text:
(a) For taxable years beginning on or after January 1, 2014, a deduction for a charitable contribution to an educational organization that is a postsecondary institution or to the Key Worldwide Foundation, pursuant to Section 170 of the Internal Revenue Code, relating to charitable, etc., contributions and gifts, and a deduction for a business expense related to a payment to the Edge College and Career Network, LLC, pursuant to Section 162 of the Internal Revenue Code, relating to trade or business expenses, shall not be allowed to a taxpayer who meets all of the following conditions:

(1) They are charged as a defendant in any of the following criminal complaints filed in the United States District Court for the District of Massachusetts:

(A) Criminal Complaint #19-CR-10081-IT.

(B) Criminal Complaint #19-CR-10078-RWZ.

(C) Criminal Complaint #19-CR-10075-MLW.

(D) Criminal Complaint #19-CR-10074-NMG.

(E) Criminal Complaint #19-cr-10079-RWZ.

(F) Criminal Complaint #1:19-cr-10117.

(G) Criminal Complaint #1:19-cr-10115.

(H) Criminal Complaint #19-cr-10131.

(I) Criminal Complaint #1:19-cr-10116.

(J) Criminal Complaint #1-19-cr-10080.

(2) There is a final determination of their guilt with regard to a violation of any offense of Title 18 of the United States Code arising out of that criminal complaint.

(3) There is a finding that they took the deduction unlawfully pursuant to the final determination of guilt described in paragraph (2), or pursuant to a determination by the Franchise Tax Board.

(b) For purposes of this section, “final determination of guilt” means that the defendant has been convicted by verdict of a jury, accepted and recorded by the court, by a finding of the court in a case where a jury has been waived, or by a plea of guilty, and that the defendant has exhausted all appellate remedies.

history: (History: Added by Stats. 2019, Ch. 511, Sec. 2. (AB 136) Effective October 4, 2019.)

article: 6. Deductions


kind: section

code: RTC

text:
(a) No deduction shall be denied under Section 170(f)(8) of the Internal Revenue Code, relating to substantiation requirement for certain contributions, upon a showing that the requirements in Section 170(f)(8) of the Internal Revenue Code have been met with respect to that contribution for federal purposes.

(b) Section 170(f)(10)(F) of the Internal Revenue Code, relating to excise tax on premiums paid, shall not apply.

(c) The provisions of Section 170(f)(11)(E) of the Internal Revenue Code, relating to qualified appraisal and appraiser, shall apply to appraisals prepared with respect to returns or submissions filed on or after January 1, 2010.

(d) Section 170(f)(13) of the Internal Revenue Code, relating to contributions of certain interests in buildings located in registered historic districts, shall not apply.

(e) Section 170(f)(18) of the Internal Revenue Code, relating to contributions to donor advised funds, shall not apply.

(f) For contributions made on or after January 1, 2024, the amendments made by Section 605(b) of Public Law 117-328 adding paragraph (19) to Section 170(f) of the Internal Revenue Code, relating to certain qualified conservation contributions, shall apply.

history: (History: Amended by Stats. 2024, Ch. 34, Sec. 21. (SB 167) Effective June 27, 2024.)

division: 2. OTHER TAXES

part: 10. PERSONAL INCOME TAX

chapter: 3. Computation of Taxable Income

article: 6. Deductions

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 3. Computation of Taxable Income > 6. Deductions


text:
(a) For contributions made on or after January 1, 2024, the amendments made by Section 605(a)(1) of Public Law 117-328 adding paragraph (7) to Section 170(h) of the Internal Revenue Code, relating to limitation on deduction for qualified conservation contributions made by passthrough entities, shall apply, except as otherwise provided.

(b) Section 170(h)(7)(G) of the Internal Revenue Code, relating to regulations, as added by Section 605(a)(1) of Public Law 117-328, shall not apply.

(c) For contributions made on or after January 1, 2024, the amendments made by Section 605(a)(3) of Public Law 117-328, relating to extension of statute of limitations for listed transactions, shall apply and are modified by substituting “Section 19755” for “sections 6501(c)(10) and 6235(c)(6) of such Code.”

(d) Section 605(d)(2) of Public Law 117-328, relating to opportunity to correct, shall apply.

history: (History: Added by Stats. 2024, Ch. 34, Sec. 22. (SB 167) Effective June 27, 2024.)

article: 6. Deductions


text:
Except as provided in Sections 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7, the deduction provided by Section 172 of the Internal Revenue Code, relating to net operating loss deduction, shall be modified as follows:

(a) (1) Net operating losses attributable to taxable years beginning before January 1, 1987, shall not be allowed.

(2) A net operating loss shall not be carried forward to any taxable year beginning before January 1, 1987.

(3) The amendments made by Section 13302(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) and Section 2303(a)(1) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136) to Section 172(a) of the Internal Revenue Code, relating to the deduction allowed, shall not apply.

(b) (1) Except as provided in paragraphs (3) and (4), the provisions of Section 172(b)(2) of the Internal Revenue Code, relating to amount of carrybacks and carryovers, shall be modified so that the applicable percentage of the entire amount of the net operating loss for any taxable year shall be eligible for carryover to any subsequent taxable year. For purposes of this subdivision, the applicable percentage shall be:

(A) Fifty percent for any taxable year beginning before January 1, 2000.

(B) Fifty-five percent for any taxable year beginning on or after January 1, 2000, and before January 1, 2002.

(C) Sixty percent for any taxable year beginning on or after January 1, 2002, and before January 1, 2004.

(D) One hundred percent for any taxable year beginning on or after January 1, 2004.

(2) Section 172(b)(2)(C) of the Internal Revenue Code shall not apply.

(3) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates a new business during that taxable year, each of the following shall apply to each loss incurred during the first three taxable years of operating the new business:

(A) If the net operating loss is equal to or less than the net loss from the new business, 100 percent of the net operating loss shall be carried forward as provided in subdivision (d).

(B) If the net operating loss is greater than the net loss from the new business, the net operating loss shall be carried over as follows:

(i) With respect to an amount equal to the net loss from the new business, 100 percent of that amount shall be carried forward as provided in subdivision (d).

(ii) With respect to the portion of the net operating loss that exceeds the net loss from the new business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d).

(C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B).

(4) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates an eligible small business during that taxable year, each of the following shall apply:

(A) If the net operating loss is equal to or less than the net loss from the eligible small business, 100 percent of the net operating loss shall be carried forward to the taxable years specified in subdivision (d).

(B) If the net operating loss is greater than the net loss from the eligible small business, the net operating loss shall be carried over as follows:

(i) With respect to an amount equal to the net loss from the eligible small business, 100 percent of that amount shall be carried forward as provided in subdivision (d).

(ii) With respect to that portion of the net operating loss that exceeds the net loss from the eligible small business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d).

(C) For purposes of Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (B) shall be absorbed before the amount described in clause (i) of subparagraph (B).

(5) In the case of a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates a business that qualifies as both a new business and an eligible small business under this section, that business shall be treated as a new business for the first three taxable years of the new business.

(6) In the case of a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates more than one business, and more than one of those businesses qualifies as either a new business or an eligible small business under this section, paragraph (2) shall be applied first, except that if there is any remaining portion of the net operating loss after application of clause (i) of subparagraph (B) of that paragraph, paragraph (3) shall be applied to the remaining portion of the net operating loss as though that remaining portion of the net operating loss constituted the entire net operating loss.

(7) For purposes of this section, the term “net loss” means the amount of net loss after application of Sections 465 and 469 of the Internal Revenue Code.

(c) Section 172(b)(1) of the Internal Revenue Code, relating to years to which the loss may be carried, is modified as follows:

(1) Net operating loss carrybacks shall not be allowed for any net operating losses attributable to taxable years beginning after December 31, 2018, and before January 1, 2013.

(2) A net operating loss attributable to taxable years beginning on or after January 1, 2013, and before January 1, 2019, shall be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss in lieu of the number of years provided therein.

(A) For a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2014, the amount of carryback to any taxable year shall not exceed 50 percent of the net operating loss.

(B) For a net operating loss attributable to a taxable year beginning on or after January 1, 2014, and before January 1, 2015, the amount of carryback to any taxable year shall not exceed 75 percent of the net operating loss.

(C) For a net operating loss attributable to a taxable year beginning on or after January 1, 2015, and before January 1, 2019, the amount of carryback to any taxable year shall not exceed 100 percent of the net operating loss.

(3) A net operating loss carryback shall not be carried back to any taxable year beginning before January 1, 2011.

(d) (1) (A) For a net operating loss for any taxable year beginning on or after January 1, 1987, and before January 1, 2000, Section 172(b)(1)(A)(ii) of the Internal Revenue Code shall apply as it read on January 1, 2015, and is modified to substitute “five taxable years” in lieu of “20 taxable years” except as otherwise provided in paragraphs (2) and (3).

