text:
(a) The amendment made by Section 7001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206) to Section 404(a)(11) of the Internal Revenue Code, regarding determinations relating to deferred compensation, shall apply to taxable years beginning on or after January 1, 2002.

(b) In the case of any taxpayer required by enactment of this section to change the method of accounting, for that taxpayer’s first taxable year beginning on or after January 1, 2002, each of the following shall apply for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001):

(1) The change shall be treated as initiated by the taxpayer.

(2) The change shall be treated as made with the consent of the Franchise Tax Board.

(3) The net amount of the adjustments required to be taken into account by the taxpayer under Chapter 6 (commencing with Section 17551) shall be taken into account ratably over the three taxable year period beginning with that taxpayer’s first taxable year beginning on or after January 1, 2002.

history: (History: Added by Stats. 2002, Ch. 35, Sec. 24. Effective May 8, 2002.)


kind: section

code: RTC

text:
(a) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 447 of the Internal Revenue Code, relating to method of accounting for corporations engaged in farming, shall apply, except as otherwise provided.

(b) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(e)(2) of the Tax Cuts and Jobs Act (Public Law 115-97), relating to preservation of suspense account rules with respect to any existing suspense accounts, shall apply to any suspense account existing as of the effective date of the act adding this subdivision.

(c) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 448 of the Internal Revenue Code, relating to limitation on use of cash method of accounting, shall apply, except as otherwise provided.

(d) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(b) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 263A of the Internal Revenue Code, relating to capitalization and inclusion in inventory cost of certain expenses, shall apply, except as otherwise provided.

(e) For taxable years beginning on or after January 1, 2019, the amendments made by Section 13102(c) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 471 of the Internal Revenue Code, relating to the general rule for inventories, shall apply, except as otherwise provided.

(f) (1) Any change in method of accounting made pursuant to this section shall be treated for purposes of applying Section 481 of the Internal Revenue Code, as applicable for California purposes under Section 17551, as initiated by the taxpayer and made with the consent of the Franchise Tax Board.

(2) Section 13102(e)(1) of the Tax Cuts and Jobs Act (Public Law 115-97) does not apply to subdivisions (a) to (e), inclusive.

(3) (A) Notwithstanding paragraph (2) and except as provided in subparagraph (B), a taxpayer may elect to apply the provisions of this section to taxable years beginning on or after January 1, 2018, and before January 1, 2019.

(B) Notwithstanding paragraph (2), a taxpayer may elect to apply the provisions of subdivision (b) to suspense accounts established before the effective date of the act adding this subdivision.

history: (History: Added by Stats. 2019, Ch. 39, Sec. 14. (AB 91) Effective July 1, 2019.)

division: 2. OTHER TAXES

part: 10. PERSONAL INCOME TAX

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 6. Accounting Periods and Methods of Accounting


text:
(a) Long-term contracts shall be accounted for in accordance with the special rules set forth in Section 460 of the Internal Revenue Code.

(b) (1) The provisions of Section 804(d) of Public Law 99-514, relating to the effective date of modifications in the method of accounting for long-term contracts, shall be applicable to taxable years beginning on or after January 1, 1987.

(2) In the case of a contract entered into after February 28, 1986, during a taxable year beginning before January 1, 1987, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between state and federal law for the taxable year in which the contract began.

(c) (1) The amendments to Section 460 of the Internal Revenue Code made by Section 10203 of Public Law 100-203, relating to a reduction in the percentage of items taken into account under the completed contract method, shall apply to taxable years beginning on or after January 1, 1990.

(2) In the case of a contract entered into after October 13, 1987, during a taxable year beginning before January 1, 1990, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between California and federal law for taxable years beginning prior to January 1, 1990.

(d) (1) The amendments to Section 460 of the Internal Revenue Code made by Section 5041 of Public Law 100-647, relating to a reduction in the percentage of items taken into account under the completed contract method, shall apply to taxable years beginning on or after January 1, 1990.

(2) In the case of a contract entered into after June 20, 1988, during a taxable year beginning before January 1, 1990, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between California and federal law for taxable years beginning prior to January 1, 1990.

(e) (1) The amendments to Section 460 of the Internal Revenue Code made by Section 7621 of Public Law 101-239, relating to the repeal of the completed contract method of accounting for long-term contracts, shall apply to taxable years beginning on or after January 1, 1990.

(2) In the case of a contract entered into after July 10, 1989, during a taxable year beginning before January 1, 1990, an adjustment to income shall be made upon completion of the contract, if necessary, to correct any underreporting or overreporting of income, for purposes of this part, resulting from differences between California and federal law for taxable years beginning prior to January 1, 1990.

(f) For purposes of applying paragraphs (2) to (6), inclusive, of Section 460(b) of the Internal Revenue Code, relating to the look-back method, any adjustment to income computed under paragraph (2) of subdivision (b), (c), (d), or (e) shall be deemed to have been reported in the taxable year from which the adjustment arose, rather than the taxable year in which the contract was completed.

(g) (1) For contracts entered into on or after the effective date of the act adding this subdivision, the amendments made by Section 13102(d) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 460 of the Internal Revenue Code, relating to special rules for long-term contracts, shall apply, except as otherwise provided.

(2) For contracts entered into on or after the effective date of the act adding this subdivision, the amendments made by Section 13102(e)(3) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to exemption from percentage completion for long-term contracts, shall apply, except as otherwise provided.

(3) (A) Any change in method of accounting made pursuant to this section shall be treated for purposes of applying Section 481 of the Internal Revenue Code, as applicable for California purposes under Section 17551, as initiated by the taxpayer and made with the consent of the Franchise Tax Board.

(B) Section 13102(e)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) does not apply to this subdivision.

(C) Notwithstanding subparagraph (B), a taxpayer may elect to apply the provisions of this subdivision, where otherwise allowed, to contracts entered into on or after January 1, 2018, in taxable years ending after January 1, 2018.

(h) The amendments to Section 460(c)(6)(B)(ii) of the Internal Revenue Code made by Section 143(a)(2) and Section 143(b)(6)(I) of Public Law 114-113, relating to the special rule for federal long-term contracts, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 55. (SB 711) Effective October 1, 2025.)

chapter: 6. Accounting Periods and Methods of Accounting


text:
(a) The taxable year of a taxpayer may not be different than the taxable year used for purposes of the Internal Revenue Code, unless initiated or approved by the Franchise Tax Board.

(b) For purposes of this section, whenever a taxpayer is required to make a federal return for a period of less than 12 months, that period shall be deemed to be a taxable year, and Section 17552 shall apply.

history: (History: Added by Stats. 1989, Ch. 1352, Sec. 53.5. Effective October 2, 1989. Applicable to taxable years beginning on or after January 1, 1989, by Sec. 172 of Ch. 1352.)


text: The amendments to Section 453B(e) of the Internal Revenue Code as enacted by Section 13512(b)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to the repeal of the small life insurance company deduction, shall not apply.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 56. (SB 711) Effective October 1, 2025.)


text:
(a) Section 13233(c)(2)(C) of the Revenue Reconciliation Act of 1993 (Public Law 103-66), relating to the effective date for changes in the mark to market accounting method for securities dealers, is modified to provide that the amount taken into account under Section 481 of the Internal Revenue Code of 1986 shall be taken into account ratably over the five-taxable-year period beginning with the first taxable year beginning on or after January 1, 1997.

(b) In the case of any taxpayer required by the enactment of the act adding this subdivision, which act incorporated by reference the amendments made by Section 7003 of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206) to Section 475 of the Internal Revenue Code, for taxable years beginning on or after January 1, 2002, to change its method of accounting on its first taxable year beginning on or after January 1, 2002, then each of the following shall apply for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001):

(1) The change shall be treated as initiated by the taxpayer.

(2) The change shall be treated as made with the consent of the Franchise Tax Board.

(3) The taxpayer shall not be required to make a change in the method of accounting until the first taxable year beginning on or after January 1, 2002.

(4) The net amount of the adjustments required to be taken into account by the taxpayer under Chapter 6 (commencing with Section 17551) shall be taken into account ratably over the three taxable year period beginning with that taxpayer’s first taxable year beginning on or after January 1, 2002.

(c) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 475(e) of the Internal Revenue Code, relating to election of mark to market for dealers in commodities, to have Section 475 of the Internal Revenue Code apply, Section 475 of the Internal Revenue Code shall apply to that dealer in commodities for state purposes, a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, and the federal election shall be binding for purposes of this part.

(2) If a taxpayer fails to make, or has not previously made, an election for federal purposes under Section 475(e) of the Internal Revenue Code, relating to election of mark to market for dealers in commodities, to have Section 475 of the Internal Revenue Code apply, an election under Section 475(e) of the Internal Revenue Code shall not be allowed for state purposes, Section 475 of the Internal Revenue Code shall not apply to that dealer in commodities for state purposes, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.

(d) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 475(f)(1) of the Internal Revenue Code, relating to election of mark to market for traders in securities, to have Section 475 of the Internal Revenue Code apply to a trade or business, Section 475 of the Internal Revenue Code shall apply to that trader in securities for state purposes with respect to that trade or business, a separate election for state purposes with respect to that trade or business shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, and the federal election shall be binding for purposes of this part.

