25120. As used in Sections 25120 to 25139, inclusive, which shall
hereafter be referred to as "this act," unless the context otherwise
requires:
(a) "Business income" means income arising from transactions and
activity in the regular course of the taxpayer's trade or business
and includes income from tangible and intangible property if the
acquisition, management, and disposition of the property constitute
integral parts of the taxpayer's regular trade or business
operations.
(b) "Commercial domicile" means the principal place from which the
trade or business of the taxpayer is directed or managed.
(c) "Compensation" means wages, salaries, commissions and any
other form of remuneration paid to employees for personal services.
(d) "Nonbusiness income" means all income other than business
income.
(e) For taxable years beginning before January 1, 2011, "sales"
means all gross receipts of the taxpayer not allocated under Sections
25123 to 25127, inclusive.
(f) For taxable years beginning on or after January 1, 2011:
(1) "Sales" means all gross receipts of the taxpayer not allocated
under Sections 25123 to 25127, inclusive.
(2) "Gross receipts" means the gross amounts realized (the sum of
money and the fair market value of other property or services
received) on the sale or exchange of property, the performance of
services, or the use of property or capital (including rents,
royalties, interest, and dividends) in a transaction that produces
business income, in which the income, gain, or loss is recognized (or
would be recognized if the transaction were in the United States)
under the Internal Revenue Code, as applicable for purposes of this
part. Amounts realized on the sale or exchange of property shall not
be reduced by the cost of goods sold or the basis of property sold.
Gross receipts, even if business income, shall not include the
following items:
(A) Repayment, maturity, or redemption of the principal of a loan,
bond, mutual fund, certificate of deposit, or similar marketable
instrument.
(B) The principal amount received under a repurchase agreement or
other transaction properly characterized as a loan.
(C) Proceeds from issuance of the taxpayer's own stock or from
sale of treasury stock.
(D) Damages and other amounts received as the result of
litigation.
(E) Property acquired by an agent on behalf of another.
(F) Tax refunds and other tax benefit recoveries.
(G) Pension reversions.
(H) Contributions to capital (except for sales of securities by
securities dealers).
(I) Income from discharge of indebtedness.
(J) Amounts realized from exchanges of inventory that are not
recognized under the Internal Revenue Code.
(K) Amounts received from transactions in intangible assets held
in connection with a treasury function of the taxpayer's unitary
business and the gross receipts and overall net gains from the
maturity, redemption, sale, exchange, or other disposition of those
intangible assets. For purposes of this subparagraph, "treasury
function" means the pooling, management, and investment of intangible
assets for the purpose of satisfying the cash flow needs of the
taxpayer's trade or business, such as providing liquidity for a
taxpayer's business cycle, providing a reserve for business
contingencies, and business acquisitions, and also includes the use
of futures contracts and options contracts to hedge foreign currency
fluctuations. A taxpayer principally engaged in the trade or business
of purchasing and selling intangible assets of the type typically
held in a taxpayer's treasury function, such as a registered
broker-dealer, is not performing a treasury function, for purposes of
this subparagraph, with respect to income so produced.
(L) Amounts received from hedging transactions involving
intangible assets. A "hedging transaction" means a transaction
related to the taxpayer's trading function involving futures and
options transactions for the purpose of hedging price risk of the
products or commodities consumed, produced, or sold by the taxpayer.
(3) Exclusion of an item from the definition of "gross receipts"
shall not be determinative of its character as business or
nonbusiness income.
(4) The changes to this section by the act adding this sentence
pertaining to taxable years beginning before January 1, 2011,
constitute clarifying, nonsubstantive changes.
(g) "State" means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, and any foreign country or political
subdivision thereof.
25121. Any taxpayer having income from business activity which is
taxable both within and without this state shall allocate and
apportion its net income as provided in this act.
25122. For purposes of allocation and apportionment of income under
this act, a taxpayer is taxable in another state if (a) in that
state it is subject to a net income tax, a franchise tax measured by
net income, a franchise tax for the privilege of doing business, or a
corporate stock tax, or (b) that state has jurisdiction to subject
the taxpayer to a net income tax regardless of whether, in fact, the
state does or does not.
25123. Rents and royalties from real or tangible personal property,
capital gains, interest, dividends, or patent or copyright
royalties, to the extent that they constitute nonbusiness income,
shall be allocated as provided in Sections 25124 through 25127 of
this act.
25124. (a) Net rents and royalties from real property located in
this state are allocable to this state.
(b) Net rent and royalties from tangible personal property are
allocable to this state:
(1) If and to the extent that the property is utilized in this
state, or
(2) In their entirety if the taxpayer's commercial domicile is in
this state and the taxpayer is not organized under the laws of or
taxable in the state in which the property is utilized.
(c) The extent of utilization of tangible personal property in a
state is determined by multiplying the rents and royalties by a
fraction, the numerator of which is the number of days of physical
location of the property in the state during the rental or royalty
period in the taxable year and the denominator of which is the number
of days of physical location of the property everywhere during all
rental or royalty periods in the taxable year. If the physical
location of the property during the rental or royalty period is
unknown or unascertainable by the taxpayer, tangible personal
property is utilized in the state in which the property was located
at the time the rental or royalty payer obtained possession.
25125. (a) Capital gains and losses from sales of real property
located in this state are allocable to this state.
