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 6. Gross Income [24271 - 24330]

  ( Chapter 6 added by Stats. 1955, Ch. 938. )

ARTICLE 2. Exclusions [24301 - 24315]
  ( Article 2 added by Stats. 1955, Ch. 938. )

24301.
  

In computing the tax imposed under this part, “gross income” does not include any of the items specified in this article.

(Repealed and added by Stats. 1955, Ch. 938.)

24302.
  

Amounts received other than amounts paid by reason of the death of the insured under life insurance, endowment or annuity contracts, either during the term or at maturity or upon surrender of the contract, equal to the total amount of premiums paid thereon. In the case of a transfer for a valuable consideration by assignment or otherwise, of a life insurance, endowment or annuity contract or any interest therein, only the actual value of such consideration and the amount of the premiums and other sums subsequently paid by the transferee shall be excluded from gross income under Section 24305 or this section. The preceding sentence shall not apply in the case of such a transfer if such contract or interest therein has a basis for determining gain or loss in the hands of a transferee determined in whole or in part by reference to such basis of such contract or interest therein in the hands of the transferor or to a corporation in which the insured is a shareholder or officer.

(Amended by Stats. 1963, Ch. 1028.)

24303.
  

Any grant made in any taxable year by the Secretary of the Treasury under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5) to a person that places in service specified energy property shall not be includable in the gross income or the alternative minimum taxable income of the taxpayer, but shall be taken into account in determining the basis of the property to which that grant relates, except that the basis of that property shall be reduced using rules prescribed under Section 50(c) of the Internal Revenue Code in the same manner as a credit allowed under Section 48(a) of the Internal Revenue Code, and adjusted in accordance with rules applied by the Secretary of the Treasury under Section 1603(f) of the American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5).

(Added by Stats. 2010, Ch. 14, Sec. 64. (SB 401) Effective January 1, 2011.)

24305.
  

(a) Except as provided in subdivisions (b) and (c), amounts received under life insurance policies and contracts paid by reason of the death of the insured but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income.

(b) Proceeds of flexible premium contracts payable by reason of death shall be excluded from gross income only in accordance with the provisions of Section 101(f) of the Internal Revenue Code.

(c) (1) In the case of an employer-owned life insurance contract, any amount received by reason of death of an insured shall be excluded from gross income only in accordance with the provisions of Section 101(j) of the Internal Revenue Code.

(2) Section 101(j) of the Internal Revenue Code, relating to treatment of certain employer-owned life insurance contracts, shall apply in accordance with the provisions of Section 863(d) of the Pension Protection Act of 2006 (Public Law 109-280), relating to effective dates, except that the phrase “January 1, 2010,” shall be substituted for “the date of the enactment of this Act” contained therein.

(Amended by Stats. 2010, Ch. 14, Sec. 65. (SB 401) Effective January 1, 2011.)

24306.
  

(a) For purposes of this section, the following terms have the following meanings, as provided in the Golden State Scholarshare Trust Act (Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code):

(1) “Beneficiary” has the meaning set forth in subdivision (c) of Section 69980 of the Education Code.

(2) “Benefit” has the meaning set forth in subdivision (d) of Section 69980 of the Education Code.

(3) “Participant” has the meaning set forth in subdivision (h) of Section 69980 of the Education Code.

(4) “Participation agreement” has the meaning set forth in subdivision (i) of Section 69980 of the Education Code.

(5) “Scholarshare trust” has the meaning set forth in subdivision (f) of Section 69980 of the Education Code.

(b) For taxable years beginning on or after January 1, 1998, and before January 1, 2002, except as otherwise provided in subdivision (c), gross income of a participant shall not include any of the following:

(1) Any earnings under a Scholarshare trust, or a participation agreement, as provided in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code.

(2) Contributions to the Scholarshare trust on behalf of a beneficiary shall not be includable as gross income of that beneficiary.

