minimum Tax


text: For the purposes of this chapter, Part VI of Subchapter A of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to alternative minimum tax, as it read on January 1, 2015, shall apply, except as otherwise provided.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 6. (SB 711) Effective October 1, 2025.)


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

history: (History: Repealed and added by Stats. 2025, Ch. 231, Sec. 9. (SB 711) Effective October 1, 2025.)


text: Section 55(b)(3) of the Internal Revenue Code, relating to maximum rate of tax on net capital gain of noncorporate taxpayers, shall not apply.

history: (History: Added by Stats. 1998, Ch. 322, Sec. 15. Effective August 20, 1998.)


text:
(a) There shall be allowed as a credit against the net tax (as defined by Section 17039) for any taxable year an amount equal to the minimum tax credit for that taxable year.

(b) For purposes of subdivision (a), the minimum tax credit shall be determined in accordance with Section 53 of the Internal Revenue Code, except as otherwise provided in this part.

(c) For purposes of this chapter, the amount determined under Section 53(c)(1) of the Internal Revenue Code shall be the regular tax as defined by paragraph (2) of subdivision (b) of Section 17062, reduced by the sum of the credits allowable under this part, other than:

(1) The credits described in paragraph (7) of subdivision (a) of Section 17039.

(2) A credit that reduces the tax below the tentative minimum tax, as defined by Section 17062.

(d) Section 53(e) of the Internal Revenue Code, relating to the application to applicable corporations, does not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 10. (SB 711) Effective October 1, 2025.)


text: Section 61 of the Internal Revenue Code, relating to gross income defined, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 7. Effective October 10, 1999.)

chapter: 3. Computation of Taxable Income

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 3. Computation of Taxable Income > 1. Definition of Gross Income, Adjusted Gross Income, Taxable Income, etc.


text:
(a) Section 62 of the Internal Revenue Code, relating to adjusted gross income defined, shall apply, except as otherwise provided.

(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to certain expenses of elementary and secondary school teachers, shall not apply.

(c) Section 62(a)(21) of the Internal Revenue Code, relating to attorneys fees relating to awards to whistleblowers, shall not apply.

history: (History: Amended by Stats. 2010, Ch. 14, Sec. 9. (SB 401) Effective January 1, 2011.)

article: 1. Definition of Gross Income, Adjusted Gross Income, Taxable Income, etc.


text:
(a) Section 63 of the Internal Revenue Code, relating to taxable income defined, shall apply, except as otherwise provided.

(b) The deduction allowed by Section 17208.1, relating to interest on loans or financed indebtedness obtained from a publicly owned utility for the purchase and installation of energy efficient products or equipment, may not be treated as a miscellaneous itemized deduction under Section 67(a) of the Internal Revenue Code, relating to the 2-percent floor on miscellaneous deductions.

(c) For individuals who do not itemize deductions, the standard deduction computed in accordance with Section 17073.5 shall be allowed as a deduction in computing taxable income.

history: (History: Amended by Stats. 2002, Ch. 664, Sec. 202. Effective January 1, 2003.)


text:
(a) A taxpayer may elect to take a standard deduction as follows:

(1) In the case of a taxpayer, other than a head of a household or a surviving spouse (as defined in Section 17046) or a married couple filing a joint return, the standard deduction shall be one thousand eight hundred eighty dollars ($1,880).

(2) In the case of a head of household or a surviving spouse (as defined in Section 17046) or a married couple filing a joint return, the standard deduction shall be three thousand seven hundred sixty dollars ($3,760).

(b) The standard deduction provided for in subdivision (a) shall be in lieu of all deductions other than those which are to be subtracted from gross income in computing adjusted gross income under Section 17072.

(c) (1) The provisions of this section shall be applied in lieu of the provisions of Sections 63(c) and 63(f) of the Internal Revenue Code, relating to standard deductions.