(2) If a taxpayer fails to make, or has not previously made, an election for federal purposes under Section 475(f)(1) of the Internal Revenue Code, relating to election of mark to market for traders in securities, to have Section 475 of the Internal Revenue Code apply to a trade or business, an election under Section 475(f)(1) of the Internal Revenue Code shall not be allowed for state purposes with respect to that trade or business, Section 475 of the Internal Revenue Code shall not apply to that trader in securities for state purposes with respect to that trade or business, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.

(e) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 475(f)(2) of the Internal Revenue Code, relating to election of mark to market for traders in commodities, to have Section 475 of the Internal Revenue Code apply to a trade or business, Section 475 of the Internal Revenue Code shall apply to that trader in commodities for state purposes with respect to that trade or business, a separate election for state purposes with respect to that trade or business shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, and the federal election with respect to that trade or business shall be binding for purposes of this part.

(2) If a taxpayer fails to make, or has not previously made, an election for federal purposes under Section 475(f)(2) of the Internal Revenue Code, relating to election of mark to market for traders in commodities, to have Section 475 of the Internal Revenue Code apply to a trade or business, an election under Section 475(f)(2) of the Internal Revenue Code shall not be allowed for state purposes with respect to that trade or business, Section 475 of the Internal Revenue Code shall not apply to that trader in commodities for state purposes with respect to that trade or business, and a separate election for state purposes with respect to that trade or business shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.

(f) (1) An election under Section 475(e) or (f) of the Internal Revenue Code made for federal purposes with respect to a taxable year beginning before January 1, 1998, shall be treated as having been made for state purposes with respect to the first taxable year beginning on or after January 1, 1998.

(2) Section 1001(d)(4)(B) of the Taxpayer Relief Act of 1997 (Public Law 105-34), relating to the effective date for election of mark to market by securities traders and traders and dealers in commodities, is modified to provide that the requirement for timely identification shall be treated as timely made for state purposes if that identification is treated as timely made for federal purposes, and the amount taken into account under Section 481 of the Internal Revenue Code of 1986 shall be taken into account ratably over the four-taxable-year period beginning with the first taxable year beginning on or after January 1, 1998.

history: (History: Amended by Stats. 2002, Ch. 35, Sec. 25. Effective May 8, 2002.)


text: An organization described in Section 401(a) of the Internal Revenue Code shall be exempt from taxation under this part unless such exemption is denied under Sections 17635 to 17639, inclusive.

history: (History: Amended by Stats. 1983, Ch. 488, Sec. 39. Effective July 28, 1983.)

chapter: 7. Exempt Trusts and Common Trust Funds

article: 1. General Rule

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 7. Exempt Trusts and Common Trust Funds > 1. General Rule


text: An organization exempt from taxation under Section 17631 shall be subject to tax to the extent provided in Article 2 (commencing at Section 17651) of this chapter (relating to tax on unrelated income), but, notwithstanding Article 2, shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes.

history: (History: Amended by Stats. 1961, Ch. 847.)

article: 1. General Rule


text:
(a) An organization described in Section 401(a) of the Internal Revenue Code which is subject to the provisions of this section shall not be exempt from taxation under Section 17631 if it has engaged in a prohibited transaction after December 31, 1960.

(b) An organization described in Section 401(a) of the Internal Revenue Code shall be denied exemption from taxation under Section 17631 by reason of subdivision (a) only for taxable years after the taxable year during which it is notified by the Franchise Tax Board that it has engaged in a prohibited transaction, unless the organization entered into the prohibited transaction with the purpose of diverting corpus or income of the organization from its exempt purposes, and the transaction involved a substantial part of the corpus or income of the organization.

history: (History: Amended by Stats. 1985, Ch. 106, Sec. 131.)

article: 1. General Rule


text: Sections 17635 to 17639, inclusive, apply to any organization described in Section 401(a) of the Internal Revenue Code.

history: (History: Amended by Stats. 1983, Ch. 488, Sec. 41. Effective July 28, 1983.)

article: 1. General Rule


text: For purposes of Sections 17635 to 17639, inclusive, the term “prohibited transaction” means any transaction in which an organization subject to the provisions of Sections 17635 to 17639, inclusive—(a) Lends any part of its income or corpus, without the receipt of adequate security and a reasonable rate of interest, to;(b) Pays any compensation, in excess of a reasonable allowance for salaries or other compensation for personal services actually rendered, to;(c) Makes any part of its services available on a preferential basis to;(d) Makes any substantial purchase of securities or any other property, for more than adequate consideration in money or money’s worth, from;(e) Sells any substantial part of its securities or other property, for less than an adequate consideration in money or money’s worth to; or(f) Engages in any other transaction which results in a substantial diversion of its income or corpus to;the creator of such organization (if a trust); a person who has made a substantial contribution to such organization; a member of the family (as defined in Section 267(c)(4) of the Internal Revenue Code) of an individual who is the creator of such trust or who has made a substantial contribution to such organization; or a corporation controlled by such creator or person through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation.

history: (History: Amended by Stats. 1983, Ch. 488, Sec. 42. Effective July 28, 1983.)

article: 1. General Rule


text: Any organization described in Section 401(a) of the Internal Revenue Code or a trust which is denied exemption under Section 17631 by reason of Section 17635, with respect to any taxable year following the taxable year in which notice of denial of exemption was received, may, under regulations prescribed by the Franchise Tax Board, file claim for exemption, and if the Franchise Tax Board, pursuant to such regulations, is satisfied that such organization will not knowingly again engage in a prohibited transaction, such organization shall be exempt with respect to taxable years after the year in which such claim is filed.

history: (History: Amended by Stats. 1983, Ch. 488, Sec. 43. Effective July 28, 1983.)

article: 1. General Rule


text:
For purposes of subdivision (a) of Section 17637, a bond, debenture, note, or certificate or other evidence of indebtedness (hereinafter in this section referred to as “obligation”) acquired by a trust described in Section 401(a) of the Internal Revenue Code shall not be treated as a loan made without the receipt of adequate security if—

(a) The obligation is acquired—

(1) On the market, either (i) at the price of the obligation prevailing on a national securities exchange which is registered with the Securities and Exchange Commission, or (ii) if the obligation is not traded on such a national securities exchange, at a price not less favorable to the trust than the offering price for the obligation as established by current bid and asked prices quoted by persons independent of the issuer;

(2) From an underwriter, at a price (i) not in excess of the public offering price for the obligation as set forth in a prospectus or offering circular filed with the Securities and Exchange Commission, and (ii) at which a substantial portion of the same issue is acquired by persons independent of the issuer; or

(3) Directly from the issuer, at a price not less favorable to the trust than the price paid currently for a substantial portion of the same issue by persons independent of the issuer;

(b) Immediately following acquisition of the obligation—

(1) Not more than 25 percent of the aggregate amount of obligations issued in the issue and outstanding at the time of acquisition is held by the trust, and

(2) At least 50 percent of the aggregate amount referred to in paragraph (1) is held by persons independent of the issuer; and

(c) Immediately following acquisition of the obligation, not more than 25 percent of the assets of the trust is invested in obligations of persons described in Section 17637.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 42. Effective October 10, 1999.)

article: 1. General Rule


text:
Subdivision (a) of Section 17637 shall not apply to a loan made by a trust described in Section 401(a) of the Internal Revenue Code to the employer (or to a renewal of such a loan or, if the loan is repayable upon demand, to a continuation of such a loan) if the loan bears a reasonable rate of interest, and if (in the case of a making or renewal)—

(a) The employer is prohibited (at the time of the making or renewal) by any law of the United States or regulation thereunder from directly or indirectly pledging, as security for such a loan, a particular class or classes of his assets the value of which (at that time) represents more than one-half of the value of all his or her assets;

(b) The making or renewal, as the case may be, is approved in writing as an investment that is consistent with the exempt purposes of the trust by a trustee who is independent of the employer, and no other similar trustee had previously refused to give that written approval; and

(c) Immediately following the making or renewal, as the case may be, the aggregate amount loaned by the trust to the employer, without the receipt of adequate security, does not exceed 25 percent of the value of all the assets of the trust.

(d) For purposes of subdivision (b), the term “trustee” means, with respect to any trust for which there is more than one trustee who is independent of the employer, a majority of those independent trustees. For purposes of subdivision (c), the determination as to whether any amount loaned by the trust to the employer is loaned without the receipt of adequate security shall be made without regard to Section 17639.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 43. Effective October 10, 1999.)

article: 1. General Rule


text:
(a) There is hereby imposed for each taxable year on the unrelated business taxable income (as defined in Section 23732) of every trust a tax computed as provided in subdivision (e) of Section 17041. In making that computation for purposes of this section, the term “taxable income” as used in subdivisions (a) and (e) of Section 17041 shall be read as “unrelated business taxable income” as defined in Section 23732.

