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 11. CORPORATION TAX LAW [23001 - 25141]

  ( Heading of Part 11 amended by Stats. 2001, Ch. 543, Sec. 21. )

CHAPTER 1. General Provisions and Definitions [23001 - 23060]

  ( Chapter 1 added by Stats. 1949, Ch. 557. )

ARTICLE 2. Definitions [23030 - 23060]
  ( Article 2 added by Stats. 1949, Ch. 557. )

23030.
  

Except where the context otherwise requires, the definitions given in this chapter govern the construction of this part.

(Added by Stats. 1949, Ch. 557.)

23031.
  

“Franchise Tax Board” means the Franchise Tax Board described in Part 10 (commencing with Section 15700) of Division 3 of Title 2 of the Government Code.

“Board” means the State Board of Equalization.

(Amended by Stats. 1984, Ch. 193, Sec. 116.)

23032.
  

“Fiscal year” means an accounting period of twelve months or less ending on the last day of any month other than December.

(Added by Stats. 1949, Ch. 557.)

23033.
  

“Paid or incurred” and “paid or accrued” shall be construed according to the method of accounting upon the basis of which net income is computed.

(Added by Stats. 1949, Ch. 557.)

23034.
  

“State” includes the District of Columbia, and the possessions of the United States.

(Amended by Stats. 1961, Ch. 485.)

23035.
  

“Counsel for the Franchise Tax Board” means attorney or attorneys appointed or employed by the Franchise Tax Board and acting subject to the approval and under the supervision of the Attorney General.

(Amended by Stats. 1951, Ch. 71.)

23036.
  

(a) (1) The term “tax” includes any of the following:

(A) The tax imposed under Chapter 2 (commencing with Section 23101).

(B) The tax imposed under Chapter 3 (commencing with Section 23501).

(C) The tax on unrelated business taxable income, imposed under Section 23731.

(D) The tax on “S” corporations imposed under Section 23802.

(2) The term “tax” does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.

(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term “tax” also includes all of the following:

(1) The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.

(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).

(3) The tax on built-in gains of “S” corporations, imposed under Section 23809.

(4) The tax on excess passive investment income of “S” corporations, imposed under Section 23811.

(c) Notwithstanding any other provision of this part, credits are allowed against the “tax” in the following order:

(1) Credits that do not contain carryover provisions.

(2) Credits that, when the credit exceeds the “tax,” allow the excess to be carried over to offset the “tax” in succeeding taxable years, except for those credits that are allowed to reduce the “tax” below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.

(3) The minimum tax credit allowed by Section 23453.

(4) Credits that are allowed to reduce the “tax” below the tentative minimum tax, as defined by Section 23455.

(5) Credits for taxes withheld under Section 18662.

(d) Notwithstanding any other provision of this part, each of the following applies:

(1) A credit may not reduce the “tax” below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:

(A) The credit allowed by former Section 23601 (relating to solar energy).

(B) The credit allowed by former Section 23601.4 (relating to solar energy).

(C) The credit allowed by former Section 23601.5 (relating to solar energy).

(D) The credit allowed by Section 23609 (relating to research expenditures).

(E) The credit allowed by former Section 23609.5 (relating to clinical testing expenses).

(F) The credit allowed by Section 23610.5 (relating to low-income housing).

(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).

(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).

(I) The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).

(J) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).

(K) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).

(L) The credit allowed by former Section 23623 (relating to program area hiring credit).

(M) The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).

(N) The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).

(O) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).

(P) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).

(Q) The credit allowed by former Section 23649 (relating to qualified property).

(R) For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).

(S) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).

(T) For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).

(U) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).

(V) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).

(2) A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).

(e) Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the “tax” in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.

(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.

(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.

(h) Unless otherwise provided, in the case of an “S” corporation, any credit allowed by this part is computed at the “S” corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the “S” corporation and to each shareholder.

(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).

(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayer’s “tax,” as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayer’s regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayer’s regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayer’s regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayer’s regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.

(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).

(j) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayer’s first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.

(2) For purposes of this subdivision, “eligible pass-thru entity” means any partnership or “S” corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.

(3) This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.

(Amended by Stats. 2015, Ch. 22, Sec. 30. (SB 81) Effective June 24, 2015.)

23036.1.
  

Notwithstanding Section 23036 or any other provision in this part to the contrary, the credit allowed by Section 23630 (relating to natural heritage) may reduce the “tax” below the tentative minimum tax, as defined by paragraph (1) of subdivision (a) of Section 23455, but only after allowance of the credit allowed by Section 23453.