(b) Capital gains and losses from sales of tangible personal
property are allocable to this state if:
(1) The property had a situs in this state at the time of the
sale, or
(2) The taxpayer's commercial domicile is in this state and the
taxpayer is not taxable in the state in which the property had a
situs.
(c) Except in the case of the sale of a partnership interest,
capital gains and losses from sales of intangible personal property
are allocable to this state if the taxpayer's commercial domicile is
in this state.
(d) Gain or loss on the sale of a partnership interest is
allocable to this state in the ratio of the original cost of
partnership tangible property in the state to the original cost of
partnership tangible property everywhere, determined at the time of
the sale. In the event that more than 50 percent of the value of
partnership's assets consist of intangibles, gain or loss from the
sale of the partnership interest is allocated to this state in
accordance with the sales factor of the partnership for its first
full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.
25126. Interest and dividends are allocable to this state if the
taxpayer's commercial domicile is in this state.
25127. (a) Patent and copyright royalties are allocable to this
state:
(1) If and to the extent that the patent or copyright is utilized
by the payor in this state, or
(2) If and to the extent that the patent or copyright is utilized
by the payor in a state in which the taxpayer is not taxable and the
taxpayer's commercial domicile is in this state.
(b) A patent is utilized in a state to the extent that it is
employed in production, fabrication, manufacturing, or other
processing in the state or to the extent that a patented product is
produced in the state. If the basis of receipts from patent royalties
does not permit allocation to states or if the accounting procedures
do not reflect states of utilization, the patent is utilized in the
state in which the taxpayer's commercial domicile is located.
(c) A copyright is utilized in a state to the extent that printing
or other publication originates in the state. If the basis of
receipts from copyright royalties does not permit allocation to
states or if the accounting procedures do not reflect states of
utilization, the copyright is utilized in the state in which the
taxpayer's commercial domicile is located.
25128. (a) Notwithstanding Section 38006, all business income shall
be apportioned to this state by multiplying the business income by a
fraction, the numerator of which is the property factor plus the
payroll factor plus twice the sales factor, and the denominator of
which is four, except as provided in subdivision (b) or (c).
(b) If an apportioning trade or business derives more than 50
percent of its "gross business receipts" from conducting one or more
qualified business activities, all business income of the
apportioning trade or business shall be apportioned to this state by
multiplying business income by a fraction, the numerator of which is
the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three.
(c) For purposes of this section, a "qualified business activity"
means the following:
(1) An agricultural business activity.
(2) An extractive business activity.
(3) A savings and loan activity.
(4) A banking or financial business activity.
(d) For purposes of this section:
(1) "Gross business receipts" means gross receipts described in
subdivision (e) or (f) of Section 25120 (other than gross receipts
from sales or other transactions within an apportioning trade or
business between members of a group of corporations whose income and
apportionment factors are required to be included in a combined
report under Section 25101, limited, if applicable, by Section
25110), whether or not the receipts are excluded from the sales
factor by operation of Section 25137.
(2) "Agricultural business activity" means activities relating to
any stock, dairy, poultry, fruit, furbearing animal, or truck farm,
plantation, ranch, nursery, or range. "Agricultural business activity"
also includes activities relating to cultivating the soil or raising
or harvesting any agricultural or horticultural commodity,
including, but not limited to, the raising, shearing, feeding, caring
for, training, or management of animals on a farm as well as the
handling, drying, packing, grading, or storing on a farm any
agricultural or horticultural commodity in its unmanufactured state,
but only if the owner, tenant, or operator of the farm regularly
produces more than one-half of the commodity so treated.
(3) "Extractive business activity" means activities relating to
the production, refining, or processing of oil, natural gas, or
mineral ore.
(4) "Savings and loan activity" means any activities performed by
savings and loan associations or savings banks which have been
chartered by federal or state law.
(5) "Banking or financial business activity" means activities
attributable to dealings in money or moneyed capital in substantial
competition with the business of national banks.
(6) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
(7) Paragraph (4) of subdivision (c) shall apply only if the
Franchise Tax Board adopts the Proposed Multistate Tax Commission
Formula for the Uniform Apportionment of Net Income from Financial
Institutions, or its substantial equivalent, and shall become
operative upon the same operative date as the adopted formula.
(8) In any case where the income and apportionment factors of two
or more savings associations or corporations are required to be
included in a combined report under Section 25101, limited, if
applicable, by Section 25110, both of the following shall apply:
(A) The application of the more than 50 percent test of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business of the group.
(B) The entire business income of the group shall be apportioned
in accordance with either subdivision (a) or (b), or subdivision (b)
of Section 25128.5, as applicable.
25128.5. (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011, any apportioning trade or
business, other than an apportioning trade or business described in
subdivision (b) of Section 25128, may make an irrevocable annual
election on an original timely filed return, in the manner and form
prescribed by the Franchise Tax Board to apportion its income in
accordance with this section, and not in accordance with Section
25128.
(b) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011, all business income of an apportioning
trade or business making an election described in subdivision (a)
shall be apportioned to this state by multiplying the business income
by the sales factor.
(c) The Franchise Tax Board is authorized to issue regulations
necessary or appropriate regarding the making of an election under
this section, including regulations that are consistent with rules
prescribed for making an election under Section 25113.