(b) The tax imposed by subdivision (a) shall apply in the case of any trust which is exempt, except as provided in this article, from taxation under this part by reason of Section 17631 and which, if it were not for such exemption, would be subject to Chapter 9 (commencing with Section 17731) relating to estates, trusts, beneficiaries, and decedents.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 44. Effective October 10, 1999.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 7. Exempt Trusts and Common Trust Funds > 2. Taxation of Business Income of Certain Exempt Organizations


text: Section 584 of the Internal Revenue Code, relating to common trust funds, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 45. Effective October 10, 1999.)

article: 3. Common Trust Funds

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 7. Exempt Trusts and Common Trust Funds > 3. Common Trust Funds


text: Every trust company operating a common trust fund shall make a return under penalties of perjury for each taxable year, stating specifically with respect to such fund the items of gross income and the deductions allowed by this article and shall include in the return information sufficient to identify the trusts and estates entitled to share in the taxable income of the common trust fund and the amount of the proportionate share of each such participant.

history: (History: Repealed and added by Stats. 1983, Ch. 488, Sec. 48. Effective July 28, 1983.)

article: 3. Common Trust Funds


text:
(a) Subchapter I of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to natural resources, shall apply, except as otherwise provided.

(b) For taxable years beginning on or after January 1, 2024, Section 613(b)(2)(B) of the Internal Revenue Code, in the case of oil shale, shall not apply.

(c) For taxable years beginning on or after January 1, 2024, Section 613(b)(4) of the Internal Revenue Code, relating to 10 percent, in the case of coal, shall not apply.

(d) For taxable years beginning on or after January 1, 2024, Section 613A of the Internal Revenue Code, relating to limitations on percentage depletion in the case of oil and gas wells, shall not apply.

history: (History: Amended by Stats. 2024, Ch. 34, Sec. 24. (SB 167) Effective June 27, 2024.)

chapter: 8. Natural Resources

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 8. Natural Resources


text:
(a) Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to estates, trusts, beneficiaries, and decedents, shall apply, except as otherwise provided.

(b) Section 692(d)(2) of the Internal Revenue Code, relating to the ten thousand-dollar ($10,000) minimum benefit, does not apply.

history: (History: Amended by Stats. 2005, Ch. 691, Sec. 37. Effective October 7, 2005.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 9. Estates, Trusts, Beneficiaries, and Decedents


text:
(a) Section 641(c)(2)(A) of the Internal Revenue Code is modified to read: “The amount of the tax imposed by subdivision (e) of Section 17041 shall be determined by using the highest rate of tax applicable to an individual under subdivision (a) of Section 17041.”

(b) Section 641(c)(2)(B) of the Internal Revenue Code is modified to read: “The credit allowed under subdivision (b) of Section 17733 shall be zero.”

history: (History: Amended by Stats. 2002, Ch. 35, Sec. 26. Effective May 8, 2002. Applicable as prescribed by Sec. 63 of Ch. 35.)

chapter: 9. Estates, Trusts, Beneficiaries, and Decedents


text: Section 642(b) of the Internal Revenue Code, relating to deduction for personal exemption, shall not apply.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 46. Effective October 10, 1999.)


text:
(a) An estate shall be allowed a credit of ten dollars ($10) against the tax imposed under Section 17041, less any amounts imposed under paragraph (1) of subdivision (d) or paragraph (1) of subdivision (e), or both, of Section 17560.

(b) (1) Except as provided in paragraph (2), a trust shall be allowed a credit of one dollar ($1) against the tax imposed under Section 17041, less any amounts imposed under paragraph (1) of subdivision (d) or paragraph (1) of subdivision (e), or both, of Section 17560.

(2) (A) A disability trust, as defined in Section 642(b)(2)(C) of the Internal Revenue Code, shall be allowed a credit in an amount equal to the personal exemption credit authorized for a single individual pursuant to subdivision (a) of Section 17054.

(B) The credit authorized by subparagraph (A) shall be subject to the credit reduction provisions of Section 17054.1. For purposes of making the adjustments required by Section 17054.1, the adjusted gross income of the disability trust shall be computed in accordance with Section 67(e) of the Internal Revenue Code, relating to determination of adjusted gross income in case of estates and trusts.

(C) This paragraph applies to taxable years beginning on or after January 1, 2004.

(c) The credits allowed by this section shall be in lieu of the credits allowed under Section 17054 (relating to credit for personal exemption).

history: (History: Amended by Stats. 2005, Ch. 691, Sec. 37.5. Effective October 7, 2005.)


text: For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, in the case of a nonresident beneficiary, income and deduction derived through an estate or trust shall be included in that computation only to the extent that the income or deduction is derived by the estate or trust from sources within this state.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 16. Effective January 1, 2002.)


text: Section 646 of the Internal Revenue Code, relating to tax treatment of electing Alaska Native Settlement Trusts, shall not apply.

history: (History: Added by Stats. 2005, Ch. 691, Sec. 37.6. Effective October 7, 2005.)


text:
(a) Section 642(c)(2) of the Internal Revenue Code is modified for purposes of this part by substituting “December 31, 1970” for “October 9, 1969” throughout that paragraph.

(b) In the case of a trust, the deduction allowed by Section 642(c) of the Internal Revenue Code is subject to Section 681 of the Internal Revenue Code, relating to limitation on charitable deduction.

history: (History: Amended by Stats. 2018, Ch. 92, Sec. 195. (SB 1289) Effective January 1, 2019.)


text:
(a) For purposes of computing the taxable income of the estate or trust and the taxable income of a spouse to whom Section 682(a) of the Internal Revenue Code, relating to income of an estate or trust in the case of divorce, etc., as it read on January 1, 2015, applies, that spouse shall be considered as the beneficiary for purposes of this chapter.

(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: Amended by Stats. 2025, Ch. 231, Sec. 57. (SB 711) Effective October 1, 2025. Applicable to taxable years beginning on or after January 1, 1987, by Sec. 189 of Stats. 1987, Ch. 1138. Repealed as of December 1, 2027, by its own provisions.)


text:
(a) Except as otherwise provided in this chapter, the income of an estate or trust is taxable to the estate or trust. The tax applies to the entire taxable income of an estate, if the decedent was a resident, regardless of the residence of the fiduciary or beneficiary, and to the entire taxable income of a trust, if the fiduciary or beneficiary (other than a beneficiary whose interest in such trust is contingent) is a resident, regardless of the residence of the settlor.

(b) For purposes of this article the residence of a corporate fiduciary of a trust means the place where the corporation transacts the major portion of its administration of the trust.

history: (History: Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)


text: Where the taxability of income under this chapter depends on the residence of the fiduciary and there are two or more fiduciaries for the trust, the income taxable under Section 17742 shall be apportioned according to the number of fiduciaries resident in this state pursuant to rules and regulations prescribed by the Franchise Tax Board.


text: Where the taxability of income under this chapter depends on the residence of the beneficiary and there are two or more beneficiaries of the trust, the income taxable under Section 17742 shall be apportioned according to the number and interest of beneficiaries resident in this state pursuant to rules and regulations prescribed by the Franchise Tax Board.


text:
(a) If, for any reason, the taxes imposed on income of a trust which is taxable to the trust because the fiduciary or beneficiary is a resident of this state are not paid when due and remain unpaid when that income is distributable to the beneficiary, or in case the income is distributable to the beneficiary before the taxes are due, if the taxes are not paid when due, such income shall be taxable to the beneficiary when distributable to him except that in the case of a nonresident beneficiary such income shall be taxable only to the extent it is derived from sources within this state.

(b) If no taxes have been paid on the current or accumulated income of the trust because the resident beneficiary’s interest in the trust was contingent such income shall be taxable to the beneficiary when distributed or distributable to him or her.

(c) The tax on that income which is taxable to the beneficiary under subdivisions (a) or (b) is a tax on the receipt of that income distributed or on the constructive receipt of that distributable income. For purposes of this section income accumulated by a trust continues to be income even though the trust provides that the income (ordinary or capital) shall become a part of the corpus.

(d) The tax attributable to the inclusion of that income in the gross income of that beneficiary for the year that income is distributed or distributable under subdivision (b) shall be the aggregate of the taxes which would have been attributable to that income had it been included in the gross income of that beneficiary ratably for the year of distribution and the five preceding taxable years, or for the period that the trust accumulated or acquired income for that contingent beneficiary, whichever period is the shorter.

(e) In the event that a person is a resident beneficiary during the period of accumulation, and leaves this state within 12 months prior to the date of distribution of accumulated income and returns to the state within 12 months after distribution, it shall be presumed that the beneficiary continued to be a resident of this state throughout the time of distribution.

(f) The Franchise Tax Board shall prescribe such regulations as it deems necessary for the application of this section.


text: The amendments of Sections 17742 and 17745 made at the 1963 Regular Session of the Legislature shall be applicable only with respect to taxable years beginning after December 31, 1962. Whether or not the income of a trust which is or was accumulated or is or was accumulated and distributed or accumulated and distributable is taxable by California for the years prior to 1963 shall be determined as if Sections 17742 and 17745 had not been amended at the 1963 Regular Session of the Legislature and without inferences drawn from the fact that such amendments were not made applicable with respect to taxable years beginning before January 1, 1963.


text:
Section 645 of the Internal Revenue Code, relating to certain revocable trusts treated as part of estate, is modified as follows:

(a) An election under Section 645(a) of the Internal Revenue Code for federal purposes shall be treated for purposes of this part as an election made by the executor, if any, of the estate and the trustee of the qualified revocable trust under Section 645(a) of the Internal Revenue Code for state purposes and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed.