(Added by Stats. 2000, Ch. 113, Sec. 4. Effective July 10, 2000.)

23036.2.
  

(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for each taxable year beginning on or after January 1, 2008, and before January 1, 2010, the total of all credits otherwise allowable under any provision of Chapter 3.5 (commencing with Section 23604) including the carryover of any credit under a former provision of that chapter, for the taxable year shall not reduce the “tax” (as defined in Section 23036) below the applicable amount.

(b) This section shall not apply to the credit allowed by Section 23623 (relating to full time employment hiring credit).

(c) For purposes of this section, the “applicable amount” shall be equal to 50 percent of the “tax” (as defined in Section 23036) before application of any credits.

(d) The amount of any credit otherwise allowable for the taxable year under Section 23036 that is not allowed due to the application of this section shall remain a credit carryover amount under this part.

(e) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit (or any portion thereof) was not allowed.

(f) The provisions of this section shall not apply to a taxpayer with income subject to tax under this part of less than $500,000 for the taxable year.

(Amended by Stats. 2009, 3rd Ex. Sess., Ch. 17, Sec. 6. Effective February 20, 2009.)

23037.
  

“Taxpayer” means any person subject to the tax imposed under Chapter 2 (commencing with Section 23101), Chapter 2.5 (commencing with Section 23400), or Chapter 3 (commencing with Section 23501).

(Amended by Stats. 1997, Ch. 605, Sec. 46. Effective January 1, 1998.)

23038.
  

(a) “Corporation” includes every corporation except corporations expressly exempt from the tax by this part or the Constitution of this state.

(b) (1) For the purposes of the tax imposed under Chapter 3 (commencing with Section 23501), “corporation” also includes associations (including nonprofit associations that perform services, borrow money or own property), other than banking associations, and Massachusetts or business trusts. For the purposes of this part, a Massachusetts or business trust includes every business organization consisting essentially of an arrangement whereby property is conveyed to one, or more than one, trustee for purposes other than the mere conservation of assets, collecting and disbursing of fixed or periodic income, or the securing of an obligation. This paragraph shall apply for income or taxable years beginning before January 1, 1997.

(2) (A) For the purposes of the tax imposed under Chapter 3 (commencing with Section 23501), “corporation” also includes associations (other than banking associations but including nonprofit associations that perform services, borrow money or own property), business trusts, and other business entities classified as associations.

(B) (i) For purposes of the preceding subparagraph, the classification of a business entity (including a business trust) as an association taxable as a corporation (under Chapter 3 (commencing with Section 23501)) shall be determined under regulations of the Franchise Tax Board, that shall be consistent with federal regulations as in effect May 1, 2014, that classify a business entity as a partnership or an association taxable as a corporation or disregard the separate existence of certain business entities for tax purposes.

(ii) The classification of an eligible business entity as a partnership or an association taxable as a corporation for purposes of this part, Part 10 (commencing with Section 17001), and Part 10.2 (commencing with Section 18401) shall be the same as the classification of the entity for federal tax purposes.

(iii) If the separate existence of an eligible business entity is disregarded for federal tax purposes, the separate existence of that business entity shall be disregarded for purposes of this part, Part 10 (commencing with Section 17001), and Part 10.2 (commencing with Section 18401), other than Section 17941 (relating to the tax of a limited liability company), Section 17942 (relating to the fee of a limited liability company), Section 18633.5 (relating to the return of a limited liability company), and Sections 17039 and 23036 (relating to tax credits).

(C) Notwithstanding clauses (ii) and (iii) of subparagraph (B), an eligible business entity that, for any income year beginning within the 60-month period preceding January 1, 1997, was properly classified as an association taxable as a corporation for California tax purposes shall continue to be an association taxable as a corporation until it elects, under regulations issued pursuant to subparagraph (B), to be classified or disregarded the same as the entity is classified or disregarded for federal tax purposes. The preceding sentence shall not apply to any entity that, during the 60-month period preceding January 1, 1997, was not doing business in this state, did not derive income from sources within this state, and had no owner who was a resident of this state.

(D) This paragraph shall apply for income or taxable years beginning on and after January 1, 1997.

(c) In addition to the above, for purposes of the tax imposed under Chapter 2 (commencing with Section 23101) for the purpose of exercising its franchise within this state, “corporation” also includes any limited liability company that is classified as an association for California tax purposes.

(d) “Corporation” includes any “corporation” operated by any receiver, liquidator, referee, trustee or other officers or agents appointed by any court, or an assignee for the benefit of creditors.