25129. The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used during the taxable year.
25130. Property owned by the taxpayer is valued at its original
cost. Property rented by the taxpayer is valued at eight times the
net annual rental rate. Net annual rental rate is the annual rental
rate paid by the taxpayer less any annual rental rate received by the
taxpayer from subrentals.
25131. The average value of property shall be determined by
averaging the values at the beginning and ending of the taxable year
but the Franchise Tax Board may require the averaging of monthly
values during the taxable year if reasonably required to reflect
properly the average value of the taxpayer's property.
25132. The payroll factor is a fraction, the numerator of which is
the total amount paid in this state during the taxable year by the
taxpayer for compensation, and the denominator of which is the total
compensation paid everywhere during the taxable year.
25133. Compensation is paid in this state if:
(a) The individual's service is performed entirely within the
state; or
(b) The individual's service is performed both within and without
the state, but the service performed without the state is incidental
to the individual's service within the state; or
(c) Some of the service is performed in the state and (1) the base
of operations or, if there is no base of operations, the place from
which the service is directed or controlled is in the state, or (2)
the base of operations or the place from which the service is
directed or controlled is not in any state in which some part of the
service is performed, but the individual's residence is in this
state.
25134. The sales factor is a fraction, the numerator of which is
the total sales of the taxpayer in this state during the taxable
year, and the denominator of which is the total sales of the taxpayer
everywhere during the taxable year.
25135. (a) Sales of tangible personal property are in this state
if:
(1) The property is delivered or shipped to a purchaser, other
than the United States government, within this state regardless of
the f.o.b. point or other conditions of the sale.
(2) The property is shipped from an office, store, warehouse,
factory, or other place of storage in this state and (A) the
purchaser is the United States government or (B) the taxpayer is not
taxable in the state of the purchaser.
(b) For taxable years beginning on or after January 1, 2011, for
purposes of determining whether sales are in this state and included
in the numerator of the sales factor, all sales of the combined
reporting group properly assigned to this state under this section
shall be included in the sales factor numerator for this state
regardless of whether the member of the combined reporting group
making the sale is subject to the taxes imposed under Chapter 2
(commencing with Section 23101) or Chapter 3 (commencing with Section
23501) of this part. All sales not assigned to this state pursuant
to subdivision (a) shall not be included in the sales factor
numerator for this state if a member of the combined reporting group
of the taxpayer is taxable in the state of the purchaser.
(c) The Franchise Tax Board may prescribe regulations as necessary
or appropriate to carry out the purposes of this section.
25136. (a) For taxable years beginning before January 1, 2011, and
for taxable years beginning on or after January 1, 2011, for which
Section 25128.5 is operative and an election under subdivision (a) of
Section 25128.5 has not been made, sales, other than sales of
tangible personal property, are in this state if:
(1) The income-producing activity is performed in this state; or
(2) The income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity
is performed in this state than in any other state, based on costs
of performance.
(3) This subdivision shall apply, and subdivision (b) shall not
apply, for any taxable year beginning on or after January 1, 2011,
for which Section 25128.5 is not operative for any taxpayer subject
to the tax imposed under this part.
(b) For taxable years beginning on or after January 1, 2011:
(1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the service in this
state.
(2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.
(3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
(4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
(5) (A) If Section 25128.5 is operative, then this subdivision
shall apply in lieu of subdivision (a) for any taxable year for which
an election has been made under subdivision (a) of Section 25128.5.
(B) If Section 25128.5 is not operative, then this subdivision
shall not apply and subdivision (a) shall apply for any taxpayer
subject to the tax imposed under this part.
(C) Notwithstanding subparagraphs (A) or (B), this subdivision
shall apply for purposes of paragraph (2) of subdivision (b) of
Section 23101.
(c) The Franchise Tax Board may prescribe those regulations as
necessary or appropriate to carry out the purposes of subdivision
(b).
25137. If the allocation and apportionment provisions of this act
do not fairly represent the extent of the taxpayer's business
activity in this state, the taxpayer may petition for or the
Franchise Tax Board may require, in respect to all or any part of the
taxpayer's business activity, if reasonable:
(a) Separate accounting;
(b) The exclusion of any one or more of the factors;
(c) The inclusion of one or more additional factors which will
fairly represent the taxpayer's business activity in this state; or
(d) The employment of any other method to effectuate an equitable
allocation and apportionment of the taxpayer's income.
25138. This act shall be so construed as to effectuate its general
purpose to make uniform the law of those states which enact it.
Enactment of Article IV of the Multistate Tax Compact (as set forth
in Section 38006 of the code) pertaining to the allocation and
apportionment of income shall be construed as a reenactment of
Sections 25120 to 25137, inclusive, without any inference that a
change in interpretation is implied by such enactment.
25139. Sections 25120 to 25139, inclusive, may be cited as the
Uniform Division of Income for Tax Purposes Act.
25140. Accounting procedures shall be adopted which will separately
reflect the revenues attributable to dividends received by
corporations having commercial domiciles in this state.
In view of pending litigation concerning the proper treatment of
intercompany dividends, it is not intended by enactment of this act
that any inference be drawn from it in such litigation.
25141. (a) For purposes of this section, the following definitions
shall apply:
(1) "Entity" means an individual, corporation, association,
partnership, limited liability company, estate, trust, or any
combination thereof.
(2) "Person" means an individual or corporation.
