Code Section Group

Revenue and Taxation Code - RTC

DIVISION 2. OTHER TAXES [6001 - 60709]

  ( Heading of Division 2 amended by Stats. 1968, Ch. 279. )

PART 10. PERSONAL INCOME TAX [17001 - 18181]

  ( Part 10 added by Stats. 1943, Ch. 659. )

CHAPTER 12. Credit for Taxes Paid [18001 - 18011]
  ( Chapter 12 added by Stats. 1955, Ch. 939. )

18001.
  

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

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

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

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

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

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

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

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

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

18002.
  

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

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

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

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

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

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

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

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

18003.
  

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

(Amended by Stats. 1959, Ch. 321.)

18004.
  

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

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

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

(Amended by Stats. 1959, Ch. 321.)

18005.
  

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

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

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

(Amended by Stats. 1957, Ch. 215.)

18006.
  

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

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

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

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

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

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

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

18007.
  

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

(Amended by Stats. 1959, Ch. 321.)

18008.
  

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

(Amended by Stats. 1957, Ch. 215.)

18009.
  

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

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

18011.
  

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

(Amended by Stats. 1957, Ch. 215.)

RTCRevenue and Taxation Code - RTC