“Corporation” includes any professional corporation incorporated pursuant to Part 4 (commencing with Section 13400) of Division 3 of Title 1 of the Corporations Code.

(e) Notwithstanding the above, “corporation” also includes a trust organized and operated exclusively for purposes contained in Section 23701d.

(f) No provision of the act adding this subdivision shall be construed to alter existing law with respect to the civil liability of a limited liability company or its members.

(Amended by Stats. 2014, Ch. 325, Sec. 2. (AB 1143) Effective September 15, 2014.)

23038.5.
  

(a) Section 7704 of the Internal Revenue Code, relating to certain publicly traded partnerships treated as corporations, shall apply, except as otherwise provided.

(b) (1) Section 7704(a) of the Internal Revenue Code shall not apply to an electing 1987 partnership.

(2) For purposes of this subdivision, the term “electing 1987 partnership” means any publicly traded partnership if all of the following apply:

(A) The partnership is an existing partnership (as defined in Section 10211(c)(2) of the Revenue Reconciliation Act of 1987).

(B) Section 7704(a) of the Internal Revenue Code has not applied (and without regard to Section 7704(c)(1) of the Internal Revenue Code would not have applied) to that partnership for all prior taxable years beginning after December 31, 1987, and before January 1, 1998.

(C) (i) The partnership has made the election under Section 7704(g)(2)(C) of the Internal Revenue Code for federal tax purposes.

(ii) The election for federal tax purposes described in clause (i) shall be treated as a binding election and a separate election for state tax purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5.

(iii) The election for federal tax purposes described in clause (i) shall be treated as a binding consent to the application of the tax imposed under paragraph (3) and a separate election for state tax purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5.

(D) A partnership that, but for this subparagraph, would be treated as an electing 1987 partnership shall cease to be so treated (and the election under subparagraph (C) shall cease to be in effect) as of the first day after December 31, 1997, that the partnership is no longer treated as an electing 1987 partnership for federal tax purposes (and the election under Section 7704(g)(2)(C) of the Internal Revenue Code ceases to be in effect for federal tax purposes).

(3) (A) There is hereby imposed for each taxable year beginning on or after January 1, 1998, on the gross income of each electing 1987 partnership a tax equal to 1 percent of that partnership’s gross income from all sources reportable to this state, taking into account Section 25101 and any election under Section 25110, attributable to the active conduct of trades and businesses by the partnership.

(B) The tax shall be due and payable on the date the return of the partnership is required to be filed under Section 18633 and shall be paid by the partnership. The tax shall be paid, collected, and refunded in the same manner as other taxes imposed by this part on corporations, and shall be subject to interest and applicable penalties. Section 19147 shall be applied to the partnership with respect to the tax imposed by this paragraph in the same manner as if references in that section to the taxable income were references to gross income referred to in subparagraph (A).

(C) For purposes of this paragraph, if a partnership is a partner in another partnership, the gross income referred to in subparagraph (A) shall include the partnership’s distributive share of the gross income of the other partnership from all sources reportable to this state, taking into account Section 25101 and any election under Section 25110, attributable to the active conduct of trades and businesses of that other partnership. A similar rule shall apply in the case of lower-tiered partnerships.

(D) The tax imposed by this paragraph shall be treated as imposed by this part other than for purposes of determining the amount of any credit allowable under this part.

(4) The provisions of this subdivision shall apply to the taxable year for which the election described in clause (i) of subparagraph (C) of paragraph (2) is made for federal purposes and all subsequent taxable years unless revoked by the partnership for federal purposes. Any revocation made for federal purposes shall be treated as a binding revocation under this part, but, once so revoked, may not be reinstated and a separate revocation for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5.

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

(Amended by Stats. 2002, Ch. 35, Sec. 34. Effective May 8, 2002.)

23039.
  

“Bank” includes national banking associations. “Bank” includes any “bank” operated by any receiver, liquidator, referee, trustee or other officers or agents appointed by any court, or an assignee for the benefit of creditors.

(Amended by Stats. 1953, Ch. 134.)

23040.
  

Income derived from or attributable to sources within this State includes income from tangible or intangible property located or having a situs in this State and income from any activities carried on in this State, regardless of whether carried on in intrastate, interstate or foreign commerce.

(Added by Stats. 1949, Ch. 557.)

23040.1.
  

(a) Notwithstanding Sections 23040 and 25101, income derived from or attributable to sources within this state shall not include:

(1) The distributive share of interest, dividends, and gains from the sale or exchange of qualifying investment securities derived by a corporation that is a partner in a partnership that qualifies as an investment partnership under Section 17955, whether or not the partnership has a usual place of business in this state, if the income from the partnership is the corporation’s only income derived from or attributable to sources within this state.