(3) "Professional athletic team" means any entity which has all of
the following characteristics:
(A) Employs concurrently during the taxable year five or more
persons, who are compensated for being participating members of an
athletic team engaging in public contests.
(B) Is a member of a league composed of at least five entities
which are engaged in the operation of an athletic team and which are
located in this and other states or in other countries.
(C) Has total minimum paid attendance in the aggregate for all
contests wherever played during the taxable year of 40,000 persons.
(D) Has minimum gross income in the taxable year of one hundred
thousand dollars ($100,000).
(b) For purposes of this chapter, a team shall be considered to
have its operations based in the state or country in which the team
derives its territorial rights under the rules of the league of which
it is a member.
(c) The business income of a professional athletic team derived
directly or indirectly from its operations as a professional athletic
team shall be allocated to this state pursuant to the following
three-factor formula:
(1) Computation of the property factor under Section 25129:
(A) For a team that has its operations based in this state, the
average value of all real and tangible personal property, wherever
located, and owned or rented and used during the taxable year, shall
be deemed to have been owned or rented and used in this state during
the taxable year.
(B) For a team that has its operations based outside of this
state, the average value of all real and tangible personal property,
wherever located, and owned or rented and used during the taxable
year, shall be deemed to have been owned or rented and used outside
this state during the taxable year.
(2) Computation of the payroll factor under Section 25132:
(A) For a team that has its operations based in this state, the
total compensation paid everywhere during the taxable year shall be
deemed to have been paid in this state during the taxable year.
(B) For a team that has its operations based outside of this
state, the total compensation paid everywhere during the taxable year
shall be deemed to have been paid outside this state during the
taxable year.
(3) Computation of the sales factor under Section 25134:
(A) For a team that has its operations based in this state, the
total sales everywhere during the taxable year shall be deemed to
have been made in this state during the taxable year.
(B) For a team that has its operations based outside of this
state, the total sales everywhere during the taxable year shall be
deemed to have been made outside this state during the taxable year.
(d) If any team that has its operations based in this state is
required to allocate or apportion a part of its business income
derived directly or indirectly from its operations as a professional
athletic team to another state or country by the laws, regulations,
or requirements of the other state or country and pays an income or
franchise tax measured by income thereon as a result of the
allocation or apportionment, then all of the following shall apply:
(1) The business income of the team otherwise subject to this
section shall be reduced for purposes of this section by the amount
of the business income which is allocated or apportioned to and taxed
by the other state or country.
(2) This section shall not apply to any team in the same league
that has its operations based in the other state or country, and the
business income of any such team derived directly or indirectly from
its operations as a professional athletic team shall be allocated or
apportioned to this state in a manner consistent with the method of
allocation or apportionment imposed by the other state or country on
the business income of the team that has its operations based in this
state.
(e) For purposes of the minimum tax imposed under Sections 23151
and 23151.1, an entity which operates a professional athletic team
shall be treated as a corporation. The liability under Sections 23151
and 23151.1 of any corporation owning any portion or share of an
entity shall be satisfied by payment of the minimum tax by that
entity, if the corporation is not otherwise doing business in this
state.
25120. As used in Sections 25120 to 25139, inclusive, which shall
hereafter be referred to as "this act," unless the context otherwise
requires:
(a) "Business income" means income arising from transactions and
activity in the regular course of the taxpayer's trade or business
and includes income from tangible and intangible property if the
acquisition, management, and disposition of the property constitute
integral parts of the taxpayer's regular trade or business
operations.
(b) "Commercial domicile" means the principal place from which the
trade or business of the taxpayer is directed or managed.
(c) "Compensation" means wages, salaries, commissions and any
other form of remuneration paid to employees for personal services.
(d) "Nonbusiness income" means all income other than business
income.
(e) For taxable years beginning before January 1, 2011, "sales"
means all gross receipts of the taxpayer not allocated under Sections
25123 to 25127, inclusive.
(f) For taxable years beginning on or after January 1, 2011:
(1) "Sales" means all gross receipts of the taxpayer not allocated
under Sections 25123 to 25127, inclusive.
(2) "Gross receipts" means the gross amounts realized (the sum of
money and the fair market value of other property or services
received) on the sale or exchange of property, the performance of
services, or the use of property or capital (including rents,
royalties, interest, and dividends) in a transaction that produces
business income, in which the income, gain, or loss is recognized (or
would be recognized if the transaction were in the United States)
under the Internal Revenue Code, as applicable for purposes of this
part. Amounts realized on the sale or exchange of property shall not
be reduced by the cost of goods sold or the basis of property sold.
Gross receipts, even if business income, shall not include the
following items:
(A) Repayment, maturity, or redemption of the principal of a loan,
bond, mutual fund, certificate of deposit, or similar marketable
instrument.
(B) The principal amount received under a repurchase agreement or
other transaction properly characterized as a loan.
(C) Proceeds from issuance of the taxpayer's own stock or from
sale of treasury stock.
(D) Damages and other amounts received as the result of
litigation.
(E) Property acquired by an agent on behalf of another.
(F) Tax refunds and other tax benefit recoveries.
(G) Pension reversions.
(H) Contributions to capital (except for sales of securities by
securities dealers).
(I) Income from discharge of indebtedness.
(J) Amounts realized from exchanges of inventory that are not
recognized under the Internal Revenue Code.