(B) For a net operating loss for any taxable year beginning on or after January 1, 2000, and before January 1, 2008, Section 172(b)(1)(A)(ii)(I) of the Internal Revenue Code is modified to substitute “10 taxable years” in lieu of “20 taxable years.”

(C) Section 172(b)(1)(A) of the Internal Revenue Code, relating to years to which loss may be carried, shall not apply.

(D) Section 172(b)(1)(D) of the Internal Revenue Code, relating to special rule for losses arising in 2018, 2019, and 2020, shall not apply.

(2) For any taxable year beginning before January 1, 2000, in the case of a “new business,” the “five taxable years” in paragraph (1) shall be modified to read as follows:

(A) “Eight taxable years” for a net operating loss attributable to the first taxable year of that new business.

(B) “Seven taxable years” for a net operating loss attributable to the second taxable year of that new business.

(C) “Six taxable years” for a net operating loss attributable to the third taxable year of that new business.

(3) For any carryover of a net operating loss for which a deduction is denied by Section 17276.3, the carryover period specified in this subdivision shall be extended as follows:

(A) By one year for a net operating loss attributable to taxable years beginning in 1991.

(B) By two years for a net operating loss attributable to taxable years beginning before January 1, 1991.

(4) The net operating loss attributable to taxable years beginning on or after January 1, 1987, and before January 1, 1994, shall be a net operating loss carryover to each of the 10 taxable years following the year of the loss if it is incurred by a taxpayer that is under the jurisdiction of the court in a Title 11 or similar case at any time during the income year. The loss carryover provided in the preceding sentence does not apply to any loss incurred after the date the taxpayer is no longer under the jurisdiction of the court in a Title 11 or similar case.

(e) For purposes of this section:

(1) “Eligible small business” means any trade or business that has gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the taxable year.

(2) Except as provided in subdivision (f), “new business” means any trade or business activity that is first commenced in this state on or after January 1, 1994.

(3) “Title 11 or similar case” shall have the same meaning as in Section 368(a)(3) of the Internal Revenue Code.

(4) In the case of any trade or business activity conducted by a partnership or “S” corporation paragraphs (1) and (2) shall be applied to the partnership or “S” corporation.

(f) For purposes of this section, in determining whether a trade or business activity qualifies as a new business under paragraph (2) of subdivision (e), the following rules apply:

(1) In any case where a taxpayer purchases or otherwise acquires all or any portion of the assets of an existing trade or business (irrespective of the form of entity) that is doing business in this state (within the meaning of Section 23101), the trade or business thereafter conducted by the taxpayer (or any related person) shall not be treated as a new business if the aggregate fair market value of the acquired assets (including real, personal, tangible, and intangible property) used by the taxpayer (or any related person) in the conduct of its trade or business exceeds 20 percent of the aggregate fair market value of the total assets of the trade or business being conducted by the taxpayer (or any related person). For purposes of this paragraph only, the following rules apply:

(A) The determination of the relative fair market values of the acquired assets and the total assets shall be made as of the last day of the first taxable year in which the taxpayer (or any related person) first uses any of the acquired trade or business assets in its business activity.

(B) Acquired assets that constituted property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the transferor shall not be treated as assets acquired from an existing trade or business, unless those assets also constitute property described in Section 1221(a)(1) of the Internal Revenue Code in the hands of the acquiring taxpayer (or related person).

(2) In a case in which a taxpayer (or any related person) is engaged in one or more trade or business activities in this state, or has been engaged in one or more trade or business activities in this state within the preceding 36 months (“prior trade or business activity”), and thereafter commences an additional trade or business activity in this state, the additional trade or business activity shall only be treated as a new business if the additional trade or business activity is classified under a different division of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, than are any of the taxpayer’s (or any related person’s) current or prior trade or business activities.

(3) In a case in which a taxpayer, including all related persons, is engaged in trade or business activities wholly outside of this state and the taxpayer first commences doing business in this state (within the meaning of Section 23101) after December 31, 1993 (other than by purchase or other acquisition described in paragraph (1)), the trade or business activity shall be treated as a new business under paragraph (2) of subdivision (e).

(4) In a case in which the legal form under which a trade or business activity is being conducted is changed, the change in form shall be disregarded and the determination of whether the trade or business activity is a new business shall be made by treating the taxpayer as having purchased or otherwise acquired all or any portion of the assets of an existing trade or business under the rules of paragraph (1).

(5) “Related person” shall mean any person that is related to the taxpayer under either Section 267 or 318 of the Internal Revenue Code.

(6) “Acquire” shall include any gift, inheritance, transfer incident to divorce, or any other transfer, whether or not for consideration.

(7) (A) For taxable years beginning on or after January 1, 1997, the term “new business” shall include any taxpayer that is engaged in biopharmaceutical activities or other biotechnology activities that are described in Codes 2833 to 2836, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, and as further amended, and that has not received regulatory approval for any product from the Food and Drug Administration.

(B) For purposes of this paragraph:

(i) “Biopharmaceutical activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.

(ii) “Other biotechnology activities” means activities consisting of the application of recombinant DNA technology to produce commercial products, as well as activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.

(g) Notwithstanding any provisions of this section to the contrary, a deduction shall be allowed to a “qualified taxpayer” as provided in Sections 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7.

(h) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this section, including any regulations necessary to prevent the avoidance of the purposes of this section through splitups, shell corporations, partnerships, tiered ownership structures, or otherwise.

(i) The Franchise Tax Board may reclassify any net operating loss carryover determined under either paragraph (2) or (3) of subdivision (b) as a net operating loss carryover under paragraph (1) of subdivision (b) upon a showing that the reclassification is necessary to prevent evasion of the purposes of this section.

(j) Except as otherwise provided, the amendments made by Chapter 107 of the Statutes of 2000 apply to net operating losses for taxable years beginning on or after January 1, 2000.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 43. (SB 711) Effective October 1, 2025.)

article: 6. Deductions


text:
(a) A qualified taxpayer, as defined in Section 17276.2, 17276.4, 17276.5, 17276.6, or 17276.7, may elect to take the deduction provided by Section 172 of the Internal Revenue Code, relating to the net operating loss deduction, as modified by Section 17276, with the following exceptions:

(1) Subdivision (a) of Section 17276, relating to years in which allowable losses are sustained, shall not be applicable.

(2) Subdivision (b) of Section 17276, relating to the 50-percent reduction of losses, shall not be applicable.

(b) The election to compute the net operating loss under this section shall be made in a statement attached to the original return, timely filed for the year in which the net operating loss is incurred and shall be irrevocable. In addition to the exceptions specified in subdivision (a), the provisions of Section 17276.2, 17276.4, 17276.5, 17276.6, or 17276.7, as appropriate, shall be applicable.

(c) Any carryover of a net operating loss sustained by a qualified taxpayer, as defined in subdivision (a) or (b) of Section 17276.2 as that section read immediately prior to January 1, 1997, shall, if previously elected, continue to be a deduction, as provided in subdivision (a), applied as if the provisions of subdivision (a) or (b) of Section 17276.2, as that section read prior to January 1, 1997, still applied.

history: (History: Amended by Stats. 2001, Ch. 623, Sec. 2. Effective October 9, 2001.)

article: 6. Deductions


text:
(a) Notwithstanding Sections 17276, 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7 of this code and Section 172 of the Internal Revenue Code, no net operating loss deduction shall be allowed for any taxable year beginning on or after January 1, 2002, and before January 1, 2004.

(b) For any carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows:

(1) By one year, for losses incurred in taxable years beginning on or after January 1, 2002, and before January 1, 2003.

(2) By two years, for losses incurred in taxable years beginning before January 1, 2002.

history: (History: Amended by Stats. 2002, Ch. 488, Sec. 2. Effective September 12, 2002.)

article: 6. Deductions


text:
(a) The term “qualified taxpayer” as used in Section 17276.1 includes a person or entity engaged in the conduct of a trade or business within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code. For purposes of this subdivision, all of the following shall apply:

(1) A net operating loss shall not be a net operating loss carryback for any taxable year, and a net operating loss for any taxable year beginning on or after the date the area in which the taxpayer conducts a trade or business is designated the Los Angeles Revitalization Zone shall be a net operating loss carryover to each following taxable year that ends before the Los Angeles Revitalization Zone expiration date or to each of the 15 taxable years following the taxable year of loss, if longer.

(2) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the taxpayer’s business activities within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) prior to the Los Angeles Revitalization Zone expiration date. The attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11, modified as follows:

(A) Loss shall be apportioned to the Los Angeles Revitalization Zone by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.

(B) “The Los Angeles Revitalization Zone” shall be substituted for “this state.”

(3) A net operating loss carryover shall be a deduction only with respect to the taxpayer’s business income attributable to the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) determined in accordance with subdivision (c).

(4) If a loss carryover is allowable pursuant to this section for any taxable year after the Los Angeles Revitalization Zone designation has expired, the Los Angeles Revitalization Zone shall be deemed to remain in existence for purposes of computing the limitation set forth in paragraph (2) and allowing a net operating loss deduction.