(2) Income, gain, or loss from stocks or securities received by an alien corporation whose sole activities in this state involve trading in those stocks or securities for the corporation’s own account within the meaning of Section 864(b)(2)(A)(ii) of the Internal Revenue Code, whether the trading is done by the corporation or its employees or through a resident broker, commission agent, custodian, or other agent, and whether or not any employee or agent has discretionary authority to make decisions in effecting the transactions. This paragraph does not apply to a dealer in stocks or securities.

(b) (1) Paragraph (1) of subdivision (a) shall not apply to a corporation that participates in the management of the investment activities of the investment partnership or that is engaged in a unitary business with another corporation or partnership that participates in the management of the investment activities of the partnership or has income derived from or attributable to sources within this state other than income described in paragraph (1) of subdivision (a).

(2) Paragraph (2) of subdivision (a) does not apply to an alien corporation that itself has, or that is engaged in a unitary business with another corporation that has, income derived from or attributable to sources within this state other than income described in paragraph (2) of subdivision (a).

(c) An alien corporation (other than a dealer in stocks or securities) trading in stocks or securities for its own account, as described in paragraph (2) of subdivision (a), is not doing business in this state for purposes of Chapter 2 of this part.

(d) For purposes of this section:

(1) “Alien corporation” means a corporation organized under the laws of a country, or any political subdivision thereof, other than the United States.

(2) “Dealer in stocks or securities” means a dealer in stocks or securities for purposes of Section 864(b)(2)(A)(ii) of the Internal Revenue Code.

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

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

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

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

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

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

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

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

(v) Repurchase agreements and loan participations.

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

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

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

(ix) Regulated futures contracts.

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

(5) “Stocks or securities” has the same meaning as applies to that phrase as used in Section 864(b)(2)(A)(ii) of the Internal Revenue Code.

(e) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1999.

(Amended by Stats. 2001, Ch. 543, Sec. 23. Effective January 1, 2002.)

23041.
  

“Taxable year” means:

(a) For the purposes of the tax imposed under Chapter 2 (commencing with Section 23101), the calendar year, or the fiscal year for which the tax is payable.

(b) For the purposes of the tax imposed under Chapter 1.5 (commencing with Section 23081), Chapter 3 (commencing with Section 23501), or Chapter 4 (commencing with Section 23701), the calendar year or the fiscal year upon the basis of which the net income is computed.

(c) For purposes of the tax imposed under Chapter 2.5 (commencing with Section 23400), (1) in the case of a taxpayer subject to the tax imposed under Chapter 2 (commencing with Section 23101), the calendar year or the fiscal year for which the tax is payable and (2) in the case of a taxpayer subject to the tax imposed under Chapter 3 (commencing with Section 23501) or Chapter 4 (commencing with Section 23701), the calendar or fiscal year upon the basis of which the net income is computed.

(d) For the purpose of the taxes imposed under this part, a period of 12 months or less.

(e) When referring to a calendar or fiscal year beginning before January 1, 2000, upon the basis of which the net income is computed, the term “taxable year” shall mean “income year,” as defined in subdivision (a) of Section 23042.

(Amended by Stats. 2003, Ch. 633, Sec. 6. Effective September 30, 2003.)

23042.
  

(a) For taxable years beginning prior to January 1, 2000, and the first taxable year beginning on or after January 1, 2000, “income year” means:

(1) For the purposes of the tax imposed under Chapter 2 (commencing with Section 23101), the calendar year or the fiscal year upon the basis of which the net income is computed. “Income year” means, for the purposes of the tax imposed under Chapter 2 (commencing with Section 23101), in the case of a return made for a fractional part of a year, the period for which such return is made.

(2) For the purposes of the tax imposed under Chapter 1.5 (commencing with Section 23081), Chapter 3 (commencing with Section 23501), or Chapter 4 (commencing with Section 23701), wherever “income year” is used throughout this part, it means “taxable year” as that term is defined in Section 23041 for the purposes of the tax imposed under Chapter 1.5 (commencing with Section 23081), Chapter 3 (commencing with Section 23501), or Chapter 4 (commencing with Section 23701).

(3) For purposes of the tax imposed under Chapter 2.5 (commencing with Section 23400), the same as defined in subdivision (a) with respect to a taxpayer subject to the tax imposed under Chapter 2 (commencing with Section 23101) and the same as defined in subdivision (b) with respect to a taxpayer subject to the tax imposed under Chapter 3 (commencing with Section 23501) or Chapter 4 (commencing with Section 23701).