(K) Amounts received from transactions in intangible assets held
in connection with a treasury function of the taxpayer's unitary
business and the gross receipts and overall net gains from the
maturity, redemption, sale, exchange, or other disposition of those
intangible assets. For purposes of this subparagraph, "treasury
function" means the pooling, management, and investment of intangible
assets for the purpose of satisfying the cash flow needs of the
taxpayer's trade or business, such as providing liquidity for a
taxpayer's business cycle, providing a reserve for business
contingencies, and business acquisitions, and also includes the use
of futures contracts and options contracts to hedge foreign currency
fluctuations. A taxpayer principally engaged in the trade or business
of purchasing and selling intangible assets of the type typically
held in a taxpayer's treasury function, such as a registered
broker-dealer, is not performing a treasury function, for purposes of
this subparagraph, with respect to income so produced.
(L) Amounts received from hedging transactions involving
intangible assets. A "hedging transaction" means a transaction
related to the taxpayer's trading function involving futures and
options transactions for the purpose of hedging price risk of the
products or commodities consumed, produced, or sold by the taxpayer.
(3) Exclusion of an item from the definition of "gross receipts"
shall not be determinative of its character as business or
nonbusiness income.
(4) The changes to this section by the act adding this sentence
pertaining to taxable years beginning before January 1, 2011,
constitute clarifying, nonsubstantive changes.
(g) "State" means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, and any foreign country or political
subdivision thereof.
25121. Any taxpayer having income from business activity which is
taxable both within and without this state shall allocate and
apportion its net income as provided in this act.
25122. For purposes of allocation and apportionment of income under
this act, a taxpayer is taxable in another state if (a) in that
state it is subject to a net income tax, a franchise tax measured by
net income, a franchise tax for the privilege of doing business, or a
corporate stock tax, or (b) that state has jurisdiction to subject
the taxpayer to a net income tax regardless of whether, in fact, the
state does or does not.
25123. Rents and royalties from real or tangible personal property,
capital gains, interest, dividends, or patent or copyright
royalties, to the extent that they constitute nonbusiness income,
shall be allocated as provided in Sections 25124 through 25127 of
this act.
25124. (a) Net rents and royalties from real property located in
this state are allocable to this state.
(b) Net rent and royalties from tangible personal property are
allocable to this state:
(1) If and to the extent that the property is utilized in this
state, or
(2) In their entirety if the taxpayer's commercial domicile is in
this state and the taxpayer is not organized under the laws of or
taxable in the state in which the property is utilized.
(c) The extent of utilization of tangible personal property in a
state is determined by multiplying the rents and royalties by a
fraction, the numerator of which is the number of days of physical
location of the property in the state during the rental or royalty
period in the taxable year and the denominator of which is the number
of days of physical location of the property everywhere during all
rental or royalty periods in the taxable year. If the physical
location of the property during the rental or royalty period is
unknown or unascertainable by the taxpayer, tangible personal
property is utilized in the state in which the property was located
at the time the rental or royalty payer obtained possession.
25125. (a) Capital gains and losses from sales of real property
located in this state are allocable to this state.
(b) Capital gains and losses from sales of tangible personal
property are allocable to this state if:
(1) The property had a situs in this state at the time of the
sale, or
(2) The taxpayer's commercial domicile is in this state and the
taxpayer is not taxable in the state in which the property had a
situs.
(c) Except in the case of the sale of a partnership interest,
capital gains and losses from sales of intangible personal property
are allocable to this state if the taxpayer's commercial domicile is
in this state.
(d) Gain or loss on the sale of a partnership interest is
allocable to this state in the ratio of the original cost of
partnership tangible property in the state to the original cost of
partnership tangible property everywhere, determined at the time of
the sale. In the event that more than 50 percent of the value of
partnership's assets consist of intangibles, gain or loss from the
sale of the partnership interest is allocated to this state in
accordance with the sales factor of the partnership for its first
full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.
25126. Interest and dividends are allocable to this state if the
taxpayer's commercial domicile is in this state.
25127. (a) Patent and copyright royalties are allocable to this
state:
(1) If and to the extent that the patent or copyright is utilized
by the payor in this state, or
(2) If and to the extent that the patent or copyright is utilized
by the payor in a state in which the taxpayer is not taxable and the
taxpayer's commercial domicile is in this state.
(b) A patent is utilized in a state to the extent that it is
employed in production, fabrication, manufacturing, or other
processing in the state or to the extent that a patented product is
produced in the state. If the basis of receipts from patent royalties
does not permit allocation to states or if the accounting procedures
do not reflect states of utilization, the patent is utilized in the
state in which the taxpayer's commercial domicile is located.
(c) A copyright is utilized in a state to the extent that printing
or other publication originates in the state. If the basis of
receipts from copyright royalties does not permit allocation to
states or if the accounting procedures do not reflect states of
utilization, the copyright is utilized in the state in which the
taxpayer's commercial domicile is located.
25128. (a) Notwithstanding Section 38006, all business income shall
be apportioned to this state by multiplying the business income by a
fraction, the numerator of which is the property factor plus the
payroll factor plus twice the sales factor, and the denominator of
which is four, except as provided in subdivision (b) or (c).