(5) Attributable income shall be that portion of the taxpayer’s California source business income which is apportioned to the Los Angeles Revitalization Zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the Los Angeles Revitalization Zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified as follows:

(A) Business income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.

(B) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the Los Angeles Revitalization Zone during the taxable year and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.

(C) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the Los Angeles Revitalization Zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.

(6) “Los Angeles Revitalization Zone expiration date” means the date the Los Angeles Revitalization Zone designation expires, is repealed, or becomes inoperative pursuant to Section 7102, 7103, or 7104 of the Government Code.

(b) This section shall be inoperative on the first day of the taxable year beginning on or after the determination date, and each taxable year thereafter, with respect to the taxpayer’s business activities within a geographic area that is excluded from the map pursuant to Section 7102 of the Government Code, or an excluded area determined pursuant to Section 7104 of the Government Code. The determination date is the earlier of the first effective date of a determination under subdivision (c) of Section 7102 of the Government Code occurring after December 1, 1994, or the first effective date of an exclusion of an area from the amended Los Angeles Revitalization Zone under Section 7104 of the Government Code. However, if the taxpayer has any unused loss amount as of the date this section becomes inoperative, that unused loss amount may continue to be carried forward as provided in this section.

(c) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section that applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (d).

(d) If a taxpayer is eligible to qualify under this section and either Section 17276.2, 17276.5, or 17276.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer.

(e) Notwithstanding Section 17276, the amount of the loss determined under this section or Section 17276.2, 17276.5, or 17276.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (c) shall be included in the election under Section 17276.1.

(f) This section shall cease to be operative on December 1, 1998. However, any unused net operating loss may continue to be carried over to following years as provided in this section.

history: (History: Added by Stats. 1998, Ch. 1039, Sec. 8. Effective September 30, 1998. Applicable as prescribed by Sec. 23(b) of Ch. 1039. Inoperative on December 1, 1998, by its own provisions.)

article: 6. Deductions


text:
(a) The term “qualified taxpayer” as used in Section 17276.1 includes a person or entity that conducts a farming business that is directly affected by Pierce’s disease and its vectors. For purposes of this subdivision, all of the following shall apply:

(1) A net operating loss shall not be a net operating loss carryback to any taxable year, and a net operating loss for any taxable year beginning on or after the date that the area in which the taxpayer conducts a farming business is affected by Pierce’s disease and its vectors shall be a net operating loss carryover to each of the nine taxable years following the taxable year of loss, until used.

(2) For purposes of this subdivision:

(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the taxpayer’s farming business activities affected by Pierce’s disease and its vectors. That attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11, modified for purposes of this subdivision, as follows:

(i) A loss shall be apportioned to the area affected by Pierce’s disease and its vectors by multiplying the total loss from the farming business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two.

(ii) “The area affected by Pierce’s disease and its vectors” shall be substituted for “this state.”

(B) A net operating loss carryover computed under this section shall be allowed as a deduction only with respect to the taxpayer’s farming business income attributable to the area affected by Pierce’s disease and its vectors.

(C) Attributable income is that portion of the taxpayer’s California source farming business income that is apportioned to the area affected by Pierce’s disease and its vectors. For that purpose, that taxpayer’s farming business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That farming business income shall be further apportioned to the area affected by Pierce’s disease and its vectors in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this subdivision as follows:

(i) Farming business income shall be apportioned to the area affected by Pierce’s disease and its vectors by multiplying the total California farming business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:

(I) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the area affected by Pierce’s disease and its vectors during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.

(II) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the area affected by Pierce’s disease and its vectors during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.

(ii) If a loss carryover is allowable pursuant to this section for any taxable year after Pierce’s disease and its vectors have occurred, the area affected by Pierce’s disease and its vectors shall be deemed to remain in existence for purposes of computing the limitation set forth in subparagraph (B) and allowing a net operating loss deduction.

(b) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section that applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (c).

(c) If a taxpayer is eligible to compute its net operating loss under this section and either Section 17276.2, 17276.4, 17276.5, or 17276.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer.

(d) Notwithstanding Section 17276, the amount of the loss determined under this section or Section 17276.2, 17276.4, 17276.5, or 17276.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (b) shall be included in the election under Section 17276.1.

(e) (1) A qualified taxpayer may utilize the net operating loss carryover allowed by this section only if the Department of Food and Agriculture confirms that the taxpayer’s farming business was affected by Pierce’s disease and its vectors during the year for which the qualified taxpayer seeks a deduction under this section.

(2) To make the determination required by this subdivision, the Department of Food and Agriculture shall utilize the definitions in Title 3 of the California Code of Regulations, relating to Pierce’s disease and its vectors.

(3) The Franchise Tax Board shall develop a management agreement with the cooperation of the Department of Food and Agriculture to establish procedures by which the Franchise Tax Board secures the information. This subdivision shall not be construed to require the Department of Food and Agriculture to confirm more than the fact that the taxpayer’s farming business was affected by Pierce’s disease and its vectors during the year for which the qualified taxpayer seeks a deduction.

(f) This section applies to net operating losses attributable to taxable years beginning on or after January 1, 2001, and before January 1, 2003.

history: (History: Amended by Stats. 2002, Ch. 524, Sec. 3. Effective January 1, 2003.)

article: 6. Deductions


text:
(a) Notwithstanding Sections 17276, 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7 of this code and Section 172 of the Internal Revenue Code, no net operating loss deduction shall be allowed for any taxable year beginning on or after January 1, 2008, and before January 1, 2012.

(b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows:

(1) By one year, for losses incurred in taxable years beginning on or after January 1, 2010, and before January 1, 2011.

(2) By two years, for losses incurred in taxable years beginning on or after January 1, 2009, and before January 1, 2010.

(3) By three years, for losses incurred in taxable years beginning on or after January 1, 2008, and before January 1, 2009.

(4) By four years, for losses incurred in taxable years beginning before January 1, 2008.

(c) Notwithstanding subdivision (a), a net operating loss deduction shall be allowed for carryback of a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019.

(d) The provisions of this section do not apply to the following taxpayers:

(1) For a taxable year beginning on or after January 1, 2008, and before January 1, 2010, this section does not apply to a taxpayer with net business income of less than five hundred thousand dollars ($500,000) for the taxable year. For purposes of this paragraph, business income means:

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

(B) Income from rental activity.

(C) Income attributable to a farming business.

(2) For a taxable year beginning on or after January 1, 2010, and before January 1, 2012, this section does not apply to a taxpayer with modified adjusted gross income of less than three hundred thousand dollars ($300,000) for the taxable year. For purposes of this paragraph, “modified adjusted gross income” means the amount described in paragraph (2) of subdivision (h) of Section 17024.5, determined without regard to the deduction allowed under Section 172 of the Internal Revenue Code, relating to net operating loss deduction.

history: (History: Amended by Stats. 2019, Ch. 39, Sec. 11. (AB 91) Effective July 1, 2019.)

article: 6. Deductions


text: Notwithstanding Section 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, or 17276.7 to the contrary, a net operating loss attributable to a taxable year beginning on or after January 1, 2008, shall be a net operating carryover to each of the 20 taxable years following the year of the loss, and a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2019, shall also be a net operating loss carryback to each of the two taxable years preceding the taxable year of loss.

history: (History: Amended by Stats. 2019, Ch. 39, Sec. 12. (AB 91) Effective July 1, 2019.)

article: 6. Deductions


text:
(a) Notwithstanding Sections 17276, 17276.1, 17276.4, 17276.7, and 17276.22, former Sections 17276.2, 17276.5, 17276.6, and 17276.20, and Section 172 of the Internal Revenue Code, a net operating loss deduction shall not be allowed for any taxable year beginning on or after January 1, 2020, and before January 1, 2022.

(b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows:

(1) By one year, for losses incurred in taxable years beginning on or after January 1, 2021, and before January 1, 2022.

(2) By two years, for losses incurred in taxable years beginning on or after January 1, 2020, and before January 1, 2021.

(3) By three years, for losses incurred in taxable years beginning before January 1, 2020.

(c) This section shall not apply as follows:

(1) For a taxable year beginning on or after January 1, 2020, and before January 1, 2022, this section shall not apply to a taxpayer with a net business income of less than one million dollars ($1,000,000) for the taxable year.

(2) For a taxable year beginning on or after January 1, 2020, and before January 1, 2022, this section shall not apply to a taxpayer with a modified adjusted gross income of less than one million dollars ($1,000,000) for the taxable year.

(d) For purposes of this section:

(1) “Business income” means any of the following:

(A) Income from a trade or business, whether conducted by the taxpayer or by a passthrough entity owned directly or indirectly by the taxpayer.

(B) Income from rental activity.

(C) Income attributable to a farming business.

(2) “Modified adjusted gross income” means the amount described in paragraph (2) of subdivision (h) of Section 17024.5, determined without regard to the deduction allowed under Section 172 of the Internal Revenue Code, relating to net operating loss deduction.