(b) If the executor, if any, of the estate and the trustee of a qualified revocable trust fail to make an election under Section 645(a) of the Internal Revenue Code for federal purposes with respect to that qualified revocable trust, that trust shall be treated and taxed for purposes of this part as a separate trust, an election under Section 645(a) of the Internal Revenue Code for state purposes with respect to that trust shall not be allowed, and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed with respect to that trust.

history: (History: Amended by Stats. 2002, Ch. 35, Sec. 27. Effective May 8, 2002. Applicable as prescribed by Sec. 64 of Ch. 35.)


text:
Section 663 of the Internal Revenue Code, relating to special rules applicable to Sections 661 and 662, is modified as follows:

(a) Section 663(b) of the Internal Revenue Code, relating to distributions in the first 65 days of the taxable year, is modified as follows:

(1) An election under Section 663(b) of the Internal Revenue Code for federal purposes shall be treated for purposes of this part as an election made by the executor of the estate or the fiduciary of the trust, as the case may be, under Section 663(b) of the Internal Revenue Code for state purposes and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed.

(2) If the executor of the estate or the fiduciary of the trust, as the case may be, fails to make an election under Section 663(b) of the Internal Revenue Code for federal purposes with respect to an amount properly paid or credited within 65 days of the taxable year, that amount shall not be considered for purposes of this part as having been paid or credited on the last day of the preceding taxable year, an election under Section 663(b) of the Internal Revenue Code for state purposes with respect to that amount shall not be allowed, and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed with respect to that amount.

(b) Section 663(c) of the Internal Revenue Code, relating to separate shares treated as separate estates or trusts, is modified as follows:

(1) An election under Section 663(c) of the Internal Revenue Code for federal purposes shall be treated for purposes of this part as an election made by the executor of the estate or the fiduciary of the trust, as the case may be, under Section 663(c) of the Internal Revenue Code for state purposes and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed.

(2) If the executor of the estate or the fiduciary of the trust, as the case may be, fails to make an election under Section 663(c) of the Internal Revenue Code for federal purposes with respect to separate shares treated as separate estates or trusts, an election under Section 663(c) of the Internal Revenue Code for state purposes shall not be allowed, and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed.

history: (History: Added by Stats. 1998, Ch. 322, Sec. 34. Effective August 20, 1998.)


text: For taxable years beginning on or after January 1, 2014, Section 664(c)(2) of the Internal Revenue Code, relating to excise tax, shall not apply and, in lieu thereof, the unrelated business taxable income, as defined in Section 23732, of every charitable remainder annuity trust or charitable remainder unitrust shall be subject to tax under Section 17651.

history: (History: Repealed and added by Stats. 2014, Ch. 478, Sec. 4. (AB 2754) Effective January 1, 2015.)


text: Section 684 of the Internal Revenue Code, relating to recognition of gain on certain transfers to certain foreign trusts and estates, shall not apply.

history: (History: Added by Stats. 2005, Ch. 691, Sec. 38. Effective October 7, 2005.)


text:
Section 685 of the Internal Revenue Code, relating to treatment of funeral trusts, is modified as follows:

(a) Section 685(a) of the Internal Revenue Code is modified to read: In the case of a qualified funeral trust—

(1) Subparts B, C, D, and E of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code shall not apply.

(2) No credit for personal exemption shall be allowed under Section 17054 or Section 17733.

(b) Section 685(b) of the Internal Revenue Code is modified as follows:

(1) An election under Section 685(b)(5) of the Internal Revenue Code for federal purposes shall be treated for purposes of this part as an election made by the trustee of the qualified funeral trust under Section 685(b)(5) of the Internal Revenue Code for state purposes and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed.

(2) If the trustee of a qualified funeral trust fails to make an election under Section 685(b)(5) of the Internal Revenue Code for federal purposes with respect to a qualified funeral trust, that trust shall be treated for purposes of this part as owned under Subpart E of the Internal Revenue Code by the purchasers of the contracts described in Section 685(b)(1) of the Internal Revenue Code, an election under Section 685(b)(5) of the Internal Revenue Code for state purposes with respect to that trust shall not be allowed, and a separate election under paragraph (3) of subdivision (e) of Section 17024.5 shall not be allowed with respect to that trust.

(c) Section 685(d) of the Internal Revenue Code is modified to read: Subdivision (e) of Section 17041 shall be applied to each qualified funeral trust by treating each beneficiary’s interest in each qualified funeral trust as a separate trust.

(d) The Franchise Tax Board may, by forms and instructions, provide rules for simplified reporting of all trusts having a single trustee consistent with the rules prescribed by the Secretary of the Treasury under Section 685 of the Internal Revenue Code.

(e) This section shall apply to taxable years ending after August 5, 1997.

(f) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998.

history: (History: Amended (as added by Stats. 1998, Ch. 7) by Stats. 1998, Ch. 322, Sec. 35. Effective August 20, 1998.)


text: Sections 665 to 668, inclusive, of the Internal Revenue Code shall not apply to distributions described in subdivision (b) of Section 17745.


text: Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to partners and partnerships, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 47. Effective October 10, 1999.)

chapter: 10. Partners and Partnerships

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 10. Partners and Partnerships


text: Notwithstanding the provisions of Section 701 of the Internal Revenue Code, relating to partners, not partnerships, subject to tax, a partnership, as an entity shall be subject to Chapter 10.5 (commencing with Section 17935), relating to tax on limited partnerships, Chapter 10.6 (commencing with Section 17941), relating to tax on limited liability companies, and Chapter 10.7 (commencing with Section 17948), relating to tax on limited liability partnerships.

history: (History: Amended by Stats. 2017, Ch. 561, Sec. 234. (AB 1516) Effective January 1, 2018.)


text: Section 703(a)(2) of the Internal Revenue Code is modified to additionally provide that the deduction for taxes provided in Section 164(a) of the Internal Revenue Code with respect to taxes, described in Section 18006, paid to another state shall not be allowed to the partnership.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 49. Effective October 10, 1999.)


text: For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, in the case of a nonresident partner, guaranteed payments, as defined by Section 707(c) of the Internal Revenue Code, shall be included in that computation as gross income from sources within this state in the same manner as if those payments were a distributive share of that partnership.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 18. Effective January 1, 2002.)


text:
The term “unrealized receivables,” as defined by Section 751(c) of the Internal Revenue Code, shall not include any of the following:

(a) Stock in certain foreign corporations, as described in Section 1248 of the Internal Revenue Code.

(b) Oil, gas, or geothermal property, described in Section 1254 of the Internal Revenue Code.

history: (History: Repealed and added by Stats. 1983, Ch. 488, Sec. 61. Effective July 28, 1983.)


text: Section 751(d)(3) of the Internal Revenue Code, relating to appreciated inventory items subject to tax as a gain on foreign investment company stock, does not apply.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 14. Effective January 1, 2004.)


text: Section 751(e) of the Internal Revenue Code, relating to the limitation on tax attributable to deemed sales of Section 1248 stock, shall not apply.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 50. Effective October 10, 1999.)


text: For purposes of this part and Part 11 (commencing with Section 23001), any election relating to the computation of depreciation shall be made by the partnership and each partner shall take into account his or her distributive share of the depreciation amount computed in accordance with that election.

history: (History: Amended by Stats. 1992, Ch. 1295, Sec. 12. Effective January 1, 1993.)


text:
(a) The amendments made by Section 13504 of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 708 of the Internal Revenue Code, relating to the continuation of a partnership, shall apply, except as otherwise provided.

(b) The amendments made by Section 13504 of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 743(e) of the Internal Revenue Code, relating to alternative rules for electing investment partnerships, shall apply, except as otherwise provided.

(c) The amendments made by Section 13504 of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 168(i)(7)(B) of the Internal Revenue Code, relating to transactions covered, shall apply, except as otherwise provided.

(d) (1) A partnership may elect to have subdivision (a) apply to partnership taxable years beginning after December 31, 2017, and before January 1, 2019, in which case subdivisions (b) and (c) shall also apply to the election.

(2) The Franchise Tax Board shall specify the form and manner in which the election under paragraph (1) shall be made, as well as whether an amended return or any other information shall be required.

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

history: (History: Added by Stats. 2019, Ch. 39, Sec. 16. (AB 91) Effective July 1, 2019.)


text: Part IV of Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code (commencing with Section 771 of the Internal Revenue Code), shall not apply, except as otherwise provided.

history: (History: Added by Stats. 1998, Ch. 322, Sec. 37. Effective August 20, 1998.)


text:
(a) Except as provided in subdivision (f), for each taxable year beginning on or after January 1, 1997, every limited partnership doing business in this state (as defined by Section 23101) and required to file a return under Section 18633 shall pay annually to this state a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in Section 23153.

(b) (1) In addition to any limited partnership that is doing business in this state and therefore is subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, every limited partnership that has executed, acknowledged, and filed a certificate of limited partnership with the Secretary of State pursuant to Section 15621 or 15902.01 of the Corporations Code, and every foreign limited partnership that has registered with the Secretary of State pursuant to Section 15692 or 15909.01 of the Corporations Code, shall pay annually the tax prescribed in subdivision (a). The tax shall be paid for each taxable year, or part thereof, until a certificate of cancellation is filed on behalf of the limited partnership with the office of the Secretary of State pursuant to Section 15623, 15696, 15902.03, or 15909.07 of the Corporations Code.

