17001. This part is known and may be cited as the "Personal Income
Tax Law."
17002. Except where the context otherwise requires, the definitions
given in this chapter govern the construction of this part.
17003. "Franchise Tax Board" means the Franchise Tax Board
described in Part 10, Division 3, Title 2 of the Government Code.
"Board" means the State Board of Equalization.
17004. "Taxpayer" includes any individual, fiduciary, estate, or
trust subject to any tax imposed by this part or any partnership.
17005. "Individual" means a natural person.
17006. "Fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any person, whether
individual or corporate, acting in any fiduciary capacity for any
person, estate or trust.
17007. "Person" includes individuals, fiduciaries, partnerships,
limited liability companies, and corporations.
17008. "Partnership" includes a syndicate, group, pool, joint
venture, or other unincorporated organization, through or by means of
which any business, financial operation, or venture is carried on,
and which is not, within the meaning of this part, a trust or estate
or a corporation.
"Partner" includes a member in such a syndicate, group, pool,
joint venture, or organization.
A person shall be recognized as a partner for income purposes if
he owns a capital interest in a partnership in which capital is a
material income-producing factor, whether or not such interest was
derived by purchase or gift from any other person.
17008.5. Section 7704 of the Internal Revenue Code, relating to
certain publicly traded partnerships treated as corporations, shall
apply, except as otherwise provided.
(a) Section 7704(a) of the Internal Revenue Code shall not apply
to an electing 1987 partnership, as defined in Section 23038.5, which
is subject to the tax imposed by Section 23038.5.
(b) The amendment made to this section by Chapter 611 of the
Statutes of 1997 shall apply to taxable years beginning on or after
January 1, 1998.
(c) Section 7704(d) of the Internal Revenue Code, relating to
qualifying income, shall apply, except as otherwise provided, without
regard to taxable year to the same extent as applicable for federal
income tax purposes.
(d) The amendment to this section by the act amending this
subdivision shall apply to taxable years beginning on or after
January 1, 2010.
17009. "Corporation" includes joint stock companies or associations
(including nonprofit associations that perform services, borrow
money or own property, and business trusts or other business entities
taxable as a corporation under regulations of the Franchise Tax
Board) and insurance companies. "Corporation" also includes a trust
organized and operated exclusively for purposes contained in Section
23701d.
17010. "Taxable year" means the calendar year or the fiscal year
upon the basis of which the taxable income is computed under this
part. If no fiscal year has been established, "taxable year" means
the calendar year.
"Taxable year" means, in the case of a return made for a
fractional part of a year under this part or under regulations
prescribed by the Franchise Tax Board, the period for which the
return is made.
17011. "Fiscal year" means an accounting period of 12 months ending
on the last day of any month other than December.
17012. "Paid or incurred" and "paid or accrued" shall be construed
according to the method of accounting upon the basis of which the
taxable income is computed under this part.
17014. (a) "Resident" includes:
(1) Every individual who is in this state for other than a
temporary or transitory purpose.
(2) Every individual domiciled in this state who is outside the
state for a temporary or transitory purpose.
(b) Any individual (and spouse) who is domiciled in this state
shall be considered outside this state for a temporary or transitory
purpose while that individual:
(1) Holds an elective office of the government of the United
States, or
(2) Is employed on the staff of an elective officer in the
legislative branch of the government of the United States as
described in paragraph (1), or
(3) Holds an appointive office in the executive branch of the
government of the United States (other than the armed forces of the
United States or career appointees in the United States Foreign
Service) if the appointment to that office was by the President of
the United States and subject to confirmation by the Senate of the
United States and whose tenure of office is at the pleasure of the
President of the United States.
(c) Any individual who is a resident of this state continues to be
a resident even though temporarily absent from the state.
(d) For any taxable year beginning on or after January 1, 1994,
any individual domiciled in this state who is absent from the state
for an uninterrupted period of at least 546 consecutive days under an
employment-related contract shall be considered outside this state
for other than a temporary or transitory purpose.
(1) For purposes of this subdivision, returns to this state,
totaling in the aggregate not more than 45 days during a taxable
year, shall be disregarded.
(2) This subdivision shall not apply to any individual, including
any spouse described in paragraph (3), who has income from stocks,
bonds, notes, or other intangible personal property in excess of two
hundred thousand dollars ($200,000) in any taxable year in which the
employment-related contract is in effect. In the case of an
individual who is married, this paragraph shall be applied to the
income of each spouse separately.
(3) Any spouse who is absent from the state for an uninterrupted
period of at least 546 consecutive days to accompany a spouse who,
under this subdivision, is considered outside this state for other
than a temporary or transitory purpose shall, for purposes of this
subdivision, also be considered outside this state for other than a
temporary or transitory purpose.
(4) This subdivision shall not apply to any individual if the
principal purpose of the individual's absence from this state is to
avoid any tax imposed by this part.
17015. "Nonresident" means every individual other than a resident.
17015.5. For purposes of Part 10.2 (commencing with Section 18401)
and this part, the term "part-year resident" means a taxpayer who
meets both of the following conditions during the same taxable year.
(a) Is a resident of this state during a portion of the taxable
year.
(b) Is a nonresident of this state during a portion of the taxable
year.
17016. Every individual who spends in the aggregate more than nine
months of the taxable year within this State shall be presumed to be
a resident. The presumption may be overcome by satisfactory evidence
that the individual is in the State for a temporary or transitory
purpose.
17017. "United States," when used in a geographical sense, includes
the states, the District of Columbia, and the possessions of the
United States.
17018. "State" includes the District of Columbia, and the
possessions of the United States.
17019. "Foreign country" means any jurisdiction other than one
embraced within the United States.
17020. "Trade or business" includes the performance of the
functions of a public office.
17020.1. 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.
17020.2. 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.
17020.3. 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.
17020.4. 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.
17020.5. 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.
17020.6. For purposes of this part:
(a) Section 7702 of the Internal Revenue Code, relating to life
insurance contracts, 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.
17020.7. 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.
17020.8. Section 7701(e) of the Internal Revenue Code, relating to
treatment of certain contracts for providing services, etc., shall
apply, except as otherwise provided.
17020.9. 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.
17020.11. Section 7701(h) of the Internal Revenue Code, relating to
motor vehicle operating leases, applies, except as otherwise
provided.
17020.12. Section 7701(a)(20) of the Internal Revenue Code,
relating to definition of "employee," shall apply, except as
otherwise provided.
17020.13. Section 7701(k) of the Internal Revenue Code, relating to
treatment of certain amounts paid to charity, shall apply, except as
otherwise provided.
17020.15. (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.
17021. As used in this part, if the husband and wife therein
referred to are divorced, wherever appropriate to the meaning of this
part, the term "wife" shall be read "former wife" and the term
"husband" shall be read "former husband." If the payments described
in this part are made by or on behalf of the wife or former wife to
the husband or former husband instead of vice versa, wherever
appropriate to the meaning of this part, the term "husband" shall be
read "wife" and the term "wife" shall be read "husband."
17021.5. Section 7703 of the Internal Revenue Code, relating to
determination of marital status, shall apply, except as otherwise
provided.
17021.7. (a) (1) For purposes of this part, the domestic partner of
the taxpayer shall be treated as the spouse of the taxpayer for
purposes of applying only Sections 105(b), 106(a), 162(l), 162(n),
and 213(a) of the Internal Revenue Code and for purposes of
determining whether an individual is the taxpayer's "dependent" or
"member of their family" as these terms are used in those sections.
(2) This subdivision shall apply to each taxable year beginning on
or after January 1, 2002.
(b) (1) Except as otherwise provided, the domestic partner or
former domestic partner of a taxpayer shall be treated as the spouse
or former spouse of that taxpayer for purposes of applying provisions
of this part, Part 10.2 (commencing with Section 18401), Part 10.7
(commencing with Section 21001), and Part 11 (commencing with Section
23001), and for purposes of applying provisions of the Internal
Revenue Code that are applicable for purposes of this part, Part
10.2, Part 10.7, or Part 11.