(b) If an apportioning trade or business derives more than 50
percent of its "gross business receipts" from conducting one or more
qualified business activities, all business income of the
apportioning trade or business shall be apportioned to this state by
multiplying business income by a fraction, the numerator of which is
the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three.
(c) For purposes of this section, a "qualified business activity"
means the following:
(1) An agricultural business activity.
(2) An extractive business activity.
(3) A savings and loan activity.
(4) A banking or financial business activity.
(d) For purposes of this section:
(1) "Gross business receipts" means gross receipts described in
subdivision (e) or (f) of Section 25120 (other than gross receipts
from sales or other transactions within an apportioning trade or
business between members of a group of corporations whose income and
apportionment factors are required to be included in a combined
report under Section 25101, limited, if applicable, by Section
25110), whether or not the receipts are excluded from the sales
factor by operation of Section 25137.
(2) "Agricultural business activity" means activities relating to
any stock, dairy, poultry, fruit, furbearing animal, or truck farm,
plantation, ranch, nursery, or range. "Agricultural business activity"
also includes activities relating to cultivating the soil or raising
or harvesting any agricultural or horticultural commodity,
including, but not limited to, the raising, shearing, feeding, caring
for, training, or management of animals on a farm as well as the
handling, drying, packing, grading, or storing on a farm any
agricultural or horticultural commodity in its unmanufactured state,
but only if the owner, tenant, or operator of the farm regularly
produces more than one-half of the commodity so treated.
(3) "Extractive business activity" means activities relating to
the production, refining, or processing of oil, natural gas, or
mineral ore.
(4) "Savings and loan activity" means any activities performed by
savings and loan associations or savings banks which have been
chartered by federal or state law.
(5) "Banking or financial business activity" means activities
attributable to dealings in money or moneyed capital in substantial
competition with the business of national banks.
(6) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
(7) Paragraph (4) of subdivision (c) shall apply only if the
Franchise Tax Board adopts the Proposed Multistate Tax Commission
Formula for the Uniform Apportionment of Net Income from Financial
Institutions, or its substantial equivalent, and shall become
operative upon the same operative date as the adopted formula.
(8) In any case where the income and apportionment factors of two
or more savings associations or corporations are required to be
included in a combined report under Section 25101, limited, if
applicable, by Section 25110, both of the following shall apply:
(A) The application of the more than 50 percent test of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business of the group.
(B) The entire business income of the group shall be apportioned
in accordance with either subdivision (a) or (b), or subdivision (b)
of Section 25128.5, as applicable.
25128.5. (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011, any apportioning trade or
business, other than an apportioning trade or business described in
subdivision (b) of Section 25128, may make an irrevocable annual
election on an original timely filed return, in the manner and form
prescribed by the Franchise Tax Board to apportion its income in
accordance with this section, and not in accordance with Section
25128.
(b) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011, all business income of an apportioning
trade or business making an election described in subdivision (a)
shall be apportioned to this state by multiplying the business income
by the sales factor.
(c) The Franchise Tax Board is authorized to issue regulations
necessary or appropriate regarding the making of an election under
this section, including regulations that are consistent with rules
prescribed for making an election under Section 25113.
25129. The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used during the taxable year.
25130. Property owned by the taxpayer is valued at its original
cost. Property rented by the taxpayer is valued at eight times the
net annual rental rate. Net annual rental rate is the annual rental
rate paid by the taxpayer less any annual rental rate received by the
taxpayer from subrentals.
25131. The average value of property shall be determined by
averaging the values at the beginning and ending of the taxable year
but the Franchise Tax Board may require the averaging of monthly
values during the taxable year if reasonably required to reflect
properly the average value of the taxpayer's property.
25132. The payroll factor is a fraction, the numerator of which is
the total amount paid in this state during the taxable year by the
taxpayer for compensation, and the denominator of which is the total
compensation paid everywhere during the taxable year.
25133. Compensation is paid in this state if:
(a) The individual's service is performed entirely within the
state; or
(b) The individual's service is performed both within and without
the state, but the service performed without the state is incidental
to the individual's service within the state; or
(c) Some of the service is performed in the state and (1) the base
of operations or, if there is no base of operations, the place from
which the service is directed or controlled is in the state, or (2)
the base of operations or the place from which the service is
directed or controlled is not in any state in which some part of the
service is performed, but the individual's residence is in this
state.
25134. The sales factor is a fraction, the numerator of which is
the total sales of the taxpayer in this state during the taxable
year, and the denominator of which is the total sales of the taxpayer
everywhere during the taxable year.
25135. (a) Sales of tangible personal property are in this state
if:
(1) The property is delivered or shipped to a purchaser, other
than the United States government, within this state regardless of
the f.o.b. point or other conditions of the sale.
(2) The property is shipped from an office, store, warehouse,
factory, or other place of storage in this state and (A) the
purchaser is the United States government or (B) the taxpayer is not
taxable in the state of the purchaser.
(b) For taxable years beginning on or after January 1, 2011, for
purposes of determining whether sales are in this state and included
in the numerator of the sales factor, all sales of the combined
reporting group properly assigned to this state under this section
shall be included in the sales factor numerator for this state
regardless of whether the member of the combined reporting group
making the sale is subject to the taxes imposed under Chapter 2
(commencing with Section 23101) or Chapter 3 (commencing with Section
23501) of this part. All sales not assigned to this state pursuant
to subdivision (a) shall not be included in the sales factor
numerator for this state if a member of the combined reporting group
of the taxpayer is taxable in the state of the purchaser.