(3) “Passthrough entity” means a partnership or an S corporation.

(e) The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2022.

history: (History: Amended by Stats. 2022, Ch. 3, Sec. 13. (SB 113) Effective February 9, 2022.)

article: 6. Deductions


text:
(a) Notwithstanding Sections 17276, 17276.1, 17276.4, 17276.7, and 17276.22, Sections 17276.2, 17276.5, and 17276.6, as those sections read on November 29, 2014, Section 17276.20, as that section read on December 31, 2015, and Section 172 of the Internal Revenue Code, a net operating loss deduction shall not be allowed for any taxable year beginning on or after January 1, 2024, and before January 1, 2027.

(b) For any net operating loss or carryover of a net operating loss for which a deduction is denied by subdivision (a), the carryover period under Section 172 of the Internal Revenue Code shall be extended as follows:

(1) By one year, for losses incurred in taxable years beginning on or after January 1, 2025, and before January 1, 2026.

(2) By two years, for losses incurred in taxable years beginning on or after January 1, 2024, and before January 1, 2025.

(3) By three years, for losses incurred in taxable years beginning before January 1, 2024.

(c) For a taxable year beginning on or after January 1, 2024, and before January 1, 2027, this section shall not apply to a taxpayer that has either of the following:

(1) Net business income of less than one million dollars ($1,000,000) for the taxable year.

(2) Modified adjusted gross income of less than one million dollars ($1,000,000) for the taxable year.

(d) For purposes of this section:

(1) “Business income” means any of the following:

(A) Income from a trade or business, whether conducted by the taxpayer or by a passthrough entity owned directly or indirectly by the taxpayer.

(B) Income from rental activity.

(C) Income attributable to a farming business.

(2) “Modified adjusted gross income” means the amount described in paragraph (2) of subdivision (h) of Section 17024.5, determined without regard to the deduction allowed under Section 172 of the Internal Revenue Code, relating to net operating loss deduction.

(3) “Passthrough entity” means a partnership or an S corporation.

(e) (1) For taxable years beginning on or after January 1, 2025, and before January 1, 2026, this section shall not apply if, by May 14, 2025, the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and pursuant to legislation in the annual Budget Act to not apply this section of law.

(2) For taxable years beginning on or after January 1, 2026, and before January 1, 2027, this section shall not apply if, by May 14, 2026, the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and pursuant to legislation in the annual Budget Act to not apply this section of law.

history: (History: Amended by Stats. 2024, Ch. 42, Sec. 9. (SB 175) Effective June 29, 2024.)

article: 6. Deductions


text:
(a) To the extent specified in subdivision (b), there shall be allowed as a deduction to a taxpayer those payments of the taxpayer which are made pursuant to an interindemnity arrangement specified in Section 1280.7 of the Insurance Code and which are paid to a trust of members of a cooperative corporation organized and operated under Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code and the members of which consist solely of physicians and surgeons licensed in this state.

(b) The deduction authorized by subdivision (a) shall be taken with respect to the taxable year in which the payment is made and shall be taken only to the extent that the payment does not exceed the amount which would otherwise be payable to an independent insurance company for similar coverage for medical malpractice insurance in that taxable year. Any portion of the payment in excess of that amount shall be treated as a payment under the interindemnity arrangement for five succeeding taxable years and may be carried forward as a deduction to those five succeeding taxable years until used. The deduction shall be applied first to the earliest years possible.

(c) In the event any payment is refunded by the trust to the taxpayer for any reason, the payment shall be included in the taxpayer’s income for the taxable year in which it is received to the extent that the payment or any portion thereof was taken as a deduction in any earlier taxable year.

(d) Any refund of a payment which is made by a trust to a taxpayer shall be reported by the trust to the Franchise Tax Board in the year in which the refund is made. The trust shall furnish the taxpayer with a copy of that report. In the case of any payment to be made to a taxpayer who is not a resident of the State of California in the year in which the refund is made, the Franchise Tax Board may, by regulation, require the trust to withhold an amount from the refund, determined by the Franchise Tax Board to reasonably represent the amount of tax due when that refund is included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at a time as it may designate.

(e) For purposes of this section:

(1) “Payment” means a contribution to or an assessment by an interindemnity arrangement described in Section 1280.7 of the Insurance Code.

(2) “Taxpayer” means a physician or surgeon licensed in this state who is a participating member in an interindemnity arrangement described in Section 1280.7 of the Insurance Code.

(3) “Trust” means a trust described in subdivision (a).

(f) Upon request, the trust shall submit to the Franchise Tax Board the names and membership dates of all participating doctors.

(g) The Franchise Tax Board shall prescribe those regulations as may be necessary to carry out the purposes of this section.

history: (History: Added by renumbering Section 17268 by Stats. 1984, Ch. 1276, Sec. 2. Effective September 19, 1984. Section applicable, by Sec. 5 of Ch. 1276, during taxable years in which federal treatment is similar.)

article: 6. Deductions


text: The deduction allowed by Section 194 of the Internal Revenue Code, relating to amortization of reforestation expenditures, shall be available only with respect to qualified timber property located in this state.

history: (History: Added by Stats. 1997, Ch. 611, Sec. 36. Effective October 3, 1997.)

article: 6. Deductions


text:
Section 197 of the Internal Revenue Code, relating to amortization of goodwill and certain other intangibles, is modified as follows:

(a) (1) Section 13261(g) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to effective dates, shall apply, except as otherwise provided.

(2) (A) If a taxpayer has, at any time, made an election for federal purposes under Section 13261(g)(2) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to election to have amendments apply to property acquired after July 25, 1991, or Section 13261(g)(3) of that act, relating to elective binding contract exception, a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5 and the federal election shall be binding for purposes of this part.

(B) If a taxpayer has not made an election for federal purposes under Section 13261(g)(2) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), relating to election to have amendments apply to property acquired after July 25, 1991, or Section 13261(g)(3) of that act, relating to elective binding contract exception, with respect to property acquired before August 11, 1993, then the taxpayer shall not be allowed to make an election under Section 13261(g) of the Revenue Reconciliation Act of 1993 (P.L. 103-66), for purposes of this part, with respect to that property.

(b) Notwithstanding any other provision of this section, each of the following shall apply:

(1) No deduction shall be allowed under this section for any taxable year beginning prior to January 1, 1994.

(2) No inference is intended with respect to the allowance or denial of any deduction for amortization in any taxable year beginning before January 1, 1994.

(3) In the case of an intangible that was acquired in a taxable year beginning before January 1, 1994, the amount to be amortized shall not exceed the adjusted basis of that intangible as of the first day of the first taxable year beginning on or after January 1, 1994, and that amount shall be amortized ratably over the period beginning with the first month of the first taxable year beginning on or after January 1, 1994, and ending 15 years after the month in which the intangible was acquired.

history: (History: Amended by Stats. 1997, Ch. 611, Sec. 37. Effective October 3, 1997.)

article: 6. Deductions


text:
Section 198 of the Internal Revenue Code, relating to expensing of environmental remediation costs, is modified as follows:

(a) For expenditures paid or incurred before January 1, 2004, all of the following shall apply:

(1) If a taxpayer has, at any time, made an election for federal purposes under Section 198(a) of the Internal Revenue Code to have Section 198 of the Internal Revenue Code apply to a qualified environmental remediation expenditure, Section 198 of the Internal Revenue Code shall apply to that qualified environmental remediation expenditure for state purposes, a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, and the federal election shall be binding for purposes of this part.

(2) If a taxpayer fails to make an election for federal purposes under Section 198(a) of the Internal Revenue Code to have Section 198 of the Internal Revenue Code apply to a qualified environmental remediation expenditure, an election under Section 198(a) of the Internal Revenue Code shall not be allowed for state purposes, Section 198 of the Internal Revenue Code shall not apply to that qualified environmental remediation expenditure for state purposes, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.

(b) No inference as to the proper treatment for purposes of this part of qualified environmental remediation expenditures paid or incurred in taxable years beginning before January 1, 1998, shall be made.

(c) Section 198(h) of the Internal Revenue Code, relating to termination, shall not apply.

(d) Section 198 of the Internal Revenue Code, relating to expensing of environmental remediation costs, shall not apply to expenditures paid or incurred after December 31, 2003.

history: (History: Amended by Stats. 2005, Ch. 691, Sec. 33. Effective October 7, 2005.)

article: 6. Deductions


text: Section 198A of the Internal Revenue Code, relating to expensing of qualified disaster expenses, shall not apply.

history: (History: Added by Stats. 2010, Ch. 14, Sec. 29. (SB 401) Effective January 1, 2011.)

article: 6. Deductions


text:
(a) No deduction shall be denied as provided by Section 265 of the Internal Revenue Code, relating to expenses and interest relating to tax-exempt income.