(2) A domestic partner shall not be treated as the spouse of a
taxpayer as required by paragraph (1) in the following circumstances:
(A) Where the treatment would result in the classification of a
business entity for purposes of this part, Part 10.2, or Part 11 that
would be different than the classification of that business entity
for federal income tax purposes.
(B) Where the treatment required by paragraph (1) would result in
disqualification for federal income tax purposes of a plan that
otherwise qualifies under Section 401(a) of the Internal Revenue
Code.
(C) Where the treatment would result in a tax-favored account that
would not be qualified as a tax-favored account for federal income
tax purposes. For purposes of this subparagraph, "tax-favored account"
means an individual account, plan, or arrangement that is exempt
from income tax under Chapter 1 of the Internal Revenue Code,
including an individual retirement account, as described in Section
408 of the Internal Revenue Code, an Archer MSA, as described in
Section 220 of the Internal Revenue Code, a qualified tuition
program, as described in Section 529 of the Internal Revenue Code,
and a Coverdell education savings account, as described in Section
530 of the Internal Revenue Code.
(3) The amendments made by the act adding this subdivision shall
be operative for each taxable year beginning on or after January 1,
2007.
(c) For purposes of this section, the term "domestic partner"
means an individual partner in a domestic partner relationship within
the meaning of Section 297 of the Family Code.
17022. The term "military or naval forces of the United States" and
the term "armed forces of the United States" each includes all
regular and reserve components of the uniformed services which are
subject to the jurisdicition of the Secretary of Defense, the
Secretary of the Army, the Secretary of the Navy, or the Secretary of
the Air Force, and each term also includes the Coast Guard. The
members of such forces include commissioned officers and personnel
below the grade of commissioned officers in such forces.
17023. The term "counsel for the Franchise Tax Board," and
"Franchise Tax Counsel" as used in this part, 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.
17024. The term "Personal Income Tax Law of 1954," means Part 10 of
Division 2 of the Revenue and Taxation Code as enacted by the
Statutes 1943, Chapter 659, and as subsequently amended, including
all amendments enacted prior to January 1, 1955.
17024.5. (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
follows:
Specified Date
of
Internal
Revenue
Taxable Code
Year Sections
(A) For taxable years
beginning on or after
January 1, 1983, and on or
before December
31, 1983....................... January 15, 1983
(B) For taxable years
beginning on or after
January 1, 1984, and on or
before December
31, 1984....................... January 1, 1984
(C) For taxable years
beginning on or after
January 1, 1985, and on or
before December
31, 1985....................... January 1, 1985
(D) For taxable years
beginning on or after
January 1, 1986, and on or
before December
31, 1986....................... January 1, 1986
(E) For taxable years
beginning on or after
January 1, 1987, and on
or before December
31, 1988....................... January 1, 1987
(F) For taxable years
beginning on or after
January 1, 1989, and on or
before December
31, 1989....................... January 1, 1989
(G) For taxable years
beginning on or after
January 1, 1990, and on or
before December
31, 1990....................... January 1, 1990
(H) For taxable years
beginning on or after
January 1, 1991, and on or
before December
31, 1991....................... January 1, 1991
(I) For taxable years
beginning on or after
January 1, 1992, and on or
before December
31, 1992....................... January 1, 1992
(J) For taxable years
beginning on or after
January 1, 1993, and on or
before December
31, 1996....................... January 1, 1993
(K) For taxable years
beginning on or after
January 1, 1997, and on or
before December
31, 1997....................... January 1, 1997
(L) For taxable years
beginning on or after
January 1, 1998, and on or
before December
31, 2001....................... January 1, 1998
(M) For taxable years
beginning on or after
January 1, 2002, and on
or before December
31, 2004....................... January 1, 2001
(N) For taxable years
beginning on or after
January 1, 2005, and on or
before December
31, 2009....................... January 1, 2005
(O) For taxable years
beginning on or after
January 1, 2010................ January 1, 2009
(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
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 any
provision of 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) Except as provided in Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2, an electing small business
corporation, as defined in Section 1361(b) of the Internal Revenue
Code.
(2) Domestic international sales corporations (DISC), as defined
in Section 992(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) Section 911 of the Internal Revenue Code, relating to citizens
or residents of the United States living abroad.
(9) A foreign corporation, except that Section 367 of the Internal
Revenue Code shall be applicable.
(10) Federal tax credits and carryovers of federal tax credits.
(11) Nonresident aliens.
(12) Deduction for personal exemptions, as provided in Section 151
of the Internal Revenue Code.
(13) The tax on generation-skipping transfers imposed by Section
2601 of the Internal Revenue Code.
(14) The tax, relating to estates, imposed by Section 2001 or 2101
of the Internal Revenue Code.
(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 each taxable year beginning on or 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
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 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 at the time and in the manner 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 11 (commencing with Section
23001), that taxpayer is deemed to have made the same election for
purposes of the tax imposed by this part, Part 10.2 (commencing with
Section 18401), and Part 11 (commencing with Section 23001), 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 10.2 (commencing with Section 18401),
or Part 11 (commencing with Section 23001), 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 11 (commencing with Section 23001),
that taxpayer may not make a separate California election for
purposes of this part, Part 10.2 (commencing with Section 18401), or
Part 11 (commencing with Section 23001), unless that separate
election is expressly authorized by this part, Part 10.2 (commencing
with Section 18401), or Part 11 (commencing with Section 23001), 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 the regulation issued by
"the secretary" authorizing an election for federal income tax
purposes apply for purposes of this part, Part 10.2 (commencing with
Section 18401) or Part 11 (commencing with Section 23001).
(f) Whenever this part allows or requires a taxpayer to file an
application or seek consent, the rules set forth in subdivision (e)
shall be applicable with respect 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) References to "adjusted gross income" shall mean the amount
computed in accordance with Section 17072, except as provided in
paragraph (2).
(2) (A) Except as provided in subparagraph (B), references to
"adjusted gross income" for purposes of computing limitations based
upon adjusted gross income, shall mean the amount required to be
shown as adjusted gross income on the federal tax return for the same
taxable year.
(B) In the case of registered domestic partners and former
registered domestic partners, adjusted gross income, for the purposes
of computing limitations based upon adjusted gross income, shall
mean the adjusted gross income on a federal tax return computed as if
the registered domestic partner or former registered domestic
partner was treated as a spouse or former spouse, respectively, for
federal income tax purposes, and used the same filing status that was
used on the state tax return for the same taxable year.
(3) Any reference to "subtitle" 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) 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.
17026. This part applies to the taxable income of taxpayers
received or accrued on or after January 1, l935.
17028. 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.
17029. The repeal of any provision of the Personal Income 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.
17029.5. (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 taxable 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.
17030. For the purpose of applying the Personal Income Tax Law of
1954 or the Personal Income Tax Law as herein enacted to any period,
any reference in either such law to another provision of the Personal
Income Tax Law of 1954 or the Personal Income 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.
17031. 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 10 of Division 2 of the Revenue and
Taxation Code or of such other Personal Income Tax Laws as were
applicable to the prior period.
17032. 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 part.
17033. 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.
17034. Unless otherwise specifically provided therein, the
provisions of any act:
(a) That affect the imposition or computation of taxes, additions
to 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.
17035. The term "withholding agent" means any person required to
deduct and withhold any tax under Section 18662.
17036. Unless expressly otherwise provided in this part, any notice
may be given by first class mail postage prepaid.
17037. Provisions in other codes or general law statutes which 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) Part 10.2 (commencing with Section 18401), relating to the
administration of franchise and income tax laws.
(c) Part 10.5 (commencing with Section 20501), relating to the
Property Tax Assistance and Postponement Law.
(d) Part 10.7 (commencing with Section 21001), relating to the
Taxpayers' Bill of Rights.
(e) Part 11 (commencing with Section 23001), relating to the
Corporation Tax Law.
(f) Sections 15700 to 15702.1, inclusive, of the Government Code,
relating to the Franchise Tax Board.
17038. (a) For purposes of this part, unless expressly otherwise
provided, for taxable years beginning before January 1, 1984,
references to the California Consumer Price Index shall mean the
California Consumer Price Index for All Urban Consumers (old series).