(2) Notwithstanding paragraph (1), Section 63(c)(5) of the Internal Revenue Code, relating to limitations on the standard deduction of certain dependents, and Section 63(c)(6)of the Internal Revenue Code, relating to certain individuals not eligible for the standard deduction, shall apply, except as otherwise provided. For purposes of this paragraph, the amount specified in Section 63(c)(5) of the Internal Revenue Code shall be adjusted for inflation in accordance with the provisions of Section 63(c)(4) of the Internal Revenue Code.

(d) For each taxable year beginning on or after January 1, 1988, the Franchise Tax Board shall recompute the standard deduction amounts prescribed in subdivision (a). 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 compute an inflation adjustment factor by adding 100 percent to that portion of the percentage change figure which is furnished pursuant to paragraph (1) and dividing the result by 100.

(3) The Franchise Tax Board shall multiply the standard deduction amounts in the preceding taxable year by the inflation adjustment factor determined in paragraph (2), and round off the resulting products to the nearest one dollar ($1).

(4) In computing the standard deduction amounts pursuant to this subdivision, the amount provided in paragraph (2) of subdivision (a) shall be twice the amount provided in paragraph (1) of subdivision (a).

history: (History: Amended by Stats. 1998, Ch. 322, Sec. 16. Effective August 20, 1998.)


text: Section 64 of the Internal Revenue Code, relating to ordinary income defined, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 9. Effective October 10, 1999.)


text: Section 65 of the Internal Revenue Code, relating to ordinary loss defined, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 10. Effective October 10, 1999.)


text:
(a) Section 67 of the Internal Revenue Code, relating to the 2-percent floor on miscellaneous itemized deductions, shall apply, except as otherwise provided.

(b) A deduction allowable under this part that exceeds three thousand dollars ($3,000) and is described in Section 17049, relating to computation of tax where the taxpayer restores a substantial amount held under claim of right, may not be treated as a miscellaneous itemized deduction under Section 67 of the Internal Revenue Code, as applicable for purposes of this part.

(c) Section 67(g) of the Internal Revenue Code, relating to suspension for taxable years 2018 to 2025, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 11. (SB 711) Effective October 1, 2025.)


text:
Section 68 of the Internal Revenue Code, relating to overall limitation on itemized deductions, shall apply, except as otherwise provided.

(a) “Six percent” shall be substituted for “3 percent” in Section 68(a)(1) of the Internal Revenue Code.

(b) Section 68(b)(1) of the Internal Revenue Code shall not apply and in lieu thereof the term “applicable amount” in each place it appears in Section 68(a) of the Internal Revenue Code means one hundred thousand dollars ($100,000) in the case of a single individual, or a spouse filing a separate return, one hundred fifty thousand dollars ($150,000) in the case of a head of household, and two hundred thousand dollars ($200,000) in the case of a surviving spouse, or spouses filing a joint return.

(c) Section 68(b)(2) of the Internal Revenue Code, relating to inflation adjustments, shall not apply. However, for any taxable year beginning on or after January 1, 1992, the applicable amounts specified in subdivision (b) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(d) Section 68(f) of the Internal Revenue Code, relating to phaseout of limitation, shall not apply.

(e) Section 68(g) of the Internal Revenue Code, relating to termination, shall not apply.

history: (History: Amended by Stats. 2016, Ch. 50, Sec. 100. (SB 1005) Effective January 1, 2017.)


text:
(a) Section 988 of the Internal Revenue Code, relating to treatment of certain foreign currency transactions, shall apply, except as otherwise provided.

(b) Section 988(a)(3) of the Internal Revenue Code, relating to source, shall not apply.

history: (History: Amended by Stats. 1993, Ch. 877, Sec. 13. Effective October 6, 1993.)


text: Part II of Subchapter B of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to items that are specifically included in gross income, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 873, Sec. 5. Effective October 6, 1993.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 3. Computation of Taxable Income > 2. Items Specifically Included in Gross Income


text:
(a) For taxable years beginning on or after January 1, 2023, the income of an incomplete gift nongrantor trust shall be included in a qualified taxpayer’s gross income to the extent the income of the trust would be taken into account in computing the qualified taxpayer’s taxable income if the trust in its entirety were treated as a grantor trust under Section 17731.