(c) For taxable years beginning on or after January 1, 1998, and before January 1, 2002:

(1) Any distribution under a Scholarshare trust participation agreement shall be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code, as modified by Section 24272.2, to the extent not excluded from gross income under any other provision of this part. For purposes of applying Section 72 of the Internal Revenue Code, the following apply:

(A) All Scholarshare trust accounts of which an individual is a beneficiary shall be treated as one account, except as otherwise provided.

(B) All distributions during a taxable year shall be treated as one distribution.

(C) The value of the participation agreement, income on the participation agreement, and investment in the participation agreement shall be computed as of the close of the calendar year in which the taxable year begins.

(2) A contribution by a for-profit or nonprofit entity, or by a state or local government agency, for the benefit of an owner or employee of that entity or a beneficiary whom the owner or employee has the power to designate, including the owner or employee’s minor children, shall be included in the gross income of that owner or employee in the year the contribution is made.

(3) For purposes of this subdivision, “distribution” includes any benefit furnished to a beneficiary under a participation agreement, as provided in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code.

(4) (A) Paragraph (1) shall not apply to that portion of any distribution that, within 60 days of distribution, is transferred to the credit of another beneficiary under the Scholarshare trust who is a “member of the family,” as that term is used in Section 529(e)(2) of the Internal Revenue Code, as amended by Section 211 of the Taxpayer Relief Act of 1997 (Public Law 105-34), of the former beneficiary of that Scholarshare trust.

(B) Any change in the beneficiary of an interest in the Scholarshare trust shall not be treated as a distribution for purposes of paragraph (1) if the new beneficiary is a “member of the family,” as that term is used in Section 2032A(e)(2) of the Internal Revenue Code, of the former beneficiary of that Scholarshare trust.

(d) For taxable years beginning on or after January 1, 2002, Sections 529(c) and 529(e) of the Internal Revenue Code shall apply except as otherwise provided in Part 10 (commencing with Section 17001) and this part.

(Amended by Stats. 2005, Ch. 691, Sec. 59. Effective October 7, 2005.)

24307.
  

(a) Section 108 of the Internal Revenue Code, relating to income from discharge of indebtedness, shall apply, except as otherwise provided.

(b) Section 108(b)(2)(B) of the Internal Revenue Code, relating to general business credit, is modified by substituting “this part” in lieu of “Section 38 (relating to general business credit).”

(c) Section 108(b)(2)(G) of the Internal Revenue Code, relating to foreign tax credit carryovers, shall not apply.

(d) Section 108(b)(3)(B) of the Internal Revenue Code, relating to credit carryover reduction, is modified by substituting “11.1 cents” in lieu of “331/3 cents” in each place in which it appears. In the case where more than one credit is allowable under this part, the credits shall be reduced on a pro rata basis.

(e) Section 108(g)(3)(B) of the Internal Revenue Code, relating to adjusted tax attributes, is modified by substituting “$9” in lieu of “$3.”

(f) (1) The amendments to Section 108 of the Internal Revenue Code made by Section 13150 of the Revenue Reconciliation Act of 1993 (Public Law 103-66), relating to exclusion from gross income for income from discharge of qualified real property business indebtedness, shall apply to discharges occurring on or after January 1, 1996, in taxable years beginning on or after January 1, 1996.

(2) If a taxpayer makes an election for federal income tax purposes under Section 108(c) of the Internal Revenue Code, relating to treatment of discharge of qualified real property business indebtedness, a separate election shall not be allowed under paragraph (3) of subdivision (e) of Section 23051.5 and the federal election shall be binding for purposes of this part.

(3) If a taxpayer has not made an election for federal income tax purposes under Section 108(c) of the Internal Revenue Code, relating to treatment of discharge of qualified real property business indebtedness, then the taxpayer shall not be allowed to make that election for purposes of this part.

(g) The amendments to Section 108 of the Internal Revenue Code made by Section 13226 of the Revenue Reconciliation Act of 1993 (Public Law 103-66), relating to modifications of discharge of indebtedness provisions, shall apply to discharges occurring on or after January 1, 1996, in taxable years beginning on or after January 1, 1996.