(b) For taxable years (other than the first taxable year) beginning on or after January 1, 2000, the term “income year” shall have the same meaning as the term “taxable year” (as defined by Section 23041).

(Amended by Stats. 2000, Ch. 862, Sec. 42. Effective January 1, 2001.)

23043.5.
  

For purposes of this part, in determining the amount of gain or loss (or deemed gain or loss) with respect to any property, Section 7701(g) of the Internal Revenue Code, relating to nonrecourse indebtedness, applies, except as otherwise provided.

(Amended by Stats. 2003, Ch. 185, Sec. 34. Effective January 1, 2004.)

23044.
  

“International banking facility” means a facility represented by a set of asset and liability accounts segregated on the books and records of a commercial bank, the principal office of which is located in this state, and which is incorporated and doing business under the laws of the United States or of this state, a United States branch or agency of a foreign bank, an Edge corporation organized under Section 25 (a) of the Federal Reserve Act, 12 United States Code 611-631, or an Agreement corporation having an agreement or undertaking with the Board of Governors of the Federal Reserve System under Section 25 of the Federal Reserve Act, 12 United States Code 601-604 (a), that includes only international banking facility time deposits (as defined in subsection (a)(2) of Section 204.8 of Regulation D (12 CFR Part 204), as promulgated by the Board of Governors of the Federal Reserve System), and international banking facility extensions of credit (as defined in subsection (a)(3) of Section 204.8 of Regulation D).

(Added by Stats. 1981, Ch. 825, Sec. 2. Effective September 26, 1981. Applicable to income years ending on or after December 3, 1981, by Sec. 6 of Ch. 825.)

23045.
  

For purposes of this part:

(a) Section 7702 of the Internal Revenue Code, relating to life insurance contract defined, shall apply, except as otherwise provided.

(b) Section 7702A of the Internal Revenue Code, relating to modified endowment contract defined, shall apply, except as otherwise provided.

(c) (1) Section 7702B of the Internal Revenue Code, relating to treatment of qualified long-term care insurance, shall apply, except as otherwise provided.

(2) The amendments made by Section 844 of the Pension Protection Act of 2006 (Public Law 109-280) to Section 7702B of the Internal Revenue Code shall not apply.

(Amended by Stats. 2010, Ch. 14, Sec. 55. (SB 401) Effective January 1, 2011.)

23045.1.
  

For purposes of this part, the term “substituted basis property” has the same meaning given that term by Section 7701(a)(42) of the Internal Revenue Code.

(Added by Stats. 1987, Ch. 1139, Sec. 8. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)

23045.2.
  

For purposes of this part, the term “transferred basis property” has the same meaning given that term by Section 7701(a)(43) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

(Added by Stats. 1987, Ch. 1139, Sec. 9. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)

23045.3.
  

For purposes of this part, the term “exchanged basis property” has the same meaning given that term by Section 7701(a)(44) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

(Added by Stats. 1987, Ch. 1139, Sec. 10. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)

23045.4.
  

For purposes of this part, the term “nonrecognition transaction” has the same meaning given that term by Section 7701(a)(45) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

(Added by Stats. 1987, Ch. 1139, Sec. 11. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)

23045.5.
  

For purposes of this part, the term “domestic building and loan association” has the same meaning given that term by Section 7701(a)(19) of the Internal Revenue Code.

(Added by Stats. 1987, Ch. 1139, Sec. 12. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)

23045.6.
  

Section 7701(a)(20) of the Internal Revenue Code, relating to the definition of “employee,” shall apply, except as otherwise provided.

(Amended by Stats. 1993, Ch. 877, Sec. 33. Effective October 6, 1993.)

23046.
  

Section 7701(a)(46) of the Internal Revenue Code, relating to determination of whether there is a collective bargaining agreement, shall apply, except as otherwise provided.

(Amended by Stats. 1993, Ch. 877, Sec. 34. Effective October 6, 1993.)

23046.5.
  

(a) Section 7701(n) of the Internal Revenue Code, relating to convention or association of churches, shall apply, except as otherwise provided.

(b) The phrase “this part” shall be substituted for “this title” in Section 7701(n) of the Internal Revenue Code.

(Added by Stats. 2010, Ch. 14, Sec. 56. (SB 401) Effective January 1, 2011.)

23047.
  

Section 7701(e) of the Internal Revenue Code, relating to treatment of certain contracts for providing services, etc., shall apply, except as otherwise provided.

(Amended by Stats. 1993, Ch. 877, Sec. 35. Effective October 6, 1993.)

23048.
  