(b) For taxable years beginning on or after January 1, 1984,
references to the California Consumer Price Index shall mean the
California Consumer Price Index for All Urban Consumers as modified
for rental equivalence homeownership (new series).
17039. (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560. Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any. Credits shall
be allowed against "net tax" in the following order:
(1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain
refundable provisions, except for those that are allowed to reduce
"net tax" below the tentative minimum tax, as defined by Section
17062.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
(5) Credits that are allowed to reduce "net tax" below the
tentative minimum tax, as defined by Section 17062.
(6) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(7) Credits that contain refundable provisions but do not contain
carryover provisions.
The order within each paragraph shall be determined by the
Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) and 19002
(relating to tax withholding), the credits provided in those sections
shall be allowed in the order provided in paragraph (6) of
subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits:
(A) The credit allowed by Section 17052.2 (relating to teacher
retention tax credit).
(B) The credit allowed by former Section 17052.4 (relating to
solar energy).
(C) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on January 1, 1987).
(D) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on December 1, 1994).
(E) The credit allowed by Section 17052.12 (relating to research
expenses).
(F) The credit allowed by former Section 17052.13 (relating to
sales and use tax credit).
(G) The credit allowed by former Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit).
(H) The credit allowed by Section 17052.25 (relating to the
adoption costs credit).
(I) The credit allowed by Section 17053.5 (relating to the renter'
s credit).
(J) The credit allowed by former Section 17053.8 (relating to
enterprise zone hiring credit).
(K) The credit allowed by former Section 17053.10 (relating to Los
Angeles Revitalization Zone hiring credit).
(L) The credit allowed by former Section 17053.11 (relating to
program area hiring credit).
(M) For each taxable year beginning on or after January 1, 1994,
the credit allowed by former Section 17053.17 (relating to Los
Angeles Revitalization Zone hiring credit).
(N) The credit allowed by Section 17053.33 (relating to targeted
tax area sales or use tax credit).
(O) The credit allowed by Section 17053.34 (relating to targeted
tax area hiring credit).
(P) The credit allowed by Section 17053.49 (relating to qualified
property).
(Q) The credit allowed by Section 17053.70 (relating to enterprise
zone sales or use tax credit).
(R) The credit allowed by Section 17053.74 (relating to enterprise
zone hiring credit).
(S) The credit allowed by Section 17054 (relating to credits for
personal exemption).
(T) The credit allowed by Section 17054.5 (relating to the credits
for a qualified joint custody head of household and a qualified
taxpayer with a dependent parent).
(U) The credit allowed by Section 17054.7 (relating to the credit
for a senior head of household).
(V) The credit allowed by former Section 17057 (relating to
clinical testing expenses).
(W) The credit allowed by Section 17058 (relating to low-income
housing).
(X) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(Y) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(Z) The credit allowed by Section 19002 (relating to tax
withholding).
(2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
(3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
(g) (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 shall be
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 "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
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 17062), determined
by excluding the income attributable to that disregarded business
entity. No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), 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 (c) and
(d).
(h) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-through
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-through
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 the credit is operative.
(3) This subdivision shall apply to credits that become
inoperative on or after the operative date of the act adding this
subdivision.
17039.1. Notwithstanding Section 17039 or any other provision in
this part to the contrary, the credit allowed by Section 17053.30
(relating to natural heritage) may reduce the tax imposed under
Section 17041 or 17048 plus the tax imposed under Section 17504
(relating to the separate tax lump-sum distributions) below the
tentative minimum tax, as defined by Section 17062, but only after
allowance of the credit allowed by Section 17063.
17039.2. (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 business credits otherwise
allowable under any credit under any provision of Chapter 2
(commencing with Section 17041), including the carryover of any
business credit under a former provision of that chapter, for the
taxable year shall not reduce the "net tax" (as defined in Section
17039) below the applicable amount.
(b) For purposes of this section, "business credit" means a credit
allowable under any provision of Chapter 2 (commencing with Section
17041) other than the following credits:
(1) The credit allowed by Section 17052.6 (relating to credit for
household and dependent care).
(2) The credit allowed by Section 17052.25 (relating to credit for
adoption costs).
(3) The credit allowed by Section 17053.5 (relating to renter's
tax credit).
(4) The credit allowed by Section 17053.80 (relating to full time
employment hiring credit).
(5) The credit allowed by Section 17054 (relating to credit for
personal exemption).
(6) The credit allowed by Section 17054.5 (relating to credit for
qualified joint custody head of household and a qualified taxpayer
with a dependent parent).
(7) The credit allowed by Section 17054.7 (relating to credit for
senior head of household).
(8) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(c) For purposes of this section, the "applicable amount" shall be
equal to 50 percent of the "net tax" (as defined in Section 17039)
before application of any credits.
(d) The amount of any credit otherwise allowable for the taxable
year under Section 17039 that is not allowed due to 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) Notwithstanding anything to the contrary in this part or Part
10.2 (commencing with Section 18401) the credits listed in
subdivision (b) shall be required to be applied before any business
credits, as limited by subdivision (a), are applied.
(g) The provisions of this section shall 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 subdivision,
business income means:
(1) Income from a trade or business, whether conducted by the
taxpayer or by a pasthrough entity owned directly or indirectly by
the taxpayer. For purposes of this paragraph, the term "passthrough
entity" means a partnership or an "S" corporation.
(2) Income from rental activity.
(3) Income attributable to a farming business.
17001. This part is known and may be cited as the "Personal Income
Tax Law."
17002. Except where the context otherwise requires, the definitions
given in this chapter govern the construction of this part.
17003. "Franchise Tax Board" means the Franchise Tax Board
described in Part 10, Division 3, Title 2 of the Government Code.
"Board" means the State Board of Equalization.
17004. "Taxpayer" includes any individual, fiduciary, estate, or
trust subject to any tax imposed by this part or any partnership.
17005. "Individual" means a natural person.
17006. "Fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any person, whether
individual or corporate, acting in any fiduciary capacity for any
person, estate or trust.
17007. "Person" includes individuals, fiduciaries, partnerships,
limited liability companies, and corporations.
17008. "Partnership" includes a syndicate, group, pool, joint
venture, or other unincorporated organization, through or by means of
which any business, financial operation, or venture is carried on,
and which is not, within the meaning of this part, a trust or estate
or a corporation.
"Partner" includes a member in such a syndicate, group, pool,
joint venture, or organization.
A person shall be recognized as a partner for income purposes if
he owns a capital interest in a partnership in which capital is a
material income-producing factor, whether or not such interest was
derived by purchase or gift from any other person.
17008.5. Section 7704 of the Internal Revenue Code, relating to
certain publicly traded partnerships treated as corporations, shall
apply, except as otherwise provided.
(a) Section 7704(a) of the Internal Revenue Code shall not apply
to an electing 1987 partnership, as defined in Section 23038.5, which
is subject to the tax imposed by Section 23038.5.
(b) The amendment made to this section by Chapter 611 of the
Statutes of 1997 shall apply to taxable years beginning on or after
January 1, 1998.
(c) Section 7704(d) of the Internal Revenue Code, relating to
qualifying income, shall apply, except as otherwise provided, without
regard to taxable year to the same extent as applicable for federal
income tax purposes.
(d) The amendment to this section by the act amending this
subdivision shall apply to taxable years beginning on or after
January 1, 2010.
17009. "Corporation" includes joint stock companies or associations
(including nonprofit associations that perform services, borrow
money or own property, and business trusts or other business entities
taxable as a corporation under regulations of the Franchise Tax
Board) and insurance companies. "Corporation" also includes a trust
organized and operated exclusively for purposes contained in Section
23701d.
17010. "Taxable year" means the calendar year or the fiscal year
upon the basis of which the taxable income is computed under this
part. If no fiscal year has been established, "taxable year" means
the calendar year.
"Taxable year" means, in the case of a return made for a
fractional part of a year under this part or under regulations
prescribed by the Franchise Tax Board, the period for which the
return is made.
17011. "Fiscal year" means an accounting period of 12 months ending
on the last day of any month other than December.