(h) The amendments made to Section 108(d)(7)(A) of the Internal Revenue Code, relating to certain provisions to be applied at the corporate level by Section 402 of the Job Creation and Worker Assistance Act of 2002 (Public Law 107-147), shall apply to discharges of indebtedness after December 31, 2001, in taxable years ending after that date. This subdivision shall not apply to any discharge of indebtedness made before March 1, 2002, pursuant to a plan of reorganization filed with a bankruptcy court on or before October 11, 2001.

(i) Section 108(i) of the Internal Revenue Code, relating to deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument, shall not apply.

(Amended by Stats. 2015, Ch. 359, Sec. 30. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)

24308.
  

Section 1078 of Public Law 98-369 (Tax Reform Act of 1984), relating to exclusions from gross income of payments from the United States Forest Service as a result of restricting motorized traffic in the Boundary Waters Canoe Area, shall apply, with the following exceptions:

(a) Section 1078(f)(2) of that act shall not be applicable.

(b) This section shall be effective only for payments made in taxable years beginning on or after January 1, 1985.

(Amended by Stats. 2000, Ch. 862, Sec. 119. Effective January 1, 2001.)

24308.1.
  

Gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by the California Energy Commission, the Public Utility Commission, or a local publicly owned electric utility, as defined in subdivision (d) of Section 9604 of the Public Utilities Code, for any expenses paid or incurred by a taxpayer for the purchase or installation of any of the following devices:

(a) A thermal system as defined in Section 25600 of the Public Resources Code.

(b) A solar system as defined in Section 25600 of the Public Resources Code.

(c) A wind energy system device that produces electricity.

(d) A fuel cell generating system, as described in the California Energy Commission’s Emerging Renewable Resources Account Guidebook, that produces electricity.

(Added by Stats. 2002, Ch. 843, Sec. 2. Effective September 24, 2002.)

24308.2.
  

(a) For taxable years beginning on or after January 1, 2014, and before January 1, 2019, gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by a local water agency or supplier for participation in a turf removal water conservation program.

(b) This section shall remain in effect only until December 1, 2019, and as of that date is repealed.

(Added by Stats. 2014, Ch. 738, Sec. 2. (AB 2434) Effective September 28, 2014. Repealed as of December 1, 2019, by its own provisions.)

24308.5.
  

(a) Gross income does not include cost-share payments received by forest landowners from the Department of Forestry and Fire Protection pursuant to the California Forest Improvement Act of 1978 (Part 2.5 (commencing with Section 4790) of Division 1 of the Public Resources Code) or from the United States Department of Agriculture, Forest Service, under the Forest Stewardship Program and the Stewardship Incentives Program, pursuant to the Cooperative Forestry Assistance Act, as amended (Public Law 101-624).

(b) The amount of any cost-share payment excluded pursuant to subdivision (a) shall not be considered with regard to either of the following:

(1) Determining the basis of property acquired or improved.

(2) Computing any allowable deduction to which the taxpayer may otherwise be entitled.

(Added by Stats. 1994, Ch. 22, Sec. 3. Effective March 25, 1994.)

24308.7.
  

(a) For each taxable year beginning on or after July 1, 2015, gross income does not include an amount received as a loan forgiveness, grant, credit, rebate, voucher, or other financial incentive issued by the California Residential Mitigation Program or the California Earthquake Authority to assist a residential property owner or occupant with expenses paid, or obligations incurred, for earthquake loss mitigation.

(b) For the purposes of this section, “earthquake loss mitigation” means an activity that reduces seismic risks to a residential structure or its contents, or both. For purposes of structural seismic risk mitigation, a residential structure is either of the following:

(1) A structure described in subdivision (a) of Section 10087 of the Insurance Code.

(2) A residential building of not fewer than 2, but not more than 10, dwelling units.

(Amended by Stats. 2015, Ch. 323, Sec. 11. (SB 102) Effective September 22, 2015.)

24308.8.
  

(a) Gross income does not include any qualified amount received by a qualified taxpayer.