Taxable mortgage pools shall be defined and treated in accordance with Section 7701(i) of the Internal Revenue Code, except as otherwise provided.

(Added by Stats. 1987, Ch. 1139, Sec. 13. Effective September 25, 1987. Applicable to income years beginning on or after January 1, 1987, by Sec. 241 of Ch. 1139.)

23049.
  

Section 7701(h) of the Internal Revenue Code, relating to motor vehicle operating leases, shall apply, except as otherwise provided.

(Amended by Stats. 1993, Ch. 877, Sec. 36. Effective October 6, 1993.)

23049.1.
  

Section 64 of the Internal Revenue Code, relating to the definition of ordinary income, shall apply.

(Added by Stats. 1991, Ch. 117, Sec. 43. Effective July 16, 1991.)

23049.2.
  

Section 65 of the Internal Revenue Code, relating to the definition of ordinary loss, shall apply.

(Added by Stats. 1991, Ch. 117, Sec. 44. Effective July 16, 1991.)

23050.
  

Definitions, other than general definitions, are set forth in the chapter to which specifically applicable.

(Added by Stats. 1949, Ch. 557.)

23051.
  

The term “Bank and Corporation Tax Law of 1954,” means Part 11 of Division 2 of the Revenue and Taxation Code as enacted by Statutes 1949, Chapter 557, and as subsequently amended, including all amendments enacted prior to December 31, 1954.

(Added by Stats. 1955, Ch. 938.)

23051.5.
  

(a) (1) Unless otherwise specifically provided, the terms “Internal Revenue Code,” “Internal Revenue Code of 1954,” or “Internal Revenue Code of 1986,” for purposes of this part, mean Title 26 of the United States Code, including all amendments thereto, as enacted on the specified date for the applicable taxable year as defined in paragraph (1) of subdivision (a) of Section 17024.5.

(2) (A) Unless otherwise specifically provided, for federal laws enacted on or after January 1, 1987, and on or before the specified date for the taxable year, uncodified provisions that relate to provisions of the Internal Revenue Code that are incorporated for purposes of this part, shall be applicable to the same taxable years as the incorporated provisions.

(B) In the case where Section 901 of the Economic Growth and Tax Relief Act of 2001 (Public Law 107-16) applies to any provision of the Internal Revenue Code that is incorporated for purposes of this part, Section 901 of the Economic Growth and Tax Relief Act of 2001 (Public Law 107-16) shall apply for purposes of this part in the same manner and to the same taxable years as it applies for federal income tax purposes.

(3) Subtitle G (Tax Technical Corrections) and Part I of Subtitle H (Repeal of Expired or Obsolete Provisions) of the Revenue Reconciliation Act of 1990 (Public Law 101-508) modified numerous provisions of the Internal Revenue Code and provisions of prior federal acts, some of which are incorporated by reference into this part. Unless otherwise provided, the provisions described in the preceding sentence, to the extent that they modify provisions that are incorporated into this part, are declaratory of existing law and shall be applied in the same manner and for the same periods as specified in the Revenue Reconciliation Act of 1990.

(b) Unless otherwise specifically provided, when applying the Internal Revenue Code for purposes of this part, a reference to any of the following is not applicable for purposes of this part:

(1) Domestic International Sales Corporations (DISC), as defined in Section 992(a) of the Internal Revenue Code.

(2) Foreign Sales Corporations (FSC), as defined in Section 922(a) of the Internal Revenue Code.

(3) A personal holding company, as defined in Section 542 of the Internal Revenue Code.

(4) A foreign personal holding company, as defined in Section 552 of the Internal Revenue Code.

(5) A foreign investment company, as defined in Section 1246(b) of the Internal Revenue Code.

(6) A foreign trust as defined in Section 679 of the Internal Revenue Code.

(7) Foreign income taxes and foreign income tax credits.

(8) Federal tax credits and carryovers of federal tax credits.

(c) (1) The provisions contained in Sections 41 to 44, inclusive, and Section 172 of the Tax Reform Act of 1984 (Public Law 98-369), relating to treatment of debt instruments, is not applicable for taxable years beginning before January 1, 1987.

(2) The provisions contained in Public Law 99-121, relating to the treatment of debt instruments, is not applicable for taxable years beginning before January 1, 1987.

(3) For taxable years beginning on and after January 1, 1987, the provisions referred to by paragraphs (1) and (2) shall be applicable for purposes of this part in the same manner and with respect to the same obligations as the federal provisions, except as otherwise provided in this part.