(b) Notwithstanding subdivision (a), Section 17745 applies to distributions from an incomplete gift nongrantor trust.

(c) Notwithstanding subdivision (a), the income of an incomplete gift nongrantor trust shall not be included in a qualified taxpayer’s gross income for a taxable year if all of the following apply:

(1) The fiduciary of the incomplete gift nongrantor trust timely files an original California Fiduciary Income Tax Return and makes an irrevocable election on that return to be taxed as a resident nongrantor trust, pursuant to Chapter 9 (commencing with Section 17731). The election shall be made in the form and manner prescribed by the Franchise Tax Board.

(2) The incomplete gift nongrantor trust is a nongrantor trust pursuant to Chapter 9 (commencing with Section 17731).

(3) Ninety percent or more of the distributable net income of the incomplete gift nongrantor trust, pursuant to Chapter 9 (commencing with Section 17731), is distributed, or treated as being distributed pursuant to Section 17752 or 17731, including subdivision (a), for purposes of Chapter 9 (commencing with Section 17731), to a charitable organization, as defined in Section 501(c)(3) of the Internal Revenue Code.

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

(1) (A) “Incomplete gift nongrantor trust” means a trust that meets both of the following conditions:

(i) The trust does not qualify as a grantor trust under Subpart E of Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to grantors and others treated as substantial owners.

(ii) The qualified taxpayer’s transfer of assets to the trust is treated as an incomplete gift under Section 2511 of the Internal Revenue Code, relating to transfers in general.

(B) “Incomplete gift nongrantor trust” shall not include a trust, or portion of a trust, that qualifies as a charitable remainder trust under Section 664 of the Internal Revenue Code.

(2) “Qualified taxpayer” means a grantor of an incomplete gift nongrantor trust.

(3) “Resident nongrantor trust” means a trust that is not a grantor trust and where the tax applies to the entire taxable income of the trust based on the residency of the fiduciary or beneficiary in accordance with Section 17742.

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

(2) The Franchise Tax Board may 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, procedure, or other guidance prescribed by the Franchise Tax Board pursuant to this section.

history: (History: Amended by Stats. 2025, Ch. 410, Sec. 2. (SB 376) Effective January 1, 2026.)

article: 2. Items Specifically Included in Gross Income


text: Section 85 of the Internal Revenue Code, relating to unemployment compensation, shall not apply.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 14. Effective October 10, 1999.)


text:
Section 72 of the Internal Revenue Code, relating to annuities, certain proceeds of endowment and life insurance contracts, is modified as follows:

(a) The amendments and transitional rules made by Public Law 99-514 shall be applicable to this part for the same transactions and the same years as they are applicable for federal purposes, except that the repeal of Section 72(d) of the Internal Revenue Code, relating to repeal of special rule for employees’ annuities, shall apply only to the following:

(1) Any individual whose annuity starting date is after December 31, 1986.

(2) At the election of the taxpayer, any individual whose annuity starting date is after July 1, 1986, and before January 1, 1987.

(b) The amount of a distribution from an individual retirement account or annuity or employee trust or employee annuity that is includable in gross income for federal purposes shall be reduced for purposes of this part by the lesser of either of the following:

(1) An amount equal to the amount includable in federal gross income for the taxable year.

(2) An amount equal to the basis in the account or annuity allowed by Section 17507 (relating to individual retirement accounts and simplified employee pensions), the increased basis allowed by Sections 17504 and 17506 (relating to plans of self-employed individuals), the increased basis allowed by Section 17501, or the increased basis allowed by Section 17551 that is remaining after adjustment for reductions in gross income under this provision in prior taxable years.

(c) (1) Except as provided in paragraph (2), the amount of the additional tax imposed under this part shall be computed in accordance with Sections 72(m), (q), (t), and (v) of the Internal Revenue Code, as applicable for federal income tax purposes for the same taxable year, using a rate of 212 percent, in lieu of the rate provided in those sections.

