The Personal Income Tax Law and the Corporation Tax Law allow various deductions in computing the income that is subject to the taxes imposed by those laws. Both laws allow a deduction for ordinary and necessary business expenses, including a deduction for amounts paid or incurred for specified types of punitive damages.
This bill, for taxable years beginning on or after January 1, 2014, would disallow, under both laws, a deduction for amounts paid or incurred for punitive damages, as provided.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of
2/3 of the membership of each house of the Legislature.
This bill would take effect immediately as a tax levy.