(b) No deduction shall be allowed for any of the following:

(1) Any amount otherwise allowable as a deduction which is allocable to one or more classes of income other than interest (whether or not any amount of income of that class or classes is received or accrued) wholly exempt from the taxes imposed by this part, or any amount otherwise allowable under Section 212 of the Internal Revenue Code (relating to expenses for production of income) which is allocable to interest (whether or not any amount of such interest is received or accrued) wholly exempt from the taxes imposed by this part.

(2) Interest on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the taxes imposed by this part. The proper apportionment and allocation of the deduction with respect to taxable and nontaxable income shall be determined under rules and regulations prescribed by the Franchise Tax Board.

(3) Interest on indebtedness incurred or continued to purchase or carry shares of stock of a management company or series thereof which during the taxable year of the holder thereof distributes exempt-interest dividends.

(c) For purposes of paragraph (2) of subdivision (b):

(1) “Interest” includes any amount paid or incurred—

(A) By any person making a short sale in connection with personal property used in that short sale, or

(B) By any other person for the use of any collateral with respect to that short sale.

(2) If—(A) The taxpayer provides cash as collateral for any short sale, and(B) The taxpayer receives no material earnings on that cash during the period of the sale,subparagraph (A) of paragraph (1) shall not apply to that short sale.

(d) No deduction shall be denied under this section for interest on a mortgage on, or real property taxes on, the home of the taxpayer by reason of the receipt of an amount as either of the following:

(1) A military housing allowance.

(2) A parsonage allowance excludable from gross income under Section 107 of the Internal Revenue Code.

history: (History: Amended by Stats. 1988, Ch. 970, Sec. 1.)

article: 6. Deductions


text:
(a) In computing taxable income, deductions, including deductions for cost of goods sold, shall not be allowed to any taxpayer from any of his or her gross income directly derived from any act or omission of criminal profiteering activity, as defined in Section 186.2 of the Penal Code, or as defined in Chapter 6 (commencing with Section 11350) of Division 10 of the Health and Safety Code, or Article 5 (commencing with Section 750) of Chapter 1 of Part 2 of Division 1 of the Insurance Code; and deductions shall not be allowed to any taxpayer from any of his or her gross income derived from any other activities which directly tend to promote or to further, or are directly connected or associated with, those acts or omissions.

(b) A prior, final determination by a court of competent jurisdiction of this state in any criminal proceedings or any proceeding in which the state, county, city and county, city, or other political subdivision was a party thereto on the merits of the legality of the activities of a taxpayer, or predecessor in interest of a taxpayer, shall be required in order for subdivision (a) to apply and shall be binding upon the Franchise Tax Board and the State Board of Equalization.

(c) (1) Except as provided in paragraphs (2) and (3), this section shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of September 14, 1982.

(2) The amendments made to this section by Chapter 962 of the Statutes of 1984 shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of January 1, 1985.

(3) The amendments made to this section by Chapter 454 of the Statutes of 2011 shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of the effective date of that act.

history: (History: Amended by Stats. 2012, Ch. 162, Sec. 171. (SB 1171) Effective January 1, 2013.)

article: 6. Deductions


text: In addition to the deduction denied under Section 162(c)(1) of the Internal Revenue Code, relating to payments made to officials or employees of a foreign government, no deduction shall be allowed for any payment that would be unlawful under the laws of the United States, if those laws were applicable to the payment and to the official or employee.

history: (History: Added by Stats. 1983, Ch. 498, Sec. 143. Effective July 28, 1983.)

article: 6. Deductions


text: Section 269A of the Internal Revenue Code is modified by substituting “California Personal Income Tax” for “Federal income tax.”

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 34. Effective October 10, 1999.)

article: 6. Deductions


text: The Franchise Tax Board may disallow a deduction under this part to an individual or entity for amounts paid as remuneration for personal services if that individual or entity fails to report the payments required under Section 13050 of the Unemployment Insurance Code or Section 18631 on the date prescribed therefor (determined with regard to any extension of time for filing).

history: (History: Amended by Stats. 2007, Ch. 156, Sec. 1. Effective January 1, 2008.)

article: 6. Deductions


text:
(a) Notwithstanding any other provisions in this part, in the case of a taxpayer who owns real property and has either failed to provide information required pursuant to Section 18642, or has provided information which is either false, misleading, or incomplete in the information return required pursuant to Section 18642, no deduction shall be allowed for interest, taxes, depreciation, or amortization paid or incurred with respect to that real property, as provided in subdivision (b).

(b) No deduction shall be allowed for the items provided in subdivision (a) from 60 days after the due date for filing the information return required pursuant to Section 18642 until the date the Franchise Tax Board determines that all provisions of Section 18642 have been complied with.

(c) In the event the period of noncompliance does not cover an entire taxable year, the deductions shall be denied at the rate of one-twelfth for each full month during the period of noncompliance.

history: (History: Amended by Stats. 1993, Ch. 31, Sec. 10. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)

article: 6. Deductions


text: For purposes of this part, in the case of a nonresident or part-year resident, the proper apportionment and allocation of the deductions in computing “taxable income of a nonresident or part-year resident” computed under paragraph (1) of subdivision (i) of Section 17041 with respect to sources of income within and without the state shall be determined under rules and regulations prescribed by the Franchise Tax Board.

history: (History: Amended by Stats. 2001, Ch. 920, Sec. 5. Effective January 1, 2002.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 3. Computation of Taxable Income > 9. Special Rules for Nonresidents and Part-Year Residents


text:
For purposes of this part, in the case of a nonresident or part-year resident, the term “California adjusted gross income” includes each of the following:

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

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

history: (History: Amended by Stats. 2004, Ch. 13, Sec. 3. Effective February 11, 2004.)

article: 9. Special Rules for Nonresidents and Part-Year Residents


text: For purposes of this part, in the case of a nonresident or part-year resident, the term “total adjusted gross income” means adjusted gross income for the entire year determined under Section 17072 regardless of source, taking into account paragraph (2) of subdivision (h) of Section 17024.5 and Section 17203.

history: (History: Added by Stats. 2001, Ch. 920, Sec. 7. Effective January 1, 2002.)


text: For purposes of this part, in the case of a nonresident or part-year resident, the term “total taxable income” means taxable income for the entire year determined under Section 17073 regardless of source.

history: (History: Added by Stats. 2001, Ch. 920, Sec. 8. Effective January 1, 2002.)


text:
(a) In the case of a nonresident or part-year resident, the deduction provided by Section 215 of the Internal Revenue Code, relating to alimony, etc., payments, as it read on January 1, 2015, shall be allowed in computing “taxable income of a nonresident or part-year resident” in the same ratio (not to exceed 1.00) that California adjusted gross income (as defined in Section 17301.3), computed without regard to the alimony deduction, bears to total adjusted gross income (as defined in Section 17301.4), computed without regard to the alimony deduction.

(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. 45. (SB 711) Effective October 1, 2025. Repealed as of December 1, 2027, by its own provisions.)


text: In the case of a nonresident or part-year resident, itemized deductions allowed as a deduction for the taxable year under Section 63 of the Internal Revenue Code, as modified by Section 17073, or the standard deduction (as provided in Section 17073.5), shall be allowed in computing “taxable income of a nonresident or part-year resident” in the ratio (not to exceed 1.00) that California adjusted gross income (as defined in Section 17301.3) bears to total adjusted gross income (as defined in Section 17301.4).

history: (History: Added by Stats. 2001, Ch. 920, Sec. 11. Effective January 1, 2002.)


text: In the case of a nonresident or part-year resident, in computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, references to “adjusted gross income” for purposes of computing limitations based upon adjusted gross income, shall mean “California adjusted gross income” (as defined in Section 17301.3) for the same taxable year without regard to the limitation used pursuant to paragraph (2) of subdivision (h) of Section 17024.5 in computing “total adjusted gross income” (as defined in Section 17301.4) for that taxable year.

history: (History: Added by Stats. 2001, Ch. 920, Sec. 12. Effective January 1, 2002.)


text:
In the case of a nonresident or part-year resident, in computing “taxable income of a nonresident or part-year resident” under paragraph (1) of subdivision (i) of Section 17041, for purposes of computing limitations on the deductions described in this section, any reference to “compensation” or “earned income” shall be a reference to the amount of “compensation” or “earned income” required to be included in computing “California adjusted gross income” (as defined in Section 17301.3) for the same taxable year without regard to the limitation used pursuant to Section 17203 in computing “total adjusted gross income” (as defined in Section 17301.4) for that taxable year.

(a) The deduction allowed by Section 219 of the Internal Revenue Code.

(b) The deductions allowed by Sections 162(1) and 404 of the Internal Revenue Code in the case of an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code.

history: (History: Added by Stats. 2001, Ch. 920, Sec. 13. Effective January 1, 2002.)


text: Subchapter C of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to corporate distributions and adjustments, shall apply, except as otherwise provided.

history: (History: Amended by Stats. 1993, Ch. 873, Sec. 16. Effective October 6, 1993.)