17012. "Paid or incurred" and "paid or accrued" shall be construed
according to the method of accounting upon the basis of which the
taxable income is computed under this part.
17014. (a) "Resident" includes:
(1) Every individual who is in this state for other than a
temporary or transitory purpose.
(2) Every individual domiciled in this state who is outside the
state for a temporary or transitory purpose.
(b) Any individual (and spouse) who is domiciled in this state
shall be considered outside this state for a temporary or transitory
purpose while that individual:
(1) Holds an elective office of the government of the United
States, or
(2) Is employed on the staff of an elective officer in the
legislative branch of the government of the United States as
described in paragraph (1), or
(3) Holds an appointive office in the executive branch of the
government of the United States (other than the armed forces of the
United States or career appointees in the United States Foreign
Service) if the appointment to that office was by the President of
the United States and subject to confirmation by the Senate of the
United States and whose tenure of office is at the pleasure of the
President of the United States.
(c) Any individual who is a resident of this state continues to be
a resident even though temporarily absent from the state.
(d) For any taxable year beginning on or after January 1, 1994,
any individual domiciled in this state who is absent from the state
for an uninterrupted period of at least 546 consecutive days under an
employment-related contract shall be considered outside this state
for other than a temporary or transitory purpose.
(1) For purposes of this subdivision, returns to this state,
totaling in the aggregate not more than 45 days during a taxable
year, shall be disregarded.
(2) This subdivision shall not apply to any individual, including
any spouse described in paragraph (3), who has income from stocks,
bonds, notes, or other intangible personal property in excess of two
hundred thousand dollars ($200,000) in any taxable year in which the
employment-related contract is in effect. In the case of an
individual who is married, this paragraph shall be applied to the
income of each spouse separately.
(3) Any spouse who is absent from the state for an uninterrupted
period of at least 546 consecutive days to accompany a spouse who,
under this subdivision, is considered outside this state for other
than a temporary or transitory purpose shall, for purposes of this
subdivision, also be considered outside this state for other than a
temporary or transitory purpose.
(4) This subdivision shall not apply to any individual if the
principal purpose of the individual's absence from this state is to
avoid any tax imposed by this part.
17015. "Nonresident" means every individual other than a resident.
17015.5. For purposes of Part 10.2 (commencing with Section 18401)
and this part, the term "part-year resident" means a taxpayer who
meets both of the following conditions during the same taxable year.
(a) Is a resident of this state during a portion of the taxable
year.
(b) Is a nonresident of this state during a portion of the taxable
year.
17016. Every individual who spends in the aggregate more than nine
months of the taxable year within this State shall be presumed to be
a resident. The presumption may be overcome by satisfactory evidence
that the individual is in the State for a temporary or transitory
purpose.
17017. "United States," when used in a geographical sense, includes
the states, the District of Columbia, and the possessions of the
United States.
17018. "State" includes the District of Columbia, and the
possessions of the United States.
17019. "Foreign country" means any jurisdiction other than one
embraced within the United States.
17020. "Trade or business" includes the performance of the
functions of a public office.
17020.1. 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.
17020.2. 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.
17020.3. 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.
17020.4. 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.
17020.5. 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.
17020.6. For purposes of this part:
(a) Section 7702 of the Internal Revenue Code, relating to life
insurance contracts, 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.
17020.7. 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.
17020.8. Section 7701(e) of the Internal Revenue Code, relating to
treatment of certain contracts for providing services, etc., shall
apply, except as otherwise provided.
17020.9. 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.
17020.11. Section 7701(h) of the Internal Revenue Code, relating to
motor vehicle operating leases, applies, except as otherwise
provided.
17020.12. Section 7701(a)(20) of the Internal Revenue Code,
relating to definition of "employee," shall apply, except as
otherwise provided.
17020.13. Section 7701(k) of the Internal Revenue Code, relating to
treatment of certain amounts paid to charity, shall apply, except as
otherwise provided.
17020.15. (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.
17021. As used in this part, if the husband and wife therein
referred to are divorced, wherever appropriate to the meaning of this
part, the term "wife" shall be read "former wife" and the term
"husband" shall be read "former husband." If the payments described
in this part are made by or on behalf of the wife or former wife to
the husband or former husband instead of vice versa, wherever
appropriate to the meaning of this part, the term "husband" shall be
read "wife" and the term "wife" shall be read "husband."
17021.5. Section 7703 of the Internal Revenue Code, relating to
determination of marital status, shall apply, except as otherwise
provided.
17021.7. (a) (1) For purposes of this part, the domestic partner of
the taxpayer shall be treated as the spouse of the taxpayer for
purposes of applying only Sections 105(b), 106(a), 162(l), 162(n),
and 213(a) of the Internal Revenue Code and for purposes of
determining whether an individual is the taxpayer's "dependent" or
"member of their family" as these terms are used in those sections.
(2) This subdivision shall apply to each taxable year beginning on
or after January 1, 2002.
(b) (1) Except as otherwise provided, the domestic partner or
former domestic partner of a taxpayer shall be treated as the spouse
or former spouse of that taxpayer for purposes of applying provisions
of this part, Part 10.2 (commencing with Section 18401), Part 10.7
(commencing with Section 21001), and Part 11 (commencing with Section
23001), and for purposes of applying provisions of the Internal
Revenue Code that are applicable for purposes of this part, Part
10.2, Part 10.7, or Part 11.
(2) A domestic partner shall not be treated as the spouse of a
taxpayer as required by paragraph (1) in the following circumstances:
(A) Where the treatment would result in the classification of a
business entity for purposes of this part, Part 10.2, or Part 11 that
would be different than the classification of that business entity
for federal income tax purposes.
(B) Where the treatment required by paragraph (1) would result in
disqualification for federal income tax purposes of a plan that
otherwise qualifies under Section 401(a) of the Internal Revenue
Code.
(C) Where the treatment would result in a tax-favored account that
would not be qualified as a tax-favored account for federal income
tax purposes. For purposes of this subparagraph, "tax-favored account"
means an individual account, plan, or arrangement that is exempt
from income tax under Chapter 1 of the Internal Revenue Code,
including an individual retirement account, as described in Section
408 of the Internal Revenue Code, an Archer MSA, as described in
Section 220 of the Internal Revenue Code, a qualified tuition
program, as described in Section 529 of the Internal Revenue Code,
and a Coverdell education savings account, as described in Section
530 of the Internal Revenue Code.
(3) The amendments made by the act adding this subdivision shall
be operative for each taxable year beginning on or after January 1,
2007.
(c) For purposes of this section, the term "domestic partner"
means an individual partner in a domestic partner relationship within
the meaning of Section 297 of the Family Code.
17022. The term "military or naval forces of the United States" and
the term "armed forces of the United States" each includes all
regular and reserve components of the uniformed services which are
subject to the jurisdicition of the Secretary of Defense, the
Secretary of the Army, the Secretary of the Navy, or the Secretary of
the Air Force, and each term also includes the Coast Guard. The
members of such forces include commissioned officers and personnel
below the grade of commissioned officers in such forces.
17023. The term "counsel for the Franchise Tax Board," and
"Franchise Tax Counsel" as used in this part, 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.
17024. The term "Personal Income Tax Law of 1954," means Part 10 of
Division 2 of the Revenue and Taxation Code as enacted by the
Statutes 1943, Chapter 659, and as subsequently amended, including
all amendments enacted prior to January 1, 1955.