(b) For purposes of this section:

(1) The term “qualified amount” includes any of the following:

(A) Amounts received by a qualified taxpayer during the remediation of the Carousel Housing Tract, located in Carson, California, from the Shell Oil Company for costs associated with temporary accommodations and relocation pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046. These costs include all amounts paid under the Temporary Living Assistance section of the Revised Remedial Action Plan, Relocation Plan, developed by URS Corporation for Shell Oil Products U.S., dated September 19, 2014.

(B) Amounts received by a qualified taxpayer paid under the Optional Real Estate Program of the Revised Remedial Action Plan, Relocation Plan, developed by URS Corporation for Shell Oil Products U.S., dated September 19, 2014.

(C) Any amounts received by a qualified taxpayer from a settlement arising out of the investigation, cleanup, or abatement of the waste discharged at the former Kast Property Tank Farm facility pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046.

(2) The term “qualified amount” does not include any reimbursed amounts representing any expenses related to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046 that were deducted under this part.

(c) For purposes of this section, “qualified taxpayer” means any taxpayer that currently owns or previously owned real property located within the Carousel Housing Tract, located in Carson, California, who received amounts, incurred expenses, or received amounts from a settlement arising out of or pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046.

(d) The payor under the Revised Remedial Action Plan, Relocation Plan, developed by URS Corporation for Shell Oil Products U.S., dated September 19, 2014, and the payor or payors of the settlement proceeds arising out of or pursuant to California Regional Water Quality Control Board, Los Angeles Region Order R4-2011-0046, shall provide, upon request by the Franchise Tax Board, an annual list of names, addresses, payment dates, and amounts paid to qualified taxpayers.

(e) (1) This section shall apply to taxable years beginning before, on, or after the effective date of the act adding this section.

(2) If the credit or refund of any overpayment of tax resulting from the application of this section to a period before the effective date of this section is prevented as of such date by the operation of any law or rule of law, including res judicata, such credit or refund may nevertheless be allowed or made if the claim therefor is filed before the close of the one-year period beginning on the effective date of the act adding this section.

(Added by Stats. 2018, Ch. 887, Sec. 3. (SB 343) Effective September 28, 2018.)

24309.
  

Gross income does not include income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee.

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

24309.5.
  

Section 110 of the Internal Revenue Code, relating to qualified lessee construction allowances for short-term leases, shall apply, except as otherwise provided.

(a) Section 110(b) of the Internal Revenue Code is modified by substituting the phrase “(including for purposes of paragraph (2) of subdivision (e) of Section 24349)” for the phrase “(including for purposes of Section 168(i)(8)(B).”

(b) Section 110(c)(2) of the Internal Revenue Code is modified by substituting the phrase “(as determined under the rules of paragraph (3) of subdivision (e) of Section 24349)” for the phrase “(as determined under the rules of Section 168(i)(3)).”

(Added by Stats. 1998, Ch. 322, Sec. 78. Effective August 20, 1998.)

24310.
  

(a) Section 111 of the Internal Revenue Code, relating to recovery of tax benefit items, shall apply, except as otherwise provided.

(b) Sections 111(b) and 111(c) of the Internal Revenue Code, relating to credits and treatment of credit carryovers, shall be applicable with respect to credits allowable under this part.

(Amended by Stats. 1991, Ch. 117, Sec. 58. Effective July 16, 1991.)

24314.
  

The following phrase (or its substantial equivalent) in other codes or statutes does not exempt the gain or loss from the sale or transfer of bonds from the provisions of this part:

“The issuance, transfer and interest income earned on any bonds issued by an agency (state or local) under this article (chapter, section, etc.) is exempt from taxation of every kind by any state or local entity.”

(Added by Stats. 1986, Ch. 317, Sec. 2. Effective July 15, 1986.)

24315.
  

Gross income does not include any amount received for empty beverage containers by a consumer from a recycling center or recycling location as the recycling value, as defined in Chapter 2 (commencing with Section 14502) of Division 12.1 of the Public Resources Code.

(Added by Stats. 1986, Ch. 1290, Sec. 5. Effective September 29, 1986.)

RTCRevenue and Taxation Code - RTC2