(2) If a taxpayer files a return with the Franchise Tax Board that is designated its final return, that board shall notify the taxpayer that the tax imposed by this chapter is due annually until a certificate of cancellation is filed with the Secretary of State pursuant to Section 15623, 15696, 15902.03, or 15909.07 of the Corporations Code.

(c) The tax imposed by this chapter shall be due and payable on the date the return is required to be filed under former Section 18432 or 18633.

(d) For purposes of this section, “limited partnership” means any partnership formed by two or more persons under the laws of this state or any other jurisdiction and having one or more general partners and one or more limited partners.

(e) Notwithstanding subdivision (b), any limited partnership that ceased doing business prior to January 1, 1997, filed a final return with the Franchise Tax Board for a taxable year ending before January 1, 1997, and filed a certificate of dissolution with the Secretary of State pursuant to Section 15623 of the Corporations Code prior to January 1, 1997, shall not be subject to the tax imposed by this chapter for any period following the date the certificate of dissolution was filed with the Secretary of State, but only if the limited partnership files a certificate of cancellation with the Secretary of State pursuant to Section 15623 of the Corporations Code. In the case where a notice of proposed deficiency assessment of tax or a notice of tax due (whichever is applicable) is mailed after January 1, 2001, the first sentence of this subdivision shall not apply unless the certificate of cancellation is filed with the Secretary of State not later than 60 days after the date of the mailing of the notice.

(f) (1) (A) Every limited partnership doing business in this state as described in subdivision (a) that files a certificate of limited partnership or registers with the Secretary of the State pursuant to subdivision (b) on or after January 1, 2021, and before January 1, 2024, shall not be subject to the tax imposed under this section for its first taxable year.

(B) This subdivision shall become operative only for a taxable year in which any budget measure appropriates one dollar ($1) or more to the Franchise Tax Board for the costs associated with administration of this subdivision.

(2) For taxable years beginning on or after January 1, 2027, and before January 1, 2030, every limited partnership required to file a return under Section 18633 shall, instead of the amount specified in Section 23153, pay the annual tax to this state in the amount of four hundred dollars ($400) for its first taxable year.

history: (History: Amended by Stats. 2026, Ch. 23, Sec. 25. (SB 122) Effective June 29, 2026.)

chapter: 10.5. Tax on Limited Partnerships

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 10.5. Tax on Limited Partnerships


text: A limited partnership shall not be subject to the taxes imposed by this chapter if the limited partnership did no business in this state during the taxable year and the taxable year was 15 days or less.

history: (History: Added by Stats. 1997, Ch. 604, Sec. 10. Effective October 3, 1997.)


text:
(a) A limited partnership shall not be subject to the taxes imposed by this chapter for a taxable year if the limited partnership does all of the following:

(1) Files with the Franchise Tax Board a timely final annual tax return for the preceding taxable year.

(2) Does not do business in this state after the end of the taxable year for which the final annual tax return was filed.

(3) Files a certificate of cancellation with the Secretary of State, pursuant to Section 15623 or 15696 of the Corporations Code, before the end of the 12-month period beginning with the date the final annual tax return was filed.

(b) For purposes of this section, a “final annual tax return” is a return described in Section 18633 that is filed on or before the due date of the return, as extended, that the taxpayer designates in the manner prescribed by the Franchise Tax Board as the taxpayer’s final annual return for purposes of the tax imposed under this chapter. For purposes of this chapter, a “final annual tax return” is a return filed pursuant to Section 18633 where the taxpayer is not required to file a subsequent return to reflect the imposition of tax under this chapter.

history: (History: Added by Stats. 2006, Ch. 773, Sec. 49. Effective September 29, 2006.)


text:
(a) Except as provided in subdivision (g), for each taxable year beginning on or after January 1, 1997, a limited liability company doing business in this state (as defined in Section 23101) shall pay annually to this state a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in subdivision (d) of Section 23153 for the taxable year.

(b) (1) In addition to any limited liability company that is doing business in this state and is therefore subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, a limited liability company shall pay annually the tax prescribed in subdivision (a) if articles of organization have been accepted, or a certificate of registration has been issued, by the office of the Secretary of State. The tax shall be paid for each taxable year, or part thereof, until a certificate of cancellation of registration or of articles of organization is filed on behalf of the limited liability company with the office of the Secretary of State.

(2) If a taxpayer files a return with the Franchise Tax Board that is designated as its final return, the Franchise Tax Board shall notify the taxpayer that the annual tax shall continue to be due annually until a certificate of dissolution is filed with the Secretary of State pursuant to Section 17707.08 of the Corporations Code or a certificate of cancellation is filed with the Secretary of State pursuant to Section 17708.06 of the Corporations Code.

(c) The tax assessed under this section shall be due and payable on or before the 15th day of the fourth month of the taxable year.

(d) For purposes of this section, “limited liability company” means an organization, other than a limited liability company that is exempt from the tax and fees imposed under this chapter pursuant to Section 23701h or Section 23701x, that is formed by one or more persons under the law of this state, any other country, or any other state, as a “limited liability company” and that is not taxable as a corporation for California tax purposes.

(e) Notwithstanding anything in this section to the contrary, if the office of the Secretary of State files a certificate of cancellation pursuant to Section 17707.02 of the Corporations Code for any limited liability company, then paragraph (1) of subdivision (f) of Section 23153 shall apply to that limited liability company as if the limited liability company were properly treated as a corporation for that limited purpose only, and paragraph (2) of subdivision (f) of Section 23153 shall not apply. Nothing in this subdivision entitles a limited liability company to receive a reimbursement for any annual taxes or fees already paid.

(f) (1) Notwithstanding any provision of this section to the contrary, for taxable years beginning on or after January 1, 2020, a limited liability company that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the tax imposed under this section for any taxable year the owner is deployed and the limited liability company operates at a loss or ceases operation.

(2) The Franchise Tax Board may promulgate regulations as necessary or appropriate to carry out the purposes of this subdivision, including a definition for “ceases operation.”

(3) For the purposes of this subdivision, all of the following definitions apply:

(A) “Deployed” means being called to active duty or active service during a period when a Presidential Executive order specifies that the United States is engaged in combat or homeland defense. “Deployed” does not include either of the following:

(i) Temporary duty for the sole purpose of training or processing.

(ii) A permanent change of station.

(B) “Operates at a loss” means a limited liability company’s expenses exceed its receipts.

(C) “Small business” means a limited liability company with total income from all sources derived from, or attributable to, the state of two hundred fifty thousand dollars ($250,000) or less.

(4) This subdivision shall become inoperative for taxable years beginning on or after January 1, 2030.

(g) (1) (A) Every limited liability company doing business in this state as described in subdivision (a) that organizes or registers with the Secretary of the State pursuant to subdivision (b) on or after January 1, 2021, and before January 1, 2024, shall not be subject to the tax imposed under this section for its first taxable year.

(B) This subdivision shall become operative only for a taxable year in which any budget measure appropriates one dollar ($1) or more to the Franchise Tax Board for the costs associated with administration of this subdivision.

(2) For taxable years beginning on or after January 1, 2027, and before January 1, 2030, every limited liability company required to file a return under Section 18633.5 shall, instead of the amount specified in Section 23153, pay the annual tax to this state in the amount of four hundred dollars ($400) for its first taxable year.

history: (History: Amended by Stats. 2026, Ch. 85, Sec. 7. (SB 180) Effective July 13, 2026.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 10.6. Tax and Fees on Limited Liability Companies


text:
(a) In addition to the tax imposed under Section 17941, every limited liability company subject to tax under Section 17941 shall pay annually to this state a fee equal to:

(1) Nine hundred dollars ($900), if the total income from all sources derived from or attributable to this state for the taxable year is two hundred fifty thousand dollars ($250,000) or more, but less than five hundred thousand dollars ($500,000).

(2) Two thousand five hundred dollars ($2,500), if the total income from all sources derived from or attributable to this state for the taxable year is five hundred thousand dollars ($500,000) or more, but less than one million dollars ($1,000,000).

(3) Six thousand dollars ($6,000), if the total income from all sources derived from or attributable to this state for the taxable year is one million dollars ($1,000,000) or more, but less than five million dollars ($5,000,000).

(4) Eleven thousand seven hundred ninety dollars ($11,790), if the total income from all sources derived from or attributable to this state for the taxable year is five million dollars ($5,000,000) or more.

(b) (1) (A) For purposes of this section, “total income from all sources derived from or attributable to this state” means gross income, as defined in Section 24271, plus the cost of goods sold that are paid or incurred in connection with the trade or business of the taxpayer. However, “total income from all sources derived from or attributable to this state” shall not include allocation or attribution of income or gain or distributions made to a limited liability company in its capacity as a member of, or holder of an economic interest in, another limited liability company if the allocation or attribution of income or gain or distributions are directly or indirectly attributable to income that is subject to the payment of the fee described in this section.

(B) For purposes of this section, “total income from all sources derived from or attributable to this state” shall be determined using the rules for assigning sales under Sections 25135 and 25136 and the regulations thereunder, as modified by regulations under Section 25137, other than those provisions that exclude receipts from the sales factor.