17024.5. (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
follows:
Specified Date
of
Internal
Revenue
Taxable Code
Year Sections
(A) For taxable years
beginning on or after
January 1, 1983, and on or
before December
31, 1983....................... January 15, 1983
(B) For taxable years
beginning on or after
January 1, 1984, and on or
before December
31, 1984....................... January 1, 1984
(C) For taxable years
beginning on or after
January 1, 1985, and on or
before December
31, 1985....................... January 1, 1985
(D) For taxable years
beginning on or after
January 1, 1986, and on or
before December
31, 1986....................... January 1, 1986
(E) For taxable years
beginning on or after
January 1, 1987, and on
or before December
31, 1988....................... January 1, 1987
(F) For taxable years
beginning on or after
January 1, 1989, and on or
before December
31, 1989....................... January 1, 1989
(G) For taxable years
beginning on or after
January 1, 1990, and on or
before December
31, 1990....................... January 1, 1990
(H) For taxable years
beginning on or after
January 1, 1991, and on or
before December
31, 1991....................... January 1, 1991
(I) For taxable years
beginning on or after
January 1, 1992, and on or
before December
31, 1992....................... January 1, 1992
(J) For taxable years
beginning on or after
January 1, 1993, and on or
before December
31, 1996....................... January 1, 1993
(K) For taxable years
beginning on or after
January 1, 1997, and on or
before December
31, 1997....................... January 1, 1997
(L) For taxable years
beginning on or after
January 1, 1998, and on or
before December
31, 2001....................... January 1, 1998
(M) For taxable years
beginning on or after
January 1, 2002, and on
or before December
31, 2004....................... January 1, 2001
(N) For taxable years
beginning on or after
January 1, 2005, and on or
before December
31, 2009....................... January 1, 2005
(O) For taxable years
beginning on or after
January 1, 2010................ January 1, 2009
(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
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 any
provision of 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) Except as provided in Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2, an electing small business
corporation, as defined in Section 1361(b) of the Internal Revenue
Code.
(2) Domestic international sales corporations (DISC), as defined
in Section 992(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) Section 911 of the Internal Revenue Code, relating to citizens
or residents of the United States living abroad.
(9) A foreign corporation, except that Section 367 of the Internal
Revenue Code shall be applicable.
(10) Federal tax credits and carryovers of federal tax credits.
(11) Nonresident aliens.
(12) Deduction for personal exemptions, as provided in Section 151
of the Internal Revenue Code.
(13) The tax on generation-skipping transfers imposed by Section
2601 of the Internal Revenue Code.
(14) The tax, relating to estates, imposed by Section 2001 or 2101
of the Internal Revenue Code.
(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 each taxable year beginning on or 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
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 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 at the time and in the manner 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 11 (commencing with Section
23001), that taxpayer is deemed to have made the same election for
purposes of the tax imposed by this part, Part 10.2 (commencing with
Section 18401), and Part 11 (commencing with Section 23001), 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 10.2 (commencing with Section 18401),
or Part 11 (commencing with Section 23001), 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 11 (commencing with Section 23001),
that taxpayer may not make a separate California election for
purposes of this part, Part 10.2 (commencing with Section 18401), or
Part 11 (commencing with Section 23001), unless that separate
election is expressly authorized by this part, Part 10.2 (commencing
with Section 18401), or Part 11 (commencing with Section 23001), 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 the regulation issued by
"the secretary" authorizing an election for federal income tax
purposes apply for purposes of this part, Part 10.2 (commencing with
Section 18401) or Part 11 (commencing with Section 23001).
(f) Whenever this part allows or requires a taxpayer to file an
application or seek consent, the rules set forth in subdivision (e)
shall be applicable with respect 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) References to "adjusted gross income" shall mean the amount
computed in accordance with Section 17072, except as provided in
paragraph (2).
(2) (A) Except as provided in subparagraph (B), references to
"adjusted gross income" for purposes of computing limitations based
upon adjusted gross income, shall mean the amount required to be
shown as adjusted gross income on the federal tax return for the same
taxable year.
(B) In the case of registered domestic partners and former
registered domestic partners, adjusted gross income, for the purposes
of computing limitations based upon adjusted gross income, shall
mean the adjusted gross income on a federal tax return computed as if
the registered domestic partner or former registered domestic
partner was treated as a spouse or former spouse, respectively, for
federal income tax purposes, and used the same filing status that was
used on the state tax return for the same taxable year.
(3) Any reference to "subtitle" 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) 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.
17026. This part applies to the taxable income of taxpayers
received or accrued on or after January 1, l935.
17028. 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.
17029. The repeal of any provision of the Personal Income 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.
17029.5. (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 taxable 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.
17030. For the purpose of applying the Personal Income Tax Law of
1954 or the Personal Income Tax Law as herein enacted to any period,
any reference in either such law to another provision of the Personal
Income Tax Law of 1954 or the Personal Income 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.
17031. 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 10 of Division 2 of the Revenue and
Taxation Code or of such other Personal Income Tax Laws as were
applicable to the prior period.
17032. 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 part.
17033. 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.
17034. Unless otherwise specifically provided therein, the
provisions of any act:
(a) That affect the imposition or computation of taxes, additions
to 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.
17035. The term "withholding agent" means any person required to
deduct and withhold any tax under Section 18662.
17036. Unless expressly otherwise provided in this part, any notice
may be given by first class mail postage prepaid.
17037. Provisions in other codes or general law statutes which 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) Part 10.2 (commencing with Section 18401), relating to the
administration of franchise and income tax laws.
(c) Part 10.5 (commencing with Section 20501), relating to the
Property Tax Assistance and Postponement Law.
(d) Part 10.7 (commencing with Section 21001), relating to the
Taxpayers' Bill of Rights.
(e) Part 11 (commencing with Section 23001), relating to the
Corporation Tax Law.
(f) Sections 15700 to 15702.1, inclusive, of the Government Code,
relating to the Franchise Tax Board.
17038. (a) For purposes of this part, unless expressly otherwise
provided, for taxable years beginning before January 1, 1984,
references to the California Consumer Price Index shall mean the
California Consumer Price Index for All Urban Consumers (old series).
(b) For taxable years beginning on or after January 1, 1984,
references to the California Consumer Price Index shall mean the
California Consumer Price Index for All Urban Consumers as modified
for rental equivalence homeownership (new series).
17039. (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560. Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any. Credits shall
be allowed against "net tax" in the following order:
(1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain
refundable provisions, except for those that are allowed to reduce
"net tax" below the tentative minimum tax, as defined by Section
17062.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
(5) Credits that are allowed to reduce "net tax" below the
tentative minimum tax, as defined by Section 17062.
(6) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(7) Credits that contain refundable provisions but do not contain
carryover provisions.
The order within each paragraph shall be determined by the
Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) and 19002
(relating to tax withholding), the credits provided in those sections
shall be allowed in the order provided in paragraph (6) of
subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits:
(A) The credit allowed by Section 17052.2 (relating to teacher
retention tax credit).
(B) The credit allowed by former Section 17052.4 (relating to
solar energy).
(C) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on January 1, 1987).
(D) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on December 1, 1994).
(E) The credit allowed by Section 17052.12 (relating to research
expenses).
(F) The credit allowed by former Section 17052.13 (relating to
sales and use tax credit).
(G) The credit allowed by former Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit).
(H) The credit allowed by Section 17052.25 (relating to the
adoption costs credit).
(I) The credit allowed by Section 17053.5 (relating to the renter'
s credit).
(J) The credit allowed by former Section 17053.8 (relating to
enterprise zone hiring credit).
(K) The credit allowed by former Section 17053.10 (relating to Los
Angeles Revitalization Zone hiring credit).
(L) The credit allowed by former Section 17053.11 (relating to
program area hiring credit).
(M) For each taxable year beginning on or after January 1, 1994,
the credit allowed by former Section 17053.17 (relating to Los
Angeles Revitalization Zone hiring credit).
(N) The credit allowed by Section 17053.33 (relating to targeted
tax area sales or use tax credit).
(O) The credit allowed by Section 17053.34 (relating to targeted
tax area hiring credit).
(P) The credit allowed by Section 17053.49 (relating to qualified
property).
(Q) The credit allowed by Section 17053.70 (relating to enterprise
zone sales or use tax credit).
(R) The credit allowed by Section 17053.74 (relating to enterprise
zone hiring credit).
(S) The credit allowed by Section 17054 (relating to credits for
personal exemption).
(T) The credit allowed by Section 17054.5 (relating to the credits
for a qualified joint custody head of household and a qualified
taxpayer with a dependent parent).
(U) The credit allowed by Section 17054.7 (relating to the credit
for a senior head of household).
(V) The credit allowed by former Section 17057 (relating to
clinical testing expenses).