(c) The Franchise Tax Board may prescribe regulations as necessary
or appropriate to carry out the purposes of this section.
25136. (a) For taxable years beginning before January 1, 2011, and
for taxable years beginning on or after January 1, 2011, for which
Section 25128.5 is operative and an election under subdivision (a) of
Section 25128.5 has not been made, sales, other than sales of
tangible personal property, are in this state if:
(1) The income-producing activity is performed in this state; or
(2) The income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity
is performed in this state than in any other state, based on costs
of performance.
(3) This subdivision shall apply, and subdivision (b) shall not
apply, for any taxable year beginning on or after January 1, 2011,
for which Section 25128.5 is not operative for any taxpayer subject
to the tax imposed under this part.
(b) For taxable years beginning on or after January 1, 2011:
(1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the service in this
state.
(2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.
(3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
(4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
(5) (A) If Section 25128.5 is operative, then this subdivision
shall apply in lieu of subdivision (a) for any taxable year for which
an election has been made under subdivision (a) of Section 25128.5.
(B) If Section 25128.5 is not operative, then this subdivision
shall not apply and subdivision (a) shall apply for any taxpayer
subject to the tax imposed under this part.
(C) Notwithstanding subparagraphs (A) or (B), this subdivision
shall apply for purposes of paragraph (2) of subdivision (b) of
Section 23101.
(c) The Franchise Tax Board may prescribe those regulations as
necessary or appropriate to carry out the purposes of subdivision
(b).
25137. If the allocation and apportionment provisions of this act
do not fairly represent the extent of the taxpayer's business
activity in this state, the taxpayer may petition for or the
Franchise Tax Board may require, in respect to all or any part of the
taxpayer's business activity, if reasonable:
(a) Separate accounting;
(b) The exclusion of any one or more of the factors;
(c) The inclusion of one or more additional factors which will
fairly represent the taxpayer's business activity in this state; or
(d) The employment of any other method to effectuate an equitable
allocation and apportionment of the taxpayer's income.
25138. This act shall be so construed as to effectuate its general
purpose to make uniform the law of those states which enact it.
Enactment of Article IV of the Multistate Tax Compact (as set forth
in Section 38006 of the code) pertaining to the allocation and
apportionment of income shall be construed as a reenactment of
Sections 25120 to 25137, inclusive, without any inference that a
change in interpretation is implied by such enactment.
25139. Sections 25120 to 25139, inclusive, may be cited as the
Uniform Division of Income for Tax Purposes Act.
25140. Accounting procedures shall be adopted which will separately
reflect the revenues attributable to dividends received by
corporations having commercial domiciles in this state.
In view of pending litigation concerning the proper treatment of
intercompany dividends, it is not intended by enactment of this act
that any inference be drawn from it in such litigation.
25141. (a) For purposes of this section, the following definitions
shall apply:
(1) "Entity" means an individual, corporation, association,
partnership, limited liability company, estate, trust, or any
combination thereof.
(2) "Person" means an individual or corporation.
(3) "Professional athletic team" means any entity which has all of
the following characteristics:
(A) Employs concurrently during the taxable year five or more
persons, who are compensated for being participating members of an
athletic team engaging in public contests.
(B) Is a member of a league composed of at least five entities
which are engaged in the operation of an athletic team and which are
located in this and other states or in other countries.
(C) Has total minimum paid attendance in the aggregate for all
contests wherever played during the taxable year of 40,000 persons.
(D) Has minimum gross income in the taxable year of one hundred
thousand dollars ($100,000).
(b) For purposes of this chapter, a team shall be considered to
have its operations based in the state or country in which the team
derives its territorial rights under the rules of the league of which
it is a member.
(c) The business income of a professional athletic team derived
directly or indirectly from its operations as a professional athletic
team shall be allocated to this state pursuant to the following
three-factor formula:
(1) Computation of the property factor under Section 25129:
(A) For a team that has its operations based in this state, the
average value of all real and tangible personal property, wherever
located, and owned or rented and used during the taxable year, shall
be deemed to have been owned or rented and used in this state during
the taxable year.
(B) For a team that has its operations based outside of this
state, the average value of all real and tangible personal property,
wherever located, and owned or rented and used during the taxable
year, shall be deemed to have been owned or rented and used outside
this state during the taxable year.
(2) Computation of the payroll factor under Section 25132:
(A) For a team that has its operations based in this state, the
total compensation paid everywhere during the taxable year shall be
deemed to have been paid in this state during the taxable year.
(B) For a team that has its operations based outside of this
state, the total compensation paid everywhere during the taxable year
shall be deemed to have been paid outside this state during the
taxable year.
(3) Computation of the sales factor under Section 25134:
(A) For a team that has its operations based in this state, the
total sales everywhere during the taxable year shall be deemed to
have been made in this state during the taxable year.
(B) For a team that has its operations based outside of this
state, the total sales everywhere during the taxable year shall be
deemed to have been made outside this state during the taxable year.
(d) If any team that has its operations based in this state is
required to allocate or apportion a part of its business income
derived directly or indirectly from its operations as a professional
athletic team to another state or country by the laws, regulations,
or requirements of the other state or country and pays an income or
franchise tax measured by income thereon as a result of the
allocation or apportionment, then all of the following shall apply:
(1) The business income of the team otherwise subject to this
section shall be reduced for purposes of this section by the amount
of the business income which is allocated or apportioned to and taxed
by the other state or country.