(d) When applying the Internal Revenue Code for purposes of this part, regulations promulgated in final form or issued as temporary regulations by “the secretary” shall be applicable as regulations issued under this part to the extent that they do not conflict with this part or with regulations issued by the Franchise Tax Board.

(e) Whenever this part allows a taxpayer to make an election, the following rules shall apply:

(1) A proper election filed with the Internal Revenue Service in accordance with the Internal Revenue Code or regulations issued by “the secretary” shall be deemed to be a proper election for purposes of this part, unless otherwise expressly provided in this part or in regulations issued by the Franchise Tax Board.

(2) A copy of that election shall be furnished to the Franchise Tax Board upon request.

(3) (A) Except as provided in subparagraph (B), in order to obtain treatment other than that elected for federal purposes, a separate election shall be filed with the Franchise Tax Board at the time and in the manner that may be required by the Franchise Tax Board.

(B) (i) If a taxpayer makes a proper election for federal income tax purposes prior to the time that taxpayer becomes subject to the tax imposed under this part or Part 10 (commencing with Section 17001), that taxpayer is deemed to have made the same election for purposes of the tax imposed by this part, Part 10 (commencing with Section 17001), and Part 10.2 (commencing with Section 18401), as applicable, and that taxpayer may not make a separate election for California tax purposes unless that separate election is expressly authorized by this part, Part 10 (commencing with Section 17001), or Part 10.2 (commencing with Section 18401), or by regulations issued by the Franchise Tax Board.

(ii) If a taxpayer has not made a proper election for federal income tax purposes prior to the time that taxpayer becomes subject to tax under this part or Part 10 (commencing with Section 17001), that taxpayer may not make a separate California election for purposes of this part, Part 10 (commencing with Section 17001), or Part 10.2 (commencing with Section 18401), unless that separate election is expressly authorized by this part, Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), or by regulations issued by the Franchise Tax Board.

(iii) This subparagraph applies only to the extent that the provisions of the Internal Revenue Code or regulations issued by “the secretary” authorizing an election for federal income tax purposes apply for purposes of this part, Part 10 (commencing with Section 17001), or Part 10.2 (commencing with Section 18401).

(f) Whenever this part allows or requires a taxpayer to file an application or seek consent, the rules set forth in subdivision (e) shall apply to that application or consent.

(g) When applying the Internal Revenue Code for purposes of determining the statute of limitations under this part, any reference to a period of three years shall be modified to read four years for purposes of this part.

(h) When applying, for purposes of this part, any section of the Internal Revenue Code or any applicable regulation thereunder, all of the following shall apply:

(1) For purposes of Chapter 2 (commencing with Section 23101), Chapter 2.5 (commencing with Section 23400), and Chapter 3 (commencing with Section 23501), the term “taxable income” shall mean “net income.”

(2) For purposes of Article 2 (commencing with Section 23731) of Chapter 4, the term “taxable income” shall mean “unrelated business taxable income,” as defined by Section 23732.

(3) Any reference to “subtitle,” “Chapter 1,” or “chapter” shall mean this part.

(4) The provisions of Section 7806 of the Internal Revenue Code, relating to construction of title, shall apply.

(5) Any provision of the Internal Revenue Code that becomes operative on or after the specified date for that taxable year shall become operative on the same date for purposes of this part.

(6) Any provision of the Internal Revenue Code that becomes inoperative on or after the specified date for that taxable year shall become inoperative on the same date for purposes of this part.

(7) Due account shall be made for differences in federal and state terminology, effective dates, substitution of “Franchise Tax Board” for “secretary” when appropriate, and other obvious differences.

(8) Any provision of the Internal Revenue Code that refers to a “corporation” shall, when applicable for purposes of this part, include a “bank,” as defined by Section 23039.

(9) Except as otherwise provided, any reference to Section 501 of the Internal Revenue Code shall be interpreted to also refer to Section 23701.

(i) Any reference to a specific provision of the Internal Revenue Code shall include modifications of that provision, if any, in this part.

(Amended by Stats. 2010, Ch. 14, Sec. 57. (SB 401) Effective January 1, 2011.)

23051.7.
  

(a) The enactment of the act adding this section to the code shall not deprive any taxpayer of any carryover of a credit, excess contribution, or loss to which that taxpayer was entitled under this part, including all amendments enacted prior to January 1, 1987.

(b) The carryover of the credit, excess contribution, or loss shall be allowed to be carried forward under the act adding this section to the code for the same period of time as the taxpayer would have been entitled to carry that item forward under prior law.