(2) In the case where Section 72(t)(6) of the Internal Revenue Code, relating to special rules for simple retirement accounts, as applicable for federal income tax purposes for the same taxable year, applies, the rate in paragraph (1) shall be 6 percent in lieu of the 212 percent rate specified therein.

(d) Section 72(f)(2) of the Internal Revenue Code shall be applicable without applying the exceptions which immediately follow that paragraph.

(e) The amendments made by Section 844 of the federal Pension Protection Act of 2006 (Public Law 109-280) to Section 72(e) of the Internal Revenue Code, shall not apply.

(f) For purposes of this part, Section 2202(b) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), relating to loans from qualified plans shall apply.

(g) For purposes of this part, Section 302(c) of Title III of the Consolidated Appropriations Act, 2021 (Public Law 116-260), relating to loans from qualified plans, shall apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 12. (SB 711) Effective October 1, 2025.)


text:
(a) In the case of any distribution made on account of a notice to withhold (pursuant to Section 18670 or 18670.5) on a qualified retirement plan, no additional tax shall be imposed in accordance with Section 72(t) of the Internal Revenue Code.

(b) This section shall apply to distributions after December 31, 1999.

history: (History: Added by Stats. 1999, Ch. 931, Sec. 4. Effective October 10, 1999.)


text:
(a) Noncash patronage allocations from farmers’ cooperative and mutual associations (whether paid in capital stock, revolving fund certificates, retain certificates, certificates of indebtedness, letters of advice or in some other manner that discloses the dollar amount of those noncash patronage allocations) may, at the election of the taxpayer, be considered as income and included in gross income for the taxable year in which received.

(b) If a taxpayer exercises the election provided for in subdivision (a), the amount included in gross income shall be the face amount of those allocations.

(c) If a taxpayer elects to exclude noncash patronage allocations from gross income for the taxable year in which received, those allocations shall be included in gross income in the year that they are redeemed or realized upon.

(d) If a taxpayer exercises the election provided for in subdivision (c), the face amount of those noncash patronage allocations shall be disclosed in the return made for the taxable year in which those noncash patronage allocations were received.

(e) If a taxpayer exercises the election provided for in subdivision (a) or (c) for any taxable year, then the method of computing income so adopted shall be adhered to with respect to all subsequent taxable years unless with the approval of the Franchise Tax Board a change to a different method is authorized.

(f) If a taxpayer has made the election provided for in subdivision (c), then (1) the statutory period for the assessment of a deficiency for any taxable year in which the amount of any noncash patronage allocations are realized shall not expire prior to the expiration of four years from the date the Franchise Tax Board is notified by the taxpayer (in the manner as the Franchise Tax Board may by regulation prescribe) of the realization of gain on those allocations; and (2) that deficiency may be assessed prior to the expiration of that four-year period, notwithstanding the provisions of Section 19057 or the provisions of any other law or rule of law which would otherwise prevent that assessment.

history: (History: Amended by Stats. 1993, Ch. 31, Sec. 6. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)


text:
(a) Section 86 of the Internal Revenue Code, relating to Social Security and Tier 1 Railroad Retirement Benefits, shall not apply.

(b) Section 72(r) of the Internal Revenue Code, relating to Tier 2 Railroad Retirement Benefits, shall not apply.

(c) Section 105(h) of the Internal Revenue Code, relating to sick pay under the Railroad Unemployment Insurance Act, shall not apply.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 18. Effective October 10, 1999.)


text:
(a) Subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to tax treatment of “S corporations” and their shareholders, shall apply, except as otherwise provided under this part or Part 11 (commencing with Section 23001).