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 4. Corporate Distributions and Adjustments


text: The amendments to Section 367(a) of the Internal Revenue Code as enacted by Section 14102 of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to repeal of the exception for transfers of certain property used in the active conduct of a trade or business, shall not apply.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 46. (SB 711) Effective October 1, 2025.)

chapter: 4. Corporate Distributions and Adjustments


text: For purposes of Section 302(c)(2) of the Internal Revenue Code, the periods of limitation to be extended for one year are the periods provided in Sections 19057 and 19371.

history: (History: Amended by Stats. 1993, Ch. 31, Sec. 11. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)


text: Section 381(c)(20) of the Internal Revenue Code, relating to carryforward of disallowed business interest, shall not apply.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 47. (SB 711) Effective October 1, 2025.)


text:
(a) Section 382(n) of the Internal Revenue Code, relating to special rule for certain ownership changes, shall not apply.

(b) Section 382(d)(3) of the Internal Revenue Code, relating to application to carryforward of disallowed interest, shall not apply.

(c) The amendments made by Section 13301(b)(3) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 382(k)(1) of the Internal Revenue Code, relating to loss corporation, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 48. (SB 711) Effective October 1, 2025. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)


text: Section 312(k)(3)(B)(ii) of the Internal Revenue Code, relating to special rule for real estate investment trusts, shall not apply.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 49. (SB 711) Effective October 1, 2025.)


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

(b) Notwithstanding the specified date contained in paragraph (1) of subdivision (a) of Section 17024.5, Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to pension, profitsharing, stock bonus plans, etc., and Part III of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to rules relating to minimum funding standards and benefit limitations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes.

(c) For taxable years beginning before January 1, 2025, the maximum amount of elective deferrals (as defined in Section 402(g)(3)) for the taxable year that may be excluded from gross income under Section 402(g) of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of elective deferrals that may be excluded from gross income under Section 402(g) of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under Section 414(v) of the Internal Revenue Code, as in effect on January 1, 2010.

(d) (1) For taxable years beginning on or after January 1, 2002, the basis of any person in the plan, account, or annuity shall be increased by the amount of elective deferrals not excluded as a result of the application of the elective deferral limitations imposed by subdivision (c).

(2) Any basis described in paragraph (1) shall be recovered in the manner specified in Section 17085.

(e) Notwithstanding the limitations provided in subdivision (c), any income attributable to elective deferrals in taxable years beginning on or after January 1, 2002, in conformance with Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan or account was established until distributed pursuant to the plan or by operation of law.

(f) (1) Section 408A(e)(1)(C) of the Internal Revenue Code, relating to qualified rollover contribution, shall not apply.

(2) In the case of any distribution made under Section 529(c)(3)(E) of the Internal Revenue Code, relating to the special rollover to Roth IRAs from long-term qualified tuition programs, treated for federal income tax purposes as a “qualified rollover contribution” under Section 408A(e)(1)(C) of the Internal Revenue Code, the amount of that distribution shall, notwithstanding Section 529 or Section 408A of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code.

(3) Notwithstanding any other provision, no increase in the basis of the Roth IRA, as defined in Section 408A of the Internal Revenue Code, shall result from any amount distributed as described in this subdivision.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 50. (SB 711) Effective October 1, 2025.)

chapter: 5. Deferred Compensation

path: 2. OTHER TAXES > 10. PERSONAL INCOME TAX > 5. Deferred Compensation


text:
The amendments made by Section 641 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107-16) to the following provisions of the Internal Revenue Code or other federal law shall apply for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001), with respect to distributions after December 31, 2001, except as otherwise provided:

(a) Section 72, relating to annuities and certain proceeds of endowment and life insurance contracts.

(b) Section 219, relating to retirement savings.

(c) Section 401, relating to qualified pension, profit-sharing, and stock bonus plans.

(d) Section 402, relating to taxability of beneficiary of employees’ trust.

(e) Section 403, relating to taxation of employee annuities.

(f) Section 408, relating to individual retirement accounts.

(g) Section 415, relating to limitations on benefits and contribution under qualified plans.

(h) Section 457, relating to deferred compensation plans of state and local governments and tax-exempt organizations.

(i) Subsections (h)(3) and (h)(5) of Section 1122 of the Tax Reform Act of 1986.

history: (History: Added by Stats. 2002, Ch. 30, Sec. 1. Effective April 26, 2002. Applicable as provided in Sec. 4 of Ch. 30.)


text:
The amendments made by Section 647 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107-16) to the following provisions of the Internal Revenue Code shall apply for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001), with respect to trustee-to-trustee transfers after December 31, 2001, except as otherwise provided:

(a) Section 403, relating to taxation of employee annuities.

(b) Section 457, relating to deferred compensation plans of state and local governments and tax-exempt organizations.

history: (History: Added by Stats. 2002, Ch. 30, Sec. 2. Effective April 26, 2002. Applicable as provided in Sec. 4 of Ch. 30.)


text:
(a) The following amendments made by the Consolidated Appropriations Act, 2023 (Public Law 117-328) shall apply for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001) except as otherwise provided:

(1) The amendments made by Section 108 of Division T of that act to Section 219(b)(5)(C) of the Internal Revenue Code, relating to indexing IRA catch-up limit.

(2) The amendments made by Section 109 of Division T of that act to Section 414(v) of the Internal Revenue Code, relating to higher catch-up limit to apply at 60 to 63 years of age, inclusive.

(3) The amendments made by Section 117 of Division T of that act to Section 414(v)(2) of the Internal Revenue Code, relating to contribution limit for simple plans.

(b) (1) For the purposes of complying with Section 41, as it pertains to the deductions expanded by this section, the Legislature finds and declares as follows:

(A) The specific goal, purpose, and objective of this bill is to conform state law to changes in federal law in order to reduce complications relating to mismatches in basis of retirement accounts for federal income tax purposes compared to state income tax purposes.

(B) The performance indicators used by the Legislature to determine if the deductions are achieving the stated goal shall be the number of taxpayers making contributions that would, but for the expansion of deductions pursuant to this section, be included in income for state purposes, and the total dollar value of those contributions.

(2) The Legislative Analyst’s Office shall, no later than October 1, 2029, submit a report to the Legislature, in accordance with Section 9795 of the Government Code, that estimates the number of taxpayers making contributions to retirement accounts that, but for the expansion of deductions provided by this section, would be included in income, and estimates of the total dollar value of those contributions, to the extent data is available.

history: (History: Added by Stats. 2025, Ch. 231, Sec. 51. (SB 711) Effective October 1, 2025.)


text:
(a) In addition to the application of Part II (commencing with Section 421) of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to certain stock options, paragraphs (1), (2), and (3) of Section 421(a) of the Internal Revenue Code shall also apply to any California qualified stock option that is granted to an individual whose earned income from the corporation granting the California qualified stock option for the taxable year in which that option is exercised does not exceed forty thousand dollars ($40,000). In the event that the option does not meet the necessary qualifications, the option shall be treated as a nonqualified stock option.

(b) For purposes of this section, “California qualified stock option” means a stock option that is issued and exercised pursuant to this section and that is designated by the corporation issuing the option as a California qualified stock option at the time the option is granted.

(c) (1) This section shall apply only to those stock options that are issued on or after January 1, 1997, and before January 1, 2002, by a corporation to its employee and are exercised by the employee, while employed by the corporation that issued those stock options (or within three months thereof, or within one year thereof if permanently and totally disabled as defined in Section 22(e)(3) of the Internal Revenue Code), during the taxable year with respect to any class of shares, or combination thereof, issued by the corporation, to the extent that the number of shares transferable by the exercise of the options does not exceed a total of 1,000 and have a combined fair market value of less than one hundred thousand dollars ($100,000). The combined fair market value of any stock shall be determined as of the time the option with respect to that stock is granted.

(2) Paragraph (1) shall be applied by taking options into account in the order in which they were granted.

(d) In the case of a California qualified stock option, no amount shall be included in the gross income of the employee until the time of the disposition of the option (or the stock acquired upon exercise of the option).

No deduction shall be allowed under Section 162 of the Internal Revenue Code to the employer on the grant or exercise of a California qualified stock option.

(e) Subdivision (d) shall not apply to any stock option for which an election has been made under Section 83(b) of the Internal Revenue Code, relating to election to include in gross income in year of transfer.

history: (History: Amended by Stats. 1997, Ch. 604, Sec. 7. Effective October 3, 1997.)


text:
(a) The provisions of Section 402 of the Internal Revenue Code, relating to taxability of beneficiaries of employees’ trusts, shall be modified as follows:

(1) The amendments and transitional rules made by Public Law 99-514 shall be applicable to this part for the same transactions and the same years as they are applicable for federal purposes, except as otherwise provided.

(2) The basis of any person in an employees’ trust shall include the amount of any contributions made prior to January 1, 1987, which were not allowed as a deduction under former Sections 17503 and 17513 (including predecessor Section 17524 repealed by Chapter 488 of the Statutes of 1983) relating to special limitations for self-employed individuals.