(2) In the event a taxpayer is a commonly controlled limited liability company, the total income from all sources derived from or attributable to this state, taking into account any election under Section 25110, may be determined by the Franchise Tax Board to be the total income of all the commonly controlled limited liability company members if it determines that multiple limited liability companies were formed for the primary purpose of reducing fees payable under this section. A determination by the Franchise Tax Board under this subdivision may only be made with respect to one limited liability company in a commonly controlled group. However, each commonly controlled limited liability company shall be jointly and severally liable for the fee. For purposes of this section, commonly controlled limited liability companies shall include the taxpayer and any other partnership or limited liability company doing business (as defined in Section 23101) in this state and required to file a return under Section 18633 or 18633.5, in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests.

(c) The fee assessed under this section shall be due and payable on the date the return of the limited liability company is required to be filed under Section 18633.5, shall be collected and refunded in the same manner as the taxes imposed by this part, and shall be subject to interest and applicable penalties.

(d) (1) The fee imposed by this section shall be estimated and paid on or before the 15th day of the sixth month of the current taxable year.

(2) A penalty of 10 percent of the amount of any underpayment shall be added to the fee. The underpayment amount shall be equal to the difference between the total amount of the fee imposed by this section for the taxable year less the amount paid under paragraph (1) by the date specified in that paragraph. A penalty shall not be imposed with respect to any fee estimated and paid under this section if the amount paid by the date prescribed in this subdivision is equal to or greater than the total amount of the fee of the limited liability company for the preceding taxable year.

history: (History: Amended by Stats. 2008, Ch. 763, Sec. 6. Effective September 30, 2008. Note: See provisions clarifying this section's application in Sec. 8 of Stats. 2008, 1st Ex., Ch. 1, which took effect on Dec. 31, 2008.)

chapter: 10.6. Tax and Fees on Limited Liability Companies


text: It is the intent of the Legislature that the amount of the annual fee described in Section 17942 shall apply to the taxable year beginning January 1, 2001, and subsequent taxable years, notwithstanding the results of any study prepared by the Franchise Tax Board and submitted to the Joint Legislative Budget Committee pursuant to former Section 17943.

history: (History: Repealed and added by Stats. 2001, Ch. 391, Sec. 3. Effective October 1, 2001.)


text:
(a) The effective date of dissolution, withdrawal, or cancellation of a limited liability company is the date on which the certified copy of the court decree, judgment, or order declaring the limited liability company duly wound up and dissolved is filed in the office of the Secretary of State or the date on which the certificate of winding up and dissolution is filed in the office of the Secretary of State. For the purposes of this chapter, the effective date of cancellation of registration of a foreign limited liability company is the date on which the certificate of cancellation of registration is filed in the office of the Secretary of State.

(b) The Secretary of State shall, through an information program and by forms and instructions, recommend that all required documents filed with the Secretary of State be sent, if mailed, by certified mail with return receipt requested. The Secretary of State shall also notify persons that receipt of documents by the Secretary of State will be acknowledged within 21 days of receipt.

(c) On or before 21 days after their receipt, the Secretary of State shall provide a payer with acknowledgment of the receipt of documents submitted by a limited liability company pursuant to this chapter.

history: (History: Added by Stats. 1996, Ch. 952, Sec. 19. Effective January 1, 1997.)


text: A limited liability company shall not be subject to the taxes and fees imposed by this chapter if the limited liability company did no business in this state during the taxable year and the taxable year was 15 days or less.


text:
(a) A limited liability company shall not be subject to the taxes imposed by this chapter for a taxable year if the limited liability company does all of the following:

(1) Files with the Franchise Tax Board a timely final annual tax return for the preceding taxable year.

(2) Does not do business in this state after the end of the taxable year for which the final annual tax return was filed.

(3) Files a certificate of dissolution with the Secretary of State, pursuant to Section 17707.08 of the Corporations Code, or a certificate of cancellation with the Secretary of State pursuant to Section 17708.06 of the Corporations Code, before the end of the 12-month period beginning with the date the final annual tax return was filed.

(b) For purposes of this section, a “final annual tax return” is a return described in Section 18633.5 that is filed on or before the due date of the return, as extended, that the taxpayer designates in the manner prescribed by the Franchise Tax Board as the taxpayer’s final return for purposes of the tax imposed under this chapter. For purposes of this chapter, a “final annual tax return” is a return filed pursuant to Section 18633.5 where the taxpayer is not required to file a subsequent return to reflect the imposition of tax under this chapter.

history: (History: Amended by Stats. 2012, Ch. 419, Sec. 27. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)


text:
(a) Except as provided in subdivision (e), for each taxable year beginning on or after January 1, 1997, every limited liability partnership doing business in this state (as defined in Section 23101) and required to file a return under Section 18633 shall pay annually to the Franchise Tax Board a tax for the privilege of doing business in this state in an amount equal to the applicable amount specified in paragraph (1) of subdivision (d) of Section 23153 for the taxable year.

(b) In addition to any limited liability partnership that is doing business in this state and therefore is subject to the tax imposed by subdivision (a), for each taxable year beginning on or after January 1, 1997, every registered limited liability partnership that has registered with the Secretary of State pursuant to Section 16953 of the Corporations Code and every foreign limited liability partnership that has registered with the Secretary of State pursuant to Section 16959 of the Corporations Code shall pay annually the tax prescribed in subdivision (a). The tax shall be paid for each taxable year, or part thereof, until any of the following occurs:

(1) A notice of cessation is filed with the Secretary of State pursuant to subdivision (b) of Section 16954 or 16960 of the Corporations Code.

(2) A foreign limited liability partnership withdraws its registration pursuant to subdivision (a) of Section 16960 of the Corporations Code.

(3) The registered limited liability partnership or foreign limited liability partnership has been dissolved and finally wound up.

(c) The tax assessed under this section shall be due and payable on the date the return is required to be filed under Section 18633.

(d) If a taxpayer files a return with the Franchise Tax Board that is designated as its final return, the Franchise Tax Board shall notify the taxpayer that the annual tax shall continue to be due annually until a certificate of cancellation is filed with the Secretary of State pursuant to Section 16954 or 16960 of the Corporations Code.

(e) (1) (A) Every limited liability partnership doing business in this state as described in subdivision (a) that registers with the Secretary of the State pursuant to subdivision (b) on or after January 1, 2021, and before January 1, 2024, shall not be subject to the tax imposed under this section for its first taxable year.

(B) This subdivision shall become operative only for a taxable year in which any budget measure appropriates one dollar ($1) or more to the Franchise Tax Board for the costs associated with administration of this subdivision.

(2) For taxable years beginning on or after January 1, 2027, and before January 1, 2030, every limited liability partnership required to file a return under Section 18633 shall, instead of the amount specified in Section 23153, pay the annual tax to this state in the amount of four hundred dollars ($400) for its first taxable year.

history: (History: Amended by Stats. 2026, Ch. 23, Sec. 27. (SB 122) Effective June 29, 2026.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 10.7. Tax on Registered Limited Liability Partnerships and Foreign Limited Liability Partnerships


text: A registered limited liability partnership or foreign limited liability partnership shall not be subject to the taxes and fees imposed by this chapter if the registered limited liability partnership or foreign limited liability partnership did no business in this state during the taxable year and the taxable year was 15 days or less.

history: (History: Added by Stats. 1996, Ch. 952, Sec. 20. Effective January 1, 1997.)

chapter: 10.7. Tax on Registered Limited Liability Partnerships and Foreign Limited Liability Partnerships


text:
(a) A registered limited liability partnership shall not be subject to the taxes imposed by this chapter for a taxable year if the registered limited liability partnership does all of the following:

(1) Files with the Franchise Tax Board a timely final annual tax return for the preceding taxable year.

(2) Does not do business within this state after the end of the taxable year for which the final annual tax return was filed.

(3) Files a notice in accordance with subdivision (b) of Section 16954 or subdivision (b) of Section 16960 of the Corporations Code with the Secretary of State before the end of the 12-month period beginning with the date of the final annual tax return was filed.

(b) For purposes of this section, a “final annual tax return” is a return described in Section 18633 that is filed on or before the due date of the return, as extended, that the taxpayer designates in the manner prescribed by the Franchise Tax Board as the taxpayer’s final annual tax return for purposes of the tax imposed under this chapter. For purposes of this chapter, a “final annual tax return” is a return filed pursuant to Section 18633 where the taxpayer is not required to file a subsequent return to reflect the imposition of tax under this chapter.

history: (History: Added by Stats. 2006, Ch. 773, Sec. 53. Effective September 29, 2006.)


text:
(a) For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, in the case of nonresident taxpayers the gross income includes only the gross income from sources within this state.

(b) Notwithstanding subdivision (a), the gross income of a nonresident taxpayer does not include income not subject to the Personal Income Tax Law (Part 10 (commencing with Section 17001) of Division 2) by operation of the following federal laws:

(1) Section 11108 of Title 46, United States Code, relating to compensation for the performance of duties of certain merchant seamen.

(2) Section 11502 of Title 49, United States Code, relating to compensation of an employee of a rail carrier.

(3) Section 14503 of Title 49, United States Code, relating to compensation of an employee of a motor carrier.

(4) Section 40116 of Title 49, United States Code, relating to the pay of an employee of an air carrier.