(b) Section 1371(f) of the Internal Revenue Code, relating to cash distributions following post-termination transition period, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 13. (SB 711) Effective October 1, 2025.)


text: If a limited liability company is classified as a partnership for California tax purposes, a person with a membership or economic interest shall take into account amounts required to be recognized under Chapter 10 (commencing with Section 17851).

history: (History: Added by Stats. 1994, Ch. 1200, Sec. 52. Effective September 30, 1994.)


text:
(a) Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to regulated investment companies and real estate investment trusts, shall apply, except as otherwise provided.

(b) Section 17145 shall apply in lieu of Section 852(b)(5) of the Internal Revenue Code, relating to exempt-interest dividends.

(c) (1) Section 852(b)(3)(D) of the Internal Revenue Code, relating to treatment by shareholders of undistributed capital gains, shall not apply.

(2) Section 852(g)(1)(A) of the Internal Revenue Code is modified by substituting the phrase “subdivision (a) of Section 17145” for the phrase “the first sentence of subsection (b)(5)” contained therein.

history: (History: Amended by Stats. 2015, Ch. 359, Sec. 5. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)


text:
(a) The amendments made to Section 860E(a)(3)(B) of the Internal Revenue Code by Section 2303(a)(2)(C) of Public Law 116-136, relating to conforming amendments, shall not apply.

(b) The amendments made to Section 860E(a)(4) of the Internal Revenue Code by Section 10101(a)(4)(B)(ii) of Public Law 117-169, relating to conforming adjustments, shall not apply.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 14. (SB 711) Effective October 1, 2025.)


text:
(a) Section 7518 of the Internal Revenue Code, relating to tax incentives relating to merchant marine capital construction funds, shall apply, except as otherwise provided.

(b) Section 7518(d)(2)(C) of the Internal Revenue Code is modified as follows:

(1) By substituting “70 percent” in lieu of the reference to “the percentage applicable under Section 243(a)(1).”

(2) To refer to Section 24402 in lieu of Section 243 of the Internal Revenue Code.

(c) Section 7518(d)(2)(D) of the Internal Revenue Code is modified to refer to “interest income exempt from taxation under this part” in lieu of “interest income exempt from taxation under Section 103.”

(d) Section 7518(g)(3) of the Internal Revenue Code is modified as follows:

(1) To refer to Article 6 (commencing with Section 19101) of Chapter 4 of Part 10.2 in lieu of Section 6601 of the Internal Revenue Code.

(2) To refer to Article 7 (commencing with Section 19131) of Chapter 4 of Part 10.2 in lieu of Section 6651 of the Internal Revenue Code.

(e) Section 7518(g)(6) of the Internal Revenue Code is modified as follows:

(1) By substituting a reference to “this part” in lieu of “Chapter 1” in each place in which it appears.

(2) To refer to Section 17041 in lieu of Section 1 of the Internal Revenue Code.

(3) The last sentence in Section 7518(g)(6)(A) of the Internal Revenue Code shall not apply.

history: (History: Added by Stats. 1997, Ch. 611, Sec. 12. Effective October 3, 1997.)


text: Gross income includes cash allowances received by an employee under a parking cash-out program, except any portion used for a ridesharing purpose and excluded from gross income by Section 17149.

history: (History: Added by Stats. 1992, Ch. 554, Sec. 6. Effective January 1, 1993.)


text:
(a) Section 71 of the Internal Revenue Code, relating to alimony and separate maintenance payments, as it read on January 1, 2015, shall apply, except as otherwise provided.

(b) Subdivision (a) shall not apply for any divorce or separation instrument executed after December 31, 2025, or for any divorce or separation instrument executed on or before December 31, 2025, and modified after that date, if the modification expressly provides that the amendments made by this subdivision apply to such modification.

(c) This section shall remain in effect only until December 1, 2027, and as of that date is repealed.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 15. (SB 711) Effective October 1, 2025. Repealed as of December 1, 2027, by its own provisions.)


text: Part III of Subchapter B of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to items that are specifically excluded from gross income, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 2005, Ch. 691, Sec. 7. Effective October 7, 2005.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 3. Computation of Taxable Income > 3. Items Specifically Excluded from Gross Income