(c) For purposes of applying the provisions of the act adding this section to the code, the basis or recomputed basis of any asset acquired prior to January 1, 1987, shall be determined under the law at the time the asset was acquired and any adjustments to basis shall be computed as follows:

(1) Any adjustments to basis for income years beginning prior to January 1, 1987, shall be computed under applicable provisions of this part, including all amendments enacted prior to January 1, 1987; and

(2) Any adjustments to basis for taxable years beginning on or after January 1, 1987, shall be computed under the applicable provisions of the act adding this section to the code.

(d) For income years beginning on or after January 1, 1987, and before January 1, 1988, references in this part to “alternative minimum tax” shall be deemed to be references to the “tax on preference income.”

(Amended by Stats. 2001, Ch. 543, Sec. 24. Effective January 1, 2002.)

23052.
  

The provisions of this code insofar as they are substantially the same as existing statutory provisions relating to the same subject matter shall be construed as restatements and continuations thereof, and not as new enactments.

(Added by Stats. 1955, Ch. 938.)

23053.
  

The repeal of any provision of the Bank and Corporation Tax Law shall not affect any act done or any right accruing or accrued, or any suit or proceeding had or commenced in any civil cause, before such repeal; but all rights and liabilities under such law shall continue, and may be enforced in the same manner, as if such repeal had not been made.

(Amended by Stats. 1991, Ch. 117, Sec. 46. Effective July 16, 1991.)

23054.
  

For the purpose of applying the Bank and Corporation Tax Law of 1954 or the Bank and Corporation Tax Law as herein enacted to any period, any reference in either such law to another provision of the Bank and Corporation Tax Law of 1954 or the Bank and Corporation Tax Law as herein enacted which is not then applicable to such period shall be deemed a reference to the corresponding provision of the other law which is then applicable to such period.

(Added by Stats. 1955, Ch. 938.)

23055.
  

Any provision of this part which refers to the application of any portion of this part to a prior period (or which depends upon the application to a prior period of any portion of this part) shall, when appropriate and consistent with the purpose of such provision, be deemed to refer to (or depend upon the application of) the corresponding provision of Part 11 of Division 2 of the Revenue and Taxation Code or of any other corporation tax laws as were applicable to the prior period.

(Amended by Stats. 2001, Ch. 543, Sec. 25. Effective January 1, 2002.)

23056.
  

Division, part, chapter, article, section and subsection headings contained herein shall not be deemed to govern, limit, modify, or in any manner affect the scope, meaning, or intent of the provisions of this code.

(Added by Stats. 1955, Ch. 938.)

23057.
  

If any chapter, article, section, subsection, clause, sentence or phrase of this part which is reasonably separable from the remaining portions of this part, or the application thereof to any person, taxpayer or circumstance, is for any reason determined unconstitutional, such determination shall not affect the remainder of this part, nor, will the application of any such provision to other persons, taxpayers or circumstances, be affected thereby.

(Added by Stats. 1955, Ch. 938.)

23058.
  

Unless otherwise specifically provided therein, the provisions of any act:

(a) That affect the imposition or computation of tax, penalties, or the allowance of credits against the tax, shall be applied to taxable years beginning on or after January 1 of the year in which the act takes effect.

(b) That otherwise affect the provisions of this part shall be applied on and after the date the act takes effect.

(Amended by Stats. 2000, Ch. 862, Sec. 44. Effective January 1, 2001.)

23059.
  

Unless expressly otherwise provided in this part, any notice may be given by first-class mail postage prepaid.

(Added by Stats. 1972, Ch. 1237.)

23060.
  

Provisions in other codes or General Law Statutes that are related to this part include all of the following:

(a) Chapter 20.6 (commencing with Section 9891) of Division 3 of the Business and Professions Code, relating to tax preparers.

(b) Sections 1502, 2204 to 2206, inclusive, 6210, 6810, 8210, and 8810 of the Corporations Code, relating to the corporation officer statement penalty.

(c) Section 2104 of the Corporations Code, that prevents the application of any provision of this part against any foreign lending institution whose activities in this state are limited to those described in subdivision (d) of Section 191 of the Corporations Code.

(d) Sections 15700 to 15702.1, inclusive, of the Government Code, relating to the Franchise Tax Board.

(e) Part 10 (commencing with Section 17001), relating to the Personal Income Tax Law.

(f) Part 10.2 (commencing with Section 18401), relating to the Administration of Franchise and Income Taxes.

(g) Part 10.7 (commencing with Section 21001), relating to the Taxpayers’ Bill of Rights.

(h) Part 18 (commencing with Section 38001), relating to the Multistate Tax Compact.

(Amended by Stats. 2006, Ch. 538, Sec. 625. Effective January 1, 2007.)

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