(5) Section 571 of Title 50, Appendix, United States Code, relating to military compensation of service members.

history: (History: Amended by Stats. 2004, Ch. 62, Sec. 1. Effective January 1, 2005.)

chapter: 11. Gross Income of Nonresidents

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 11. Gross Income of Nonresidents


text: For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, income of nonresidents from stocks, bonds, notes, or other intangible personal property is not income from sources within this state unless the property has acquired a business situs in this state, except that if a nonresident buys or sells such property in this state or places orders with brokers in this state to buy or sell such property so regularly, systematically, and continuously as to constitute doing business in this state, the profit or gain derived from such activity is income from sources within this state irrespective of the situs of the property.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 20. Effective January 1, 2002.)


text:
(a) For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, gross income of a nonresident, as defined in Section 17015, from sources within this state shall not include “qualified retirement income” received on or after January 1, 1996, for any part of the taxable year during which the taxpayer was not a resident of this state.

(b) For purposes of this section, “qualified retirement income” means income from any of the following:

(1) A qualified trust under Section 401(a) of the Internal Revenue Code that is exempt under Section 501(a) of the Internal Revenue Code from taxation.

(2) A simplified employee pension as defined in Section 408(k) of the Internal Revenue Code.

(3) An annuity plan described in Section 403(a) of the Internal Revenue Code.

(4) An annuity contract described in Section 403(b) of the Internal Revenue Code.

(5) An individual retirement plan described in Section 7701(a)(37) of the Internal Revenue Code.

(6) An eligible deferred compensation plan as defined in Section 457 of the Internal Revenue Code.

(7) A governmental plan as defined in Section 414(d) of the Internal Revenue Code.

(8) A trust described in Section 501(c)(18) of the Internal Revenue Code.

(9) Any plan, program, or arrangement described in Section 3121(v)(2)(C) of the Internal Revenue Code, or any plan, program, or arrangement that is in writing, that provides for retirement payments in recognition of prior service to be made to a retired partner, and that is in effect immediately before retirement begins, if that income is either of the following:

(A) Part of a series of substantially equal periodic payments (not less frequently than annually), which may include income described in paragraphs (1) to (8), inclusive, made for either of the following:

(i) The life or the life expectancy of the recipient (or the joint lives or joint life expectancies of the recipient and the designated beneficiary of the recipient).

(ii) A period of not less than 10 years.

(B) A payment received after termination of employment, under a plan, program, or arrangement to which that employment relates, maintained solely for the purpose of providing retirement benefits for employees in excess of the limitation imposed by Section 401(a)(17), 401(k), 401(m), 402(g), 403(b), 408(k), or 415 of the Internal Revenue Code, or any combination of those sections, or any other limitation on contributions or benefits in the Internal Revenue Code on plans to which any of those sections apply.

(C) The fact that payments may be adjusted, from time to time, pursuant to this plan, program, or arrangement to limit total disbursements under a predetermined formula, or to provide cost-of-living or similar adjustments, will not cause the periodic payments provided under that plan, program, or arrangement to fail the “substantially-equal-periodic-payments” test.

(10) Any retired or retainer pay of a member or former member of a uniform service computed under Section 1401 and following of Title 10 of the United States Code.

(c) For purposes of this section, the term “retired partner” is an individual who is described as a partner in Section 7701(a)(2) of the Internal Revenue Code and who is retired under that individual’s partnership agreement.

(d) This section shall apply only to any taxable year, or portion thereof, that the provisions of Section 114 of Title 4 of the United States Code, relating to limitation on state income taxation of certain pension income, are effective.

(e) Except as otherwise provided, references to the Internal Revenue Code are subject to paragraph (1) of subdivision (a) of Section 17024.5.

history: (History: Amended by Stats. 2010, Ch. 14, Sec. 35. (SB 401) Effective January 1, 2011.)


text: For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, income of estates and trusts distributed or distributable to nonresident beneficiaries is income from sources within this state only if distributed or distributable out of income of the estate or trust derived from sources within this state. For the purposes of this section, the nonresident beneficiary shall be deemed to be the owner of intangible personal property from which the income of the estate or trust is derived.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 22. Effective January 1, 2002.)


text: For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, except as provided in Section 25141, gross income from sources within and without this state shall be allocated and apportioned under rules and regulations prescribed by the Franchise Tax Board.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 23. Effective January 1, 2002.)


text:
(a) For purposes of computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, notwithstanding Sections 17951, 17952, and 17953, gross income of a nonresident (as defined in Section 17015) from sources within this state shall not include dividends, interest, or gains and losses from qualifying investment securities if any of the following apply:

(1) In the case of an individual, with respect to the qualifying investment securities, the taxpayer’s only contact with this state is through a broker, dealer, or investment adviser located in this state.

(2) In the case of a partner’s distributive share of income from qualifying investment securities, the partnership qualifies as an investment partnership, whether or not the partnership has a usual place of business located in this state.

(3) In the case of a beneficiary of a qualifying estate or trust, the taxpayer’s only contact with this state is through an investment account managed by a corporate fiduciary located in this state.

(4) In the case of a unit holder in a regulated investment company (as defined in Section 851 of the Internal Revenue Code), to the extent of the dividends distributed by the regulated investment company, whether or not the regulated investment company has a principal place of business in this state.

(b) This section shall not apply to income derived from investment activity that is interrelated with any trade or business activity of the nonresident or an entity in which the nonresident owns an interest in this state, whose primary activities are separate and distinct from the acts of acquiring, managing, or disposing of qualified investment securities, or if those securities were acquired with working capital of a trade or business activity conducted in this state in which the nonresident owns an interest.

(c) For purposes of this section:

(1) “Investment partnership” means a partnership that meets both of the following requirements:

(A) No less than 90 percent of the partnership’s cost of its total assets consist of qualifying investment securities, deposits at banks or other financial institutions, and office space and equipment reasonably necessary to carry on its activities as an investment partnership.

(B) No less than 90 percent of its gross income consists of interest, dividends, and gains from the sale or exchange of qualifying investment securities.

(2) “Qualifying estate or trust” means an estate or trust that meets both of the following requirements:

(A) No less than 90 percent of the estate’s or trust’s cost of its total assets consist of qualifying investment securities, deposits at banks or other financial institutions, and office space and equipment reasonably necessary to carry on its investment activities.

(B) No less than 90 percent of its gross income consists of interest, dividends, and gains from the sale or exchange of qualifying investment securities.

(3) (A) “Qualifying investment securities” include all of the following:

(i) Common stock, including preferred or debt securities convertible into common stock, and preferred stock.

(ii) Bonds, debentures, and other debt securities.

(iii) Foreign and domestic currency deposits or equivalents and securities convertible into foreign securities.

(iv) Mortgage- or asset-backed securities secured by federal, state, or local governmental agencies.

(v) Repurchase agreements and loan participations.

(vi) Foreign currency exchange contracts and forward and futures contracts on foreign currencies.

(vii) Stock and bond index securities and futures contracts, and other similar financial securities and futures contracts on those securities.

(viii) Options for the purchase or sale of any of the securities, currencies, contracts, or financial instruments described in clauses (i) to (vii), inclusive.

(ix) Regulated futures contracts.

(B) “Qualifying investment securities” does not include an interest in a partnership unless that partnership is itself an investment partnership.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 24. Effective January 1, 2002.)


text:
(a) Subject to the following conditions, residents shall be allowed a credit against the “net tax” (as defined by Section 17039) for net income taxes imposed by and paid to another state (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) on income taxable under this part:

(1) The credit shall be allowed only for taxes paid to the other state (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) on income derived from sources within that state which is taxable under its laws irrespective of the residence or domicile of the recipient.

This paragraph shall not apply to residents to whom subdivision (b) of Section 17014 applies.

(2) The credit shall not be allowed if the other state allows residents of this state a credit against the taxes imposed by that state (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) for “net tax” (as defined by Section 17039) paid or payable under this part.

(3) The credit shall not exceed the proportion of the “net tax” (as defined by Section 17039) payable under this part as the income subject to tax in the other state (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) and also taxable under this part bears to the taxpayer’s entire income upon which the “net tax” (as defined by Section 17039) is imposed by this part.

(4) No credit shall be allowed under this section for any tax imposed by Section 17062.

(b) For purposes of this section, the amount of “net income taxes” paid to another state shall include the taxpayer’s pro rata share of any taxes on, or according to, or measured by, income or profits paid or accrued, which were paid by an S corporation, as provided by Section 18006.

(c) For purposes of this section, “income derived from sources within that state” shall be determined by applying the nonresident sourcing rules for determining income from sources within this state, as specified in Chapter 11 (commencing with Section 17951), and the regulations thereunder.

history: (History: Amended by Stats. 2002, Ch. 374, Sec. 3. Effective January 1, 2003.)

chapter: 12. Credit for Taxes Paid

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 12. Credit for Taxes Paid


text:
(a) Subject to the following conditions, nonresidents shall be allowed a credit against the “net tax” (as defined by Section 17039) for net income taxes imposed by and paid to the state of residence (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) on income taxable under this part:

(1) The credit shall be allowed only if the state of residence either does not tax income of residents of this state derived from sources within that state or allows residents of this state a credit against the taxes imposed by that state on such income for “net tax” (as defined by Section 17039) paid or payable thereon under this part.