(W) The credit allowed by Section 17058 (relating to low-income
housing).
(X) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(Y) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(Z) The credit allowed by Section 19002 (relating to tax
withholding).
(2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
(3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
(g) (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 shall be
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 "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
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 17062), determined
by excluding the income attributable to that disregarded business
entity. No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), 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 (c) and
(d).
(h) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-through
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-through
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 the credit is operative.
(3) This subdivision shall apply to credits that become
inoperative on or after the operative date of the act adding this
subdivision.
17039.1. Notwithstanding Section 17039 or any other provision in
this part to the contrary, the credit allowed by Section 17053.30
(relating to natural heritage) may reduce the tax imposed under
Section 17041 or 17048 plus the tax imposed under Section 17504
(relating to the separate tax lump-sum distributions) below the
tentative minimum tax, as defined by Section 17062, but only after
allowance of the credit allowed by Section 17063.
17039.2. (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 business credits otherwise
allowable under any credit under any provision of Chapter 2
(commencing with Section 17041), including the carryover of any
business credit under a former provision of that chapter, for the
taxable year shall not reduce the "net tax" (as defined in Section
17039) below the applicable amount.
(b) For purposes of this section, "business credit" means a credit
allowable under any provision of Chapter 2 (commencing with Section
17041) other than the following credits:
(1) The credit allowed by Section 17052.6 (relating to credit for
household and dependent care).
(2) The credit allowed by Section 17052.25 (relating to credit for
adoption costs).
(3) The credit allowed by Section 17053.5 (relating to renter's
tax credit).
(4) The credit allowed by Section 17053.80 (relating to full time
employment hiring credit).
(5) The credit allowed by Section 17054 (relating to credit for
personal exemption).
(6) The credit allowed by Section 17054.5 (relating to credit for
qualified joint custody head of household and a qualified taxpayer
with a dependent parent).
(7) The credit allowed by Section 17054.7 (relating to credit for
senior head of household).
(8) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(c) For purposes of this section, the "applicable amount" shall be
equal to 50 percent of the "net tax" (as defined in Section 17039)
before application of any credits.
(d) The amount of any credit otherwise allowable for the taxable
year under Section 17039 that is not allowed due to 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) Notwithstanding anything to the contrary in this part or Part
10.2 (commencing with Section 18401) the credits listed in
subdivision (b) shall be required to be applied before any business
credits, as limited by subdivision (a), are applied.
(g) The provisions of this section shall 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 subdivision,
business income means:
(1) Income from a trade or business, whether conducted by the
taxpayer or by a pasthrough entity owned directly or indirectly by
the taxpayer. For purposes of this paragraph, the term "passthrough
entity" means a partnership or an "S" corporation.
(2) Income from rental activity.
(3) Income attributable to a farming business.
17001. This part is known and may be cited as the "Personal Income
Tax Law."
17002. Except where the context otherwise requires, the definitions
given in this chapter govern the construction of this part.
17003. "Franchise Tax Board" means the Franchise Tax Board
described in Part 10, Division 3, Title 2 of the Government Code.
"Board" means the State Board of Equalization.
17004. "Taxpayer" includes any individual, fiduciary, estate, or
trust subject to any tax imposed by this part or any partnership.
17005. "Individual" means a natural person.
17006. "Fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any person, whether
individual or corporate, acting in any fiduciary capacity for any
person, estate or trust.
17007. "Person" includes individuals, fiduciaries, partnerships,
limited liability companies, and corporations.
17008. "Partnership" includes a syndicate, group, pool, joint
venture, or other unincorporated organization, through or by means of
which any business, financial operation, or venture is carried on,
and which is not, within the meaning of this part, a trust or estate
or a corporation.
"Partner" includes a member in such a syndicate, group, pool,
joint venture, or organization.
A person shall be recognized as a partner for income purposes if
he owns a capital interest in a partnership in which capital is a
material income-producing factor, whether or not such interest was
derived by purchase or gift from any other person.
17008.5. Section 7704 of the Internal Revenue Code, relating to
certain publicly traded partnerships treated as corporations, shall
apply, except as otherwise provided.
(a) Section 7704(a) of the Internal Revenue Code shall not apply
to an electing 1987 partnership, as defined in Section 23038.5, which
is subject to the tax imposed by Section 23038.5.
(b) The amendment made to this section by Chapter 611 of the
Statutes of 1997 shall apply to taxable years beginning on or after
January 1, 1998.
(c) Section 7704(d) of the Internal Revenue Code, relating to
qualifying income, shall apply, except as otherwise provided, without
regard to taxable year to the same extent as applicable for federal
income tax purposes.
(d) The amendment to this section by the act amending this
subdivision shall apply to taxable years beginning on or after
January 1, 2010.
17009. "Corporation" includes joint stock companies or associations
(including nonprofit associations that perform services, borrow
money or own property, and business trusts or other business entities
taxable as a corporation under regulations of the Franchise Tax
Board) and insurance companies. "Corporation" also includes a trust
organized and operated exclusively for purposes contained in Section
23701d.
17010. "Taxable year" means the calendar year or the fiscal year
upon the basis of which the taxable income is computed under this
part. If no fiscal year has been established, "taxable year" means
the calendar year.
"Taxable year" means, in the case of a return made for a
fractional part of a year under this part or under regulations
prescribed by the Franchise Tax Board, the period for which the
return is made.
17011. "Fiscal year" means an accounting period of 12 months ending
on the last day of any month other than December.
17012. "Paid or incurred" and "paid or accrued" shall be construed
according to the method of accounting upon the basis of which the
taxable income is computed under this part.
17014. (a) "Resident" includes:
(1) Every individual who is in this state for other than a
temporary or transitory purpose.
(2) Every individual domiciled in this state who is outside the
state for a temporary or transitory purpose.
(b) Any individual (and spouse) who is domiciled in this state
shall be considered outside this state for a temporary or transitory
purpose while that individual:
(1) Holds an elective office of the government of the United
States, or
(2) Is employed on the staff of an elective officer in the
legislative branch of the government of the United States as
described in paragraph (1), or
(3) Holds an appointive office in the executive branch of the
government of the United States (other than the armed forces of the
United States or career appointees in the United States Foreign
Service) if the appointment to that office was by the President of
the United States and subject to confirmation by the Senate of the
United States and whose tenure of office is at the pleasure of the
President of the United States.
(c) Any individual who is a resident of this state continues to be
a resident even though temporarily absent from the state.
(d) For any taxable year beginning on or after January 1, 1994,
any individual domiciled in this state who is absent from the state
for an uninterrupted period of at least 546 consecutive days under an
employment-related contract shall be considered outside this state
for other than a temporary or transitory purpose.
(1) For purposes of this subdivision, returns to this state,
totaling in the aggregate not more than 45 days during a taxable
year, shall be disregarded.
(2) This subdivision shall not apply to any individual, including
any spouse described in paragraph (3), who has income from stocks,
bonds, notes, or other intangible personal property in excess of two
hundred thousand dollars ($200,000) in any taxable year in which the
employment-related contract is in effect. In the case of an
individual who is married, this paragraph shall be applied to the
income of each spouse separately.
(3) Any spouse who is absent from the state for an uninterrupted
period of at least 546 consecutive days to accompany a spouse who,
under this subdivision, is considered outside this state for other
than a temporary or transitory purpose shall, for purposes of this
subdivision, also be considered outside this state for other than a
temporary or transitory purpose.
(4) This subdivision shall not apply to any individual if the
principal purpose of the individual's absence from this state is to
avoid any tax imposed by this part.
17015. "Nonresident" means every individual other than a resident.
17015.5. For purposes of Part 10.2 (commencing with Section 18401)
and this part, the term "part-year resident" means a taxpayer who
meets both of the following conditions during the same taxable year.
(a) Is a resident of this state during a portion of the taxable
year.
(b) Is a nonresident of this state during a portion of the taxable
year.
17016. Every individual who spends in the aggregate more than nine
months of the taxable year within this State shall be presumed to be
a resident. The presumption may be overcome by satisfactory evidence
that the individual is in the State for a temporary or transitory
purpose.