(b) (1) There is hereby imposed a tax on lump-sum distributions computed in accordance with the provisions of Section 402(d) of the Internal Revenue Code using the rates and brackets prescribed in subdivision (a) of Section 17041 (without regard to Section 17045) in lieu of the rates and brackets in Section 1(c) of the Internal Revenue Code. The recipient of the lump-sum distribution shall be liable for the tax imposed by this paragraph.

(2) For purposes of this part, the provisions of Section 1122(h) of Public Law 99-514, as modified by Section 1011A(b) of Public Law 100-647, shall apply, except as modified by each of the following:

(A) The provisions of Section 1122(h)(3)(B) of Public Law 99-514 shall be modified to refer to Section 17041 rather than Section 1 of the Internal Revenue Code of 1986.

(B) The provisions of Section 1122(h)(3)(B)(ii) of Public Law 99-514 shall be modified to provide a tax rate of 5.5 percent rather than a tax rate of 20 percent.

(C) The provisions of Section 1122(h)(5) of Public Law 99-514 shall be modified to refer to Section 17041 rather than Section 1 of the Internal Revenue Code of 1954.

(3) For purposes of this section, a taxpayer shall elect the same special lump-sum distribution averaging method for purposes of this part as that elected for federal purposes under Section 402(d)(4)(B) of the Internal Revenue Code.

(4) The provisions of Section 1124(a) of Public Law 99-514, as amended by Section 1011A(d) of Public Law 100-647, shall apply.

(5) The provisions of Section 1124(c) of Public Law 99-514, as added by Section 1011A(d) of Public Law 100-647, shall apply.

history: (History: Amended by Stats. 1993, Ch. 873, Sec. 18. Effective October 6, 1993.)


text: The provisions of Section 403 of the Internal Revenue Code, relating to taxation of employee annuities, shall be modified to provide that the basis of any person in an employee annuity shall include the amount of any contributions made prior to January 1, 1987, which were not allowed as a deduction under former Sections 17503 and 17513 of the Revenue and Taxation Code (including predecessor Section 17524 repealed by Chapter 488 of the Statutes of 1983) relating to special limitations for self-employed individuals.

history: (History: Amended by Stats. 1994, Ch. 1243, Sec. 23. Effective September 30, 1994.)


text:
The provisions of Section 408 of the Internal Revenue Code, relating to individual retirement accounts, shall be modified as follows:

(a) The following provisions shall be incorporated into Section 408(e) of the Internal Revenue Code:

(1) In the case of a plan in existence in taxable year 1975 where contributions were made pursuant to, and in conformance with, Section 408 or 409 of the Internal Revenue Code of 1954, as amended by the Employee Retirement Income Security Act of 1974 (Public Law 93-406), any net income attributable to the 1975 contribution shall not be includable in the gross income, for taxable year 1977 or succeeding taxable years, of the individual for whose benefit the plan was established until distributed pursuant to the provisions of the plan or by operation of law.

(2) In the case of a simplified employee pension, where contributions are also made pursuant to, and in conformance with, the provisions of Section 408(k) of the Internal Revenue Code of 1954, the net income attributable to the nondeductible portion of those contributions shall not be includable in the gross income of the individual for whose benefit the plan was established for the taxable year or for succeeding taxable years until distributed pursuant to the provisions of the plan or by operation of law.

(3) Notwithstanding the limitations provided in former Section 17272 (as amended by Chapter 1461 of the Statutes of 1985) with respect to the amount of deductible contributions and individuals eligible for the deduction, any income attributable to contributions made to a plan in existence in taxable years beginning on or after January 1, 1982, in conformance with Sections 219, 220, 408, and 409 of the Internal Revenue Code of 1954, shall not be includable in the gross income of the individual for whose benefit the plan was established until distributed pursuant to the provisions of the plan or by operation of law.

(b) The provisions of Section 408(d) of the Internal Revenue Code, relating to the tax treatment of distributions, are modified as follows:

(1) For taxable years beginning on or after January 1, 1982, and before January 1, 1987, the basis of any person in the account or annuity is the amount of contributions not allowed as a deduction under former subdivision (a), (e), or (g) of Section 17272 (as amended by Chapter 1461 of the Statutes of 1985) on account of the purchase of the account or annuity.

(2) For purposes of paragraph (1), the rules for recovery of basis shall be governed by Section 17085.

(c) A copy of the report, which is required to be filed with the Secretary of the Treasury under Section 408(i) or 408(l) of the Internal Revenue Code, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in those sections.

history: (History: Amended by Stats. 1997, Ch. 611, Sec. 39. Effective October 3, 1997.)


text: The provisions of Section 408(o) of the Internal Revenue Code, relating to definitions and rules relating to nondeductible contributions to individual retirement plans, shall be applicable and the information required to be reported shall be reported on the return filed pursuant to Chapter 2 (commencing with Section 18501) of Part 10.2 at the time and in the manner as specified in that section.

history: (History: Amended by Stats. 1993, Ch. 31, Sec. 12. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)


text:
For taxable years beginning on or after January 1, 2013, Section 409A of the Internal Revenue Code is modified as follows:

(a) By substituting the phrase “five percent” in lieu of the phrase “20 percent” in Section 409A(a)(1)(B)(i)(II) of the Internal Revenue Code.

(b) By substituting the phrase “five percent” in lieu of the phrase “20 percent” in Section 409A(b)(5)(A)(ii) of the Internal Revenue Code.

history: (History: Added by Stats. 2013, Ch. 536, Sec. 1. (AB 1173) Effective January 1, 2014.)


text: Sections 413(b)(6) and 413(c)(5) of the Internal Revenue Code, relating to liability for funding tax, do not apply.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 12. Effective January 1, 2004.)


text:
(a) For taxable years beginning on or after January 1, 2026, Section 530A of the Internal Revenue Code, relating to 530A accounts, added by Section 70204(a)(1) of Public Law 119-21, shall apply, except as otherwise provided.

(b) The amount of the additional tax imposed under Section 530A(d)(2) of the Internal Revenue Code, relating to tax treatment of allowable distributions, as applicable for federal income tax purposes for the same taxable year, shall be computed using a rate of 2.5 percent in lieu of the rate provided in that section.

(c) Section 530A(d)(5)(C) of the Internal Revenue Code, relating to distributions of excess contributions, shall not apply.

(d) Section 530A(g) of the Internal Revenue Code, relating to trustee selection, shall not apply.

(e) A copy of the report required to be filed with the Secretary of the Treasury under Section 530A(i) of the Internal Revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.

history: (History: Added by Stats. 2026, Ch. 85, Sec. 6. (SB 180) Effective July 13, 2026.)


text: Section 7701(j) of the Internal Revenue Code, relating to Federal Thrift Savings Funds, applies, except as otherwise provided.

history: (History: Amended by Stats. 2003, Ch. 185, Sec. 13. Effective January 1, 2004.)


text:
(a) Subchapter E of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to accounting periods and methods of accounting, shall apply, except as otherwise provided.

(b) Section 444(c)(1) of the Internal Revenue Code, relating to effect of election, shall not apply.

(c) Section 451(b) of the Internal Revenue Code, relating to inclusion not later than for financial accounting purposes, shall not apply to specified credit card fees, as defined in Treasury Regulations Section 1.451-3(j)(2).

(d) (1) Notwithstanding the specified date contained in paragraph (1) of subdivision (a) of Section 17024.5, Section 457 of the Internal Revenue Code, relating to deferred compensation plans of state and local governments and tax-exempt organizations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes.

(2) The maximum deferred compensation for the taxable year that may be excluded from gross income under Section 457 of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of deferred compensation that may be excluded from gross income under Section 457 of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under Section 414(v) of the Internal Revenue Code, as in effect on January 1, 2010.

(e) (1) For taxable years beginning on or after January 1, 2002, the basis of any person in the plan shall be increased by the amount of compensation not allowed to be excluded under subdivision (a).

(2) Any basis described in paragraph (1) shall be recovered in the manner specified in Section 17085.

(f) Notwithstanding the limitations provided in subdivision (a), any income attributable to compensation deferred in a plan in taxable years beginning on or after January 1, 2002, in conformance with Section 457 of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan was established until distributed pursuant to the provisions of the plan or by operation of law.

(g) Section 451(k) of the Internal Revenue Code, relating to special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy, shall not apply.

(h) Section 457A of the Internal Revenue Code, relating to nonqualified deferred compensation from certain tax indifferent parties, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 52. (SB 711) Effective October 1, 2025.)

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


text:
(a) Notwithstanding Section 17565, a return for a period of less than 12 months shall also be made when the Franchise Tax Board terminates the taxpayer’s taxable year under Section 19082 (relating to tax in jeopardy).

(b) Section 443(c) of the Internal Revenue Code, relating to adjustment in deduction for personal exemption, is modified by substituting the phrase “the credit allowed under Section 17054” for the phrase “the exemptions allowed as a deduction under section 151 (and any deduction in lieu thereof).”