(2) The credit shall not be allowed for taxes paid to a state which allows its residents a credit against the taxes imposed by that state for “net tax” (as defined by Section 17039) paid or payable under this part irrespective of whether its residents are allowed a credit against the taxes imposed by this part for income taxes paid to that state.

(3) Credit shall be allowed only for such proportion of the taxes paid to the state of residence (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) as the income taxable under this part and also subject to tax in the state of residence bears to the entire income upon which the taxes paid to the state of residence are imposed.

(4) The credit shall not exceed such proportion of the “net tax” (as defined by Section 17039) payable under this part as the income subject to tax in the state of residence and also taxable under this part bears to the entire income taxable under this part.

(5) No credit shall be allowed under this section for any tax imposed by Section 17062.

(b) For purposes of this section, the amount of “net income taxes” paid to another state shall include the taxpayer’s pro rata share of any taxes on, or according to, or measured by, income or profits paid or accrued, which were paid by an S corporation, as provided by Section 18006.

history: (History: Amended by Stats. 1990, Ch. 1349, Sec. 9. Effective September 26, 1990.)


text: For the purpose of this chapter an estate or trust is considered a resident of the state which taxes the income of the estate or trust irrespective of whether the income is derived from sources within that state.

history: (History: Amended by Stats. 1959, Ch. 321.)


text:
If an estate or trust is a resident of this State and also a resident of another state, it shall, notwithstanding the limitations contained in Sections 18001 and 18002, be allowed a credit against the taxes imposed by this part for net income taxes imposed by and paid to the other state, subject to the following conditions:

(a) Credit shall be allowed only for such proportion of the taxes paid to the other state as the income taxable under this part and also subject to tax in the other state bears to the entire income upon which the taxes paid to the other state are imposed.

(b) The credit shall not exceed such proportion of the tax payable under this part as the income subject to tax in the other state and also taxable under this part bears to the entire income taxable under this part.


text:
A resident beneficiary of an estate or trust who is taxable on the income of the estate or trust under Chapter 9 of this part shall, subject to the following conditions, be allowed a credit against the taxes imposed by this part on such income for net income taxes paid by the estate or trust to another state on such income:

(a) Credit shall be allowed only for such proportion of the tax paid to the other state by the estate or trust as the income of the estate or trust which is taxable to the beneficiary under this part and also taxed to the estate or trust in the other state bears to the entire income of the estate or trust upon which the taxes paid to the other state were imposed.

(b) The credit shall not exceed such proportion of the tax payable under this part as the income of the estate or trust which is taxable to the beneficiary under this part and also taxed to the estate or trust in the other state bears to the beneficiary’s entire income upon which the tax is imposed by this part.

history: (History: Amended by Stats. 1957, Ch. 215.)


text:
For purposes of determining a credit under Section 18001 (relating to residents) or Section 18002 (relating to nonresidents), both of the following apply:

(a) A member of a partnership is allowed to treat his, her, or its pro rata share of net income taxes paid to another state by the partnership as if those taxes had been paid directly by the partner.

(b) (1) A shareholder of a corporation that is an S corporation under Chapter 4.5 (commencing with Section 23800) of Part 11 is allowed to treat his or her pro rata share of net income taxes paid to another state by the S corporation as if those taxes had been paid by the shareholder.

(2) This subdivision applies only if either of the following requirements is met:

(A) The state imposing the tax does not allow corporations to elect to be treated as an S corporation.

(B) The state imposes a tax on S corporations and the corporation referred to in paragraph (1) has elected to be treated as an S corporation in the other state.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 15. Effective January 1, 2004.)


text: If any taxes paid to another state for which a taxpayer has been allowed a credit under this chapter are at any time credited or refunded to the taxpayer, the taxpayer shall immediately report that fact to the Franchise Tax Board.


text: A tax equal to the credit allowed for the taxes credited or refunded by the other state is due and payable from the taxpayer upon notice and demand from the Franchise Tax Board.


text: Interest shall be assessed, collected and paid in the same manner as the tax at the adjusted annual rate established pursuant to Section 19521 from the date the credit was allowed under this part to the date of payment.

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


text: The credit against the taxes imposed by this part for net income taxes paid to another state shall not be allowed to any taxpayer or any class of taxpayers if the allowance of the credit will result in an invalid or illegal discrimination against another taxpayer or another class of taxpayers.


text: Subchapter O of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to gain or loss on disposition of property, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 873, Sec. 27. Effective October 6, 1993.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 13. Gain or Loss on Disposition of Property


text:
(a) The amendments made by Section 13303(a) and (b) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 1031 of the Internal Revenue Code, relating to exchange of real property held for productive use or investment, shall apply, except as otherwise provided in this section.

(b) (1) (A) In the case of a taxpayer who is a head of household, a surviving spouse, or spouses filing a joint return, this section shall only apply to those taxpayers with adjusted gross income, as defined in Section 17072, of five hundred thousand dollars ($500,000) or more for the taxable year in which the exchange begins.

(B) In the case of a taxpayer filing an individual return, this section shall only apply to those taxpayers with adjusted gross income, as defined in Section 17072, of two hundred fifty thousand dollars ($250,000) or more for the taxable year in which the exchange begins.

(2) This subdivision shall not apply for taxable years beginning on or after January 1, 2025.

(c) (1) This section shall apply to exchanges completed after January 10, 2019.

(2) This section shall not apply to an exchange where the property to be disposed of by the taxpayer in the exchange is disposed of by that taxpayer on or before January 10, 2019, or where the property to be received by the taxpayer in the exchange is received by that taxpayer on or before January 10, 2019.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 58. (SB 711) Effective October 1, 2025.)

chapter: 13. Gain or Loss on Disposition of Property


text:
(a) If gain or loss from the exchange of property in this state of a taxpayer is not recognized under this part because of Section 1031 of the Internal Revenue Code, relating to exchange of property held for productive use or investment, for a taxable year and the property acquired in that exchange is located outside of this state, the taxpayer shall file an information return with the Franchise Tax Board for the taxable year of the exchange and for each subsequent taxable year in which the gain or loss from that exchange has not been recognized, in the form and manner prescribed by the Franchise Tax Board.

(b) If a taxpayer fails to file an information return required pursuant to subdivision (a), and fails to file a return required under Part 10.2 (commencing with Section 18401), the Franchise Tax Board may make an estimate of the net income, from any available information, including the amount of gain described in subdivision (a), and may propose to assess the amount of tax, interest, and penalties due in the same manner as Section 19087.

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

(d) This section shall apply to exchanges of property that occur in taxable years beginning on or after January 1, 2014.

history: (History: Added by Stats. 2013, Ch. 26, Sec. 4. (AB 92) Effective June 27, 2013.)


text:
(a) In addition to the adjustments to basis provided by Section 1016(a) of the Internal Revenue Code, a proper adjustment shall also be made for amounts allowed as deductions as deferred expenses under subdivision (b) of former Section 17689 or former Section 17689.5 (relating to certain exploration expenditures) and resulting in a reduction of the taxpayer’s taxes under this part, but not less than the amounts allowable under those sections for the taxable year and prior years. A proper adjustment shall also be made for amounts deducted under Section 17252.5, 17265, or 17266.

(b) Notwithstanding the provisions of Sections 164(a) and 1016(a) of the Internal Revenue Code, no adjustment to basis shall be made for any of the following:

(1) Abandonment fees paid in respect of property on which the open-space easement is terminated under Section 51061 or 51093 of the Government Code.

(2) Tax recoupment fees paid under Section 51142 of the Government Code.

(3) Sales or use tax which is paid or incurred by the taxpayer in connection with the acquisition of property for which a tax credit is claimed pursuant to Section 17052.13.

(c) The provisions of Section 1016(c) of the Internal Revenue Code, relating to increase in basis of property on which additional estate tax is imposed, shall be applicable.

(d) The amendments made to Section 1016 of the Internal Revenue Code by Section 1913(a) of Public Law 102-486, relating to deduction for clean-fuel vehicles and certain refueling property, shall apply to property placed in service after June 30, 1993, without respect to taxable year.

(e) The provisions of Section 1016(a)(38) of the Internal Revenue Code, relating to basis adjustments for capital gains invested in opportunity zones, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 59. (SB 711) Effective October 1, 2025.)


text: In addition to the adjustments to basis provided by Section 1016(a) of the Internal Revenue Code, a proper adjustment shall also be made in the case of property the acquisition of which resulted under Section 18038.5 in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in paragraph (4) of subdivision (b) of Section 18038.5.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 16. Effective January 1, 2004.)


text: An election made by a taxpayer pursuant to Section 1033(g)(3) of the Internal Revenue Code, relating to the election to treat outdoor advertising displays as real property, may not be denied because the taxpayer has, on his or her federal return, elected to expense the asset.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 17. Effective January 1, 2004.)


text: The amendments made by Section 844 of the Pension Protection Act of 2006 (Public Law 109-280) to Section 1035 of the Internal Revenue Code, shall not apply.

history: (History: Added by Stats. 2010, Ch. 14, Sec. 37. (SB 401) Effective January 1, 2011.)


text: Section 1040 of the Internal Revenue Code, relating to transfer of certain real property, does not apply.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 20. Effective January 1, 2004.)