17017. "United States," when used in a geographical sense, includes
the states, the District of Columbia, and the possessions of the
United States.
17018. "State" includes the District of Columbia, and the
possessions of the United States.
17019. "Foreign country" means any jurisdiction other than one
embraced within the United States.
17020. "Trade or business" includes the performance of the
functions of a public office.
17020.1. 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.
17020.2. 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.
17020.3. 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.
17020.4. 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.
17020.5. 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.
17020.6. For purposes of this part:
(a) Section 7702 of the Internal Revenue Code, relating to life
insurance contracts, 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.
17020.7. 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.
17020.8. Section 7701(e) of the Internal Revenue Code, relating to
treatment of certain contracts for providing services, etc., shall
apply, except as otherwise provided.
17020.9. 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.
17020.11. Section 7701(h) of the Internal Revenue Code, relating to
motor vehicle operating leases, applies, except as otherwise
provided.
17020.12. Section 7701(a)(20) of the Internal Revenue Code,
relating to definition of "employee," shall apply, except as
otherwise provided.
17020.13. Section 7701(k) of the Internal Revenue Code, relating to
treatment of certain amounts paid to charity, shall apply, except as
otherwise provided.
17020.15. (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.
17021. As used in this part, if the husband and wife therein
referred to are divorced, wherever appropriate to the meaning of this
part, the term "wife" shall be read "former wife" and the term
"husband" shall be read "former husband." If the payments described
in this part are made by or on behalf of the wife or former wife to
the husband or former husband instead of vice versa, wherever
appropriate to the meaning of this part, the term "husband" shall be
read "wife" and the term "wife" shall be read "husband."
17021.5. Section 7703 of the Internal Revenue Code, relating to
determination of marital status, shall apply, except as otherwise
provided.
17021.7. (a) (1) For purposes of this part, the domestic partner of
the taxpayer shall be treated as the spouse of the taxpayer for
purposes of applying only Sections 105(b), 106(a), 162(l), 162(n),
and 213(a) of the Internal Revenue Code and for purposes of
determining whether an individual is the taxpayer's "dependent" or
"member of their family" as these terms are used in those sections.
(2) This subdivision shall apply to each taxable year beginning on
or after January 1, 2002.
(b) (1) Except as otherwise provided, the domestic partner or
former domestic partner of a taxpayer shall be treated as the spouse
or former spouse of that taxpayer for purposes of applying provisions
of this part, Part 10.2 (commencing with Section 18401), Part 10.7
(commencing with Section 21001), and Part 11 (commencing with Section
23001), and for purposes of applying provisions of the Internal
Revenue Code that are applicable for purposes of this part, Part
10.2, Part 10.7, or Part 11.
(2) A domestic partner shall not be treated as the spouse of a
taxpayer as required by paragraph (1) in the following circumstances:
(A) Where the treatment would result in the classification of a
business entity for purposes of this part, Part 10.2, or Part 11 that
would be different than the classification of that business entity
for federal income tax purposes.
(B) Where the treatment required by paragraph (1) would result in
disqualification for federal income tax purposes of a plan that
otherwise qualifies under Section 401(a) of the Internal Revenue
Code.
(C) Where the treatment would result in a tax-favored account that
would not be qualified as a tax-favored account for federal income
tax purposes. For purposes of this subparagraph, "tax-favored account"
means an individual account, plan, or arrangement that is exempt
from income tax under Chapter 1 of the Internal Revenue Code,
including an individual retirement account, as described in Section
408 of the Internal Revenue Code, an Archer MSA, as described in
Section 220 of the Internal Revenue Code, a qualified tuition
program, as described in Section 529 of the Internal Revenue Code,
and a Coverdell education savings account, as described in Section
530 of the Internal Revenue Code.
(3) The amendments made by the act adding this subdivision shall
be operative for each taxable year beginning on or after January 1,
2007.
(c) For purposes of this section, the term "domestic partner"
means an individual partner in a domestic partner relationship within
the meaning of Section 297 of the Family Code.
17022. The term "military or naval forces of the United States" and
the term "armed forces of the United States" each includes all
regular and reserve components of the uniformed services which are
subject to the jurisdicition of the Secretary of Defense, the
Secretary of the Army, the Secretary of the Navy, or the Secretary of
the Air Force, and each term also includes the Coast Guard. The
members of such forces include commissioned officers and personnel
below the grade of commissioned officers in such forces.
17023. The term "counsel for the Franchise Tax Board," and
"Franchise Tax Counsel" as used in this part, 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.
17024. The term "Personal Income Tax Law of 1954," means Part 10 of
Division 2 of the Revenue and Taxation Code as enacted by the
Statutes 1943, Chapter 659, and as subsequently amended, including
all amendments enacted prior to January 1, 1955.
17024.5. (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
follows:
Specified Date
of
Internal
Revenue
Taxable Code
Year Sections
(A) For taxable years
beginning on or after
January 1, 1983, and on or
before December
31, 1983....................... January 15, 1983
(B) For taxable years
beginning on or after
January 1, 1984, and on or
before December
31, 1984....................... January 1, 1984
(C) For taxable years
beginning on or after
January 1, 1985, and on or
before December
31, 1985....................... January 1, 1985
(D) For taxable years
beginning on or after
January 1, 1986, and on or
before December
31, 1986....................... January 1, 1986
(E) For taxable years
beginning on or after
January 1, 1987, and on
or before December
31, 1988....................... January 1, 1987
(F) For taxable years
beginning on or after
January 1, 1989, and on or
before December
31, 1989....................... January 1, 1989
(G) For taxable years
beginning on or after
January 1, 1990, and on or
before December
31, 1990....................... January 1, 1990
(H) For taxable years
beginning on or after
January 1, 1991, and on or
before December
31, 1991....................... January 1, 1991
(I) For taxable years
beginning on or after
January 1, 1992, and on or
before December
31, 1992....................... January 1, 1992
(J) For taxable years
beginning on or after
January 1, 1993, and on or
before December
31, 1996....................... January 1, 1993
(K) For taxable years
beginning on or after
January 1, 1997, and on or
before December
31, 1997....................... January 1, 1997
(L) For taxable years
beginning on or after
January 1, 1998, and on or
before December
31, 2001....................... January 1, 1998
(M) For taxable years
beginning on or after
January 1, 2002, and on
or before December
31, 2004....................... January 1, 2001
(N) For taxable years
beginning on or after
January 1, 2005, and on or
before December
31, 2009....................... January 1, 2005
(O) For taxable years
beginning on or after
January 1, 2010................ January 1, 2009
(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
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 any
provision of 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) Except as provided in Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2, an electing small business
corporation, as defined in Section 1361(b) of the Internal Revenue
Code.
(2) Domestic international sales corporations (DISC), as defined
in Section 992(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) Section 911 of the Internal Revenue Code, relating to citizens
or residents of the United States living abroad.
(9) A foreign corporation, except that Section 367 of the Internal
Revenue Code shall be applicable.
(10) Federal tax credits and carryovers of federal tax credits.
(11) Nonresident aliens.
(12) Deduction for personal exemptions, as provided in Section 151
of the Internal Revenue Code.
(13) The tax on generation-skipping transfers imposed by Section
2601 of the Internal Revenue Code.
(14) The tax, relating to estates, imposed by Section 2001 or 2101
of the Internal Revenue Code.
(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 each taxable year beginning on or 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
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 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 at the time and in the manner 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 11 (commencing with Section
23001), that taxpayer is deemed to have made the same election for
purposes of the tax imposed by this part, Part 10.2 (commencing with
Section 18401), and Part 11 (commencing with Section 23001), 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 10.2 (commencing with Section 18401),
or Part 11 (commencing with Section 23001), 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 11 (commencing with Section 23001),
that taxpayer may not make a separate California election for
purposes of this part, Part 10.2 (commencing with Section 18401), or
Part 11 (commencing with Section 23001), unless that separate
election is expressly authorized by this part, Part 10.2 (commencing
with Section 18401), or Part 11 (commencing with Section 23001), 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 the regulation issued by
"the secretary" authorizing an election for federal income tax
purposes apply for purposes of this part, Part 10.2 (commencing with
Section 18401) or Part 11 (commencing with Section 23001).