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 39. Effective October 10, 1999.)

chapter: 6. Accounting Periods and Methods of Accounting


text:
(a) (1) The options under Sections 112(d)(2) and 112(d)(3) of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. Sec. 7212(d)(2) and (3)), as in effect on October 21, 1998, shall be disregarded in determining the taxable year for which any payment under a production flexibility contract under Subtitle B of Title I of that act (as so in effect) is properly includable in gross income for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001).

(2) In order to provide farmers with the same tax treatment for all payments in years beginning before January 1, 2002, with respect to production flexibility contract payments as provided under federal law as modified by Public Law 105-277, this subdivision shall apply to taxable years ending after December 31, 1995.

(b) Any option to accelerate the receipt of any payment under a production flexibility contract entered into on or after January 1, 2002, that is payable under the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. Sec. 7200 et seq.) as in effect on December 17, 1999, shall be disregarded in determining the taxable year for which that payment is properly includable in gross income for purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001).

history: (History: Added by Stats. 2002, Ch. 34, Sec. 22. Effective May 8, 2002. See identical section added by Stats. 2002, Ch. 35.)


text: Section 454(c) of the Internal Revenue Code, relating to matured United States Savings Bonds, shall not apply.

history: (History: Amended by Stats. 1999, Ch. 987, Sec. 40. Effective October 10, 1999.)


text: In any case where spouses file separate returns, the Franchise Tax Board may distribute, apportion, or allocate gross income between the spouses, if it is determined that such distribution, apportionment, or allocation is necessary in order to reflect the proper income of the spouses.

history: (History: Amended by Stats. 2016, Ch. 50, Sec. 101. (SB 1005) Effective January 1, 2017.)


text: Notwithstanding Section 442 of the Internal Revenue Code, the estate may change its annual accounting period one time without the approval of the Franchise Tax Board.

history: (History: Added by Stats. 1983, Ch. 1102, Sec. 22. Effective September 27, 1983.)


text:
(a) Section 451(g) of the Internal Revenue Code, relating to special rule for proceeds from livestock sold on account of drought, is modified by substituting the phrase “drought, flood, or other weather-related conditions, and that those conditions” in lieu of the phrase “drought conditions, and that these drought conditions” contained therein.

(b) This section shall apply to sales and exchanges after December 31, 1996.

(c) This section shall not apply to taxable years beginning on or after January 1, 1998.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 53. (SB 711) Effective October 1, 2025.)


text:
(a) The provisions of Sections 811(c)(4), 811(c)(6), and 811(c)(7) of Public Law 99-514, as modified by Section 1008(f) of Public Law 100-647, shall apply.

(b) The provisions of Section 812 of Public Law 99-514, relating to the disallowance of use of installment method for certain obligations as modified by Section 1008(g) of Public Law 100-647, shall apply to taxable years beginning on or after January 1, 1987.

(c) The repeal of Section 453C of the Internal Revenue Code by Section 10202(a) of Public Law 100-203, relating to repeal of the proportionate disallowance of the installment method, shall apply to dispositions in taxable years beginning on or after January 1, 1990.

(d) (1) In the case of any installment obligation to which Section 453(l)(2)(B) of the Internal Revenue Code applies, in lieu of the provisions of Section 453(l)(3)(A) of the Internal Revenue Code, the tax imposed under Section 17041 or 17048 for any taxable year for which payment is received on that obligation shall be increased by the amount of interest determined in the manner provided under Section 453(l)(3)(B) of the Internal Revenue Code.

(2) The provisions of Sections 10202 and 10204 of Public Law 100-203 are modified to provide for each of the following:

(A) The provisions of Section 10202 shall apply to dispositions in taxable years beginning on or after January 1, 1990.

(B) The provisions of Section 10204 shall apply to costs incurred in taxable years beginning on or after January 1, 1990.

(C) Any adjustments required by Section 481 of the Internal Revenue Code shall be included in gross income as follows:

(i) Fifty percent in the first taxable year beginning on or after January 1, 1990.

(ii) Fifty percent in the second taxable year beginning on or after January 1, 1990.

(e) (1) In the case of any installment obligation to which Section 453A of the Internal Revenue Code applies and which is outstanding as of the close of the taxable year, in lieu of the provisions of Section 453A(c)(1) of the Internal Revenue Code, the tax imposed by Section 17041 or 17048 for the taxable year shall be increased by the amount of interest determined in the manner provided under Section 453A(c)(2) of the Internal Revenue Code.

(2) The provisions of Section 453A(c)(3)(B) of the Internal Revenue Code, relating to the maximum rate used in calculating the deferred tax liability, are modified to refer to the maximum rate of tax imposed under Section 17041 in lieu of the maximum rate of tax imposed under Section 1 or 11 of the Internal Revenue Code.

history: (History: Amended by Stats. 2002, Ch. 807, Sec. 8. Effective September 23, 2002.)


text:
(a) Section 461(j) of the Internal Revenue Code, relating to limitation on excess farm losses of certain taxpayers, shall not apply.

(b) (1) Section 11012(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to limitation on excess business losses on noncorporate taxpayers, shall apply except as otherwise provided.

(2) Section 461(l)(1) of the Internal Revenue Code, relating to limitation, as amended by Section 11012(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by substituting “beginning after December 31, 2018” for the phrase “beginning after December 31, 2017, and before January 1, 2026.”

(3) Section 461(l)(2) of the Internal Revenue Code, relating to disallowed loss carryover, as amended by Section 11012(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by substituting “Any loss which is disallowed under paragraph (1) shall be treated as a carryover excess business loss for the following taxable year.” for “Any loss which is disallowed under paragraph (1) shall be treated as a net operating loss carryover to the following taxable year under section 172.”

(4) Section 461(l)(3)(A) of the Internal Revenue Code, as amended by Section 11012 (a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by inserting “(i) the sum of (I) Any prior year carryover excess business losses, plus” below “In general, the term ‘excess business loss’ means the excess (if any) of.”

(5) Section 461(l)(3)(A)(i) of the Internal Revenue Code, as amended by Section 11012 (a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by inserting “(II)” for “(i).”

(6) Section 461(l)(6) of the Internal Revenue Code, relating to coordination with section 469, as amended by Section 11012(a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by substituting “Section 17561” for “section 469.”

(c) The amendments to Section 461(l) of the Internal Revenue Code made by Section 2304(a) and (b) of Public Law 116-136, relating to the modification of limitation on losses for taxpayers other than corporations, shall not apply.

(d) The amendments to Section 461(l)(1) of the Internal Revenue Code made by Section 9041(a) of Public Law 117-2, relating to the extension of limitation on excess business losses of noncorporate taxpayers, shall not apply.

(e) The amendments to Section 461(l)(1) of the Internal Revenue Code made by Section 13903(b)(1) of Public Law 117-169, relating to the extension of limitation on excess business losses of noncorporate taxpayers, shall not apply.

history: (History: Amended by Stats. 2025, Ch. 231, Sec. 54. (SB 711) Effective October 1, 2025.)


text:
(a) Section 469(c)(7) of the Internal Revenue Code, relating to special rules for taxpayers in real property business, shall not apply.

(b) Section 469(d)(2) of the Internal Revenue Code, relating to passive activity credits, is modified to refer to the following credits:

(1) The credit for research expenses allowed by Section 17052.12.

(2) The credit for certain wages paid (targeted jobs) allowed by Section 17053.7.

(3) The credit allowed by former Section 17057 (relating to clinical testing expenses).

(4) The credit for low-income housing allowed by Section 17058.

(c) Section 469(g)(1)(A) of the Internal Revenue Code is modified to provide that if all gain or loss realized on the disposition of the taxpayer’s entire interest in any passive activity (or former passive activity) is recognized, the excess of—

(1) The sum of—

(A) Any loss from that activity for that taxable year (determined after application of Section 469(b) of the Internal Revenue Code), plus

(B) Any loss realized on that disposition, over

(2) Net income or gain for the taxable year from all passive activities (determined without regard to losses described in paragraph (1)),shall be treated as a loss which is not from a passive activity.

(d) (1) For purposes of applying the provisions of Section 469(i) of the Internal Revenue Code, relating to the twenty-five thousand dollars ($25,000) offset for rental real estate activities, the dollar limitation specified in Section 469(i)(2) of the Internal Revenue Code, relating to dollar limitation, for the credit allowed under Section 17058, relating to low-income housing, shall not apply.

(2) The amendments made to this subdivision by the act adding this paragraph shall apply to each taxable year beginning on or after January 1, 2020.

(e) Section 502 of the Tax Reform Act of 1986 (P.L. 99-514) shall apply.

(f) For taxable years beginning on or after January 1, 1987, the provisions of Section 10212 of Public Law 100-203, relating to treatment of publicly traded partnerships under Section 469 of the Internal Revenue Code, shall be applicable.

history: (History: Amended by Stats. 2019, Ch. 159, Sec. 25. (AB 101) Effective July 31, 2019.)


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. 34, Sec. 24. Effective May 8, 2002. See identical section added by Stats. 2002, Ch. 35.)