(f) Whenever this part allows or requires a taxpayer to file an
application or seek consent, the rules set forth in subdivision (e)
shall be applicable with respect 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) References to "adjusted gross income" shall mean the amount
computed in accordance with Section 17072, except as provided in
paragraph (2).
(2) (A) Except as provided in subparagraph (B), references to
"adjusted gross income" for purposes of computing limitations based
upon adjusted gross income, shall mean the amount required to be
shown as adjusted gross income on the federal tax return for the same
taxable year.
(B) In the case of registered domestic partners and former
registered domestic partners, adjusted gross income, for the purposes
of computing limitations based upon adjusted gross income, shall
mean the adjusted gross income on a federal tax return computed as if
the registered domestic partner or former registered domestic
partner was treated as a spouse or former spouse, respectively, for
federal income tax purposes, and used the same filing status that was
used on the state tax return for the same taxable year.
(3) Any reference to "subtitle" 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) 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.
17026. This part applies to the taxable income of taxpayers
received or accrued on or after January 1, l935.
17028. 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.
17029. The repeal of any provision of the Personal Income 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.
17029.5. (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 taxable 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.
17030. For the purpose of applying the Personal Income Tax Law of
1954 or the Personal Income Tax Law as herein enacted to any period,
any reference in either such law to another provision of the Personal
Income Tax Law of 1954 or the Personal Income 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.
17031. 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 10 of Division 2 of the Revenue and
Taxation Code or of such other Personal Income Tax Laws as were
applicable to the prior period.
17032. 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 part.
17033. 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.
17034. Unless otherwise specifically provided therein, the
provisions of any act:
(a) That affect the imposition or computation of taxes, additions
to 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.
17035. The term "withholding agent" means any person required to
deduct and withhold any tax under Section 18662.
17036. Unless expressly otherwise provided in this part, any notice
may be given by first class mail postage prepaid.
17037. Provisions in other codes or general law statutes which 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) Part 10.2 (commencing with Section 18401), relating to the
administration of franchise and income tax laws.
(c) Part 10.5 (commencing with Section 20501), relating to the
Property Tax Assistance and Postponement Law.
(d) Part 10.7 (commencing with Section 21001), relating to the
Taxpayers' Bill of Rights.
(e) Part 11 (commencing with Section 23001), relating to the
Corporation Tax Law.
(f) Sections 15700 to 15702.1, inclusive, of the Government Code,
relating to the Franchise Tax Board.
17038. (a) For purposes of this part, unless expressly otherwise
provided, for taxable years beginning before January 1, 1984,
references to the California Consumer Price Index shall mean the
California Consumer Price Index for All Urban Consumers (old series).
(b) For taxable years beginning on or after January 1, 1984,
references to the California Consumer Price Index shall mean the
California Consumer Price Index for All Urban Consumers as modified
for rental equivalence homeownership (new series).
17039. (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560. Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any. Credits shall
be allowed against "net tax" in the following order:
(1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain
refundable provisions, except for those that are allowed to reduce
"net tax" below the tentative minimum tax, as defined by Section
17062.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
(5) Credits that are allowed to reduce "net tax" below the
tentative minimum tax, as defined by Section 17062.
(6) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(7) Credits that contain refundable provisions but do not contain
carryover provisions.
The order within each paragraph shall be determined by the
Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) and 19002
(relating to tax withholding), the credits provided in those sections
shall be allowed in the order provided in paragraph (6) of
subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits:
(A) The credit allowed by Section 17052.2 (relating to teacher
retention tax credit).
(B) The credit allowed by former Section 17052.4 (relating to
solar energy).
(C) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on January 1, 1987).
(D) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on December 1, 1994).
(E) The credit allowed by Section 17052.12 (relating to research
expenses).
(F) The credit allowed by former Section 17052.13 (relating to
sales and use tax credit).
(G) The credit allowed by former Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit).
(H) The credit allowed by Section 17052.25 (relating to the
adoption costs credit).
(I) The credit allowed by Section 17053.5 (relating to the renter'
s credit).
(J) The credit allowed by former Section 17053.8 (relating to
enterprise zone hiring credit).
(K) The credit allowed by former Section 17053.10 (relating to Los
Angeles Revitalization Zone hiring credit).
(L) The credit allowed by former Section 17053.11 (relating to
program area hiring credit).
(M) For each taxable year beginning on or after January 1, 1994,
the credit allowed by former Section 17053.17 (relating to Los
Angeles Revitalization Zone hiring credit).
(N) The credit allowed by Section 17053.33 (relating to targeted
tax area sales or use tax credit).
(O) The credit allowed by Section 17053.34 (relating to targeted
tax area hiring credit).
(P) The credit allowed by Section 17053.49 (relating to qualified
property).
(Q) The credit allowed by Section 17053.70 (relating to enterprise
zone sales or use tax credit).
(R) The credit allowed by Section 17053.74 (relating to enterprise
zone hiring credit).
(S) The credit allowed by Section 17054 (relating to credits for
personal exemption).
(T) The credit allowed by Section 17054.5 (relating to the credits
for a qualified joint custody head of household and a qualified
taxpayer with a dependent parent).
(U) The credit allowed by Section 17054.7 (relating to the credit
for a senior head of household).
(V) The credit allowed by former Section 17057 (relating to
clinical testing expenses).
(W) The credit allowed by Section 17058 (relating to low-income
housing).
(X) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(Y) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(Z) The credit allowed by Section 19002 (relating to tax
withholding).
(2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
(3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
(g) (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 shall be
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 "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
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 17062), determined
by excluding the income attributable to that disregarded business
entity. No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), 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 (c) and
(d).
(h) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-through
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-through
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 the credit is operative.
(3) This subdivision shall apply to credits that become
inoperative on or after the operative date of the act adding this
subdivision.
17039.1. Notwithstanding Section 17039 or any other provision in
this part to the contrary, the credit allowed by Section 17053.30
(relating to natural heritage) may reduce the tax imposed under
Section 17041 or 17048 plus the tax imposed under Section 17504
(relating to the separate tax lump-sum distributions) below the
tentative minimum tax, as defined by Section 17062, but only after
allowance of the credit allowed by Section 17063.
17039.2. (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 business credits otherwise
allowable under any credit under any provision of Chapter 2
(commencing with Section 17041), including the carryover of any
business credit under a former provision of that chapter, for the
taxable year shall not reduce the "net tax" (as defined in Section
17039) below the applicable amount.
(b) For purposes of this section, "business credit" means a credit
allowable under any provision of Chapter 2 (commencing with Section
17041) other than the following credits:
(1) The credit allowed by Section 17052.6 (relating to credit for
household and dependent care).
(2) The credit allowed by Section 17052.25 (relating to credit for
adoption costs).
(3) The credit allowed by Section 17053.5 (relating to renter's
tax credit).
(4) The credit allowed by Section 17053.80 (relating to full time
employment hiring credit).
(5) The credit allowed by Section 17054 (relating to credit for
personal exemption).
(6) The credit allowed by Section 17054.5 (relating to credit for
qualified joint custody head of household and a qualified taxpayer
with a dependent parent).
(7) The credit allowed by Section 17054.7 (relating to credit for
senior head of household).
(8) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(c) For purposes of this section, the "applicable amount" shall be
equal to 50 percent of the "net tax" (as defined in Section 17039)
before application of any credits.
(d) The amount of any credit otherwise allowable for the taxable
year under Section 17039 that is not allowed due to 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) Notwithstanding anything to the contrary in this part or Part
10.2 (commencing with Section 18401) the credits listed in
subdivision (b) shall be required to be applied before any business
credits, as limited by subdivision (a), are applied.
(g) The provisions of this section shall 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 subdivision,
business income means:
(1) Income from a trade or business, whether conducted by the
taxpayer or by a pasthrough entity owned directly or indirectly by
the taxpayer. For purposes of this paragraph, the term "passthrough
entity" means a partnership or an "S" corporation.
(2) Income from rental activity.
(3) Income attributable to a farming business.