(2) This section shall not apply to any team in the same league
that has its operations based in the other state or country, and the
business income of any such team derived directly or indirectly from
its operations as a professional athletic team shall be allocated or
apportioned to this state in a manner consistent with the method of
allocation or apportionment imposed by the other state or country on
the business income of the team that has its operations based in this
state.
(e) For purposes of the minimum tax imposed under Sections 23151
and 23151.1, an entity which operates a professional athletic team
shall be treated as a corporation. The liability under Sections 23151
and 23151.1 of any corporation owning any portion or share of an
entity shall be satisfied by payment of the minimum tax by that
entity, if the corporation is not otherwise doing business in this
state.
25120. As used in Sections 25120 to 25139, inclusive, which shall
hereafter be referred to as "this act," unless the context otherwise
requires:
(a) "Business income" means income arising from transactions and
activity in the regular course of the taxpayer's trade or business
and includes income from tangible and intangible property if the
acquisition, management, and disposition of the property constitute
integral parts of the taxpayer's regular trade or business
operations.
(b) "Commercial domicile" means the principal place from which the
trade or business of the taxpayer is directed or managed.
(c) "Compensation" means wages, salaries, commissions and any
other form of remuneration paid to employees for personal services.
(d) "Nonbusiness income" means all income other than business
income.
(e) For taxable years beginning before January 1, 2011, "sales"
means all gross receipts of the taxpayer not allocated under Sections
25123 to 25127, inclusive.
(f) For taxable years beginning on or after January 1, 2011:
(1) "Sales" means all gross receipts of the taxpayer not allocated
under Sections 25123 to 25127, inclusive.
(2) "Gross receipts" means the gross amounts realized (the sum of
money and the fair market value of other property or services
received) on the sale or exchange of property, the performance of
services, or the use of property or capital (including rents,
royalties, interest, and dividends) in a transaction that produces
business income, in which the income, gain, or loss is recognized (or
would be recognized if the transaction were in the United States)
under the Internal Revenue Code, as applicable for purposes of this
part. Amounts realized on the sale or exchange of property shall not
be reduced by the cost of goods sold or the basis of property sold.
Gross receipts, even if business income, shall not include the
following items:
(A) Repayment, maturity, or redemption of the principal of a loan,
bond, mutual fund, certificate of deposit, or similar marketable
instrument.
(B) The principal amount received under a repurchase agreement or
other transaction properly characterized as a loan.
(C) Proceeds from issuance of the taxpayer's own stock or from
sale of treasury stock.
(D) Damages and other amounts received as the result of
litigation.
(E) Property acquired by an agent on behalf of another.
(F) Tax refunds and other tax benefit recoveries.
(G) Pension reversions.
(H) Contributions to capital (except for sales of securities by
securities dealers).
(I) Income from discharge of indebtedness.
(J) Amounts realized from exchanges of inventory that are not
recognized under the Internal Revenue Code.
(K) Amounts received from transactions in intangible assets held
in connection with a treasury function of the taxpayer's unitary
business and the gross receipts and overall net gains from the
maturity, redemption, sale, exchange, or other disposition of those
intangible assets. For purposes of this subparagraph, "treasury
function" means the pooling, management, and investment of intangible
assets for the purpose of satisfying the cash flow needs of the
taxpayer's trade or business, such as providing liquidity for a
taxpayer's business cycle, providing a reserve for business
contingencies, and business acquisitions, and also includes the use
of futures contracts and options contracts to hedge foreign currency
fluctuations. A taxpayer principally engaged in the trade or business
of purchasing and selling intangible assets of the type typically
held in a taxpayer's treasury function, such as a registered
broker-dealer, is not performing a treasury function, for purposes of
this subparagraph, with respect to income so produced.
(L) Amounts received from hedging transactions involving
intangible assets. A "hedging transaction" means a transaction
related to the taxpayer's trading function involving futures and
options transactions for the purpose of hedging price risk of the
products or commodities consumed, produced, or sold by the taxpayer.
(3) Exclusion of an item from the definition of "gross receipts"
shall not be determinative of its character as business or
nonbusiness income.
(4) The changes to this section by the act adding this sentence
pertaining to taxable years beginning before January 1, 2011,
constitute clarifying, nonsubstantive changes.
(g) "State" means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, and any foreign country or political
subdivision thereof.
25121. Any taxpayer having income from business activity which is
taxable both within and without this state shall allocate and
apportion its net income as provided in this act.
25122. For purposes of allocation and apportionment of income under
this act, a taxpayer is taxable in another state if (a) in that
state it is subject to a net income tax, a franchise tax measured by
net income, a franchise tax for the privilege of doing business, or a
corporate stock tax, or (b) that state has jurisdiction to subject
the taxpayer to a net income tax regardless of whether, in fact, the
state does or does not.
25123. Rents and royalties from real or tangible personal property,
capital gains, interest, dividends, or patent or copyright
royalties, to the extent that they constitute nonbusiness income,
shall be allocated as provided in Sections 25124 through 25127 of
this act.
25124. (a) Net rents and royalties from real property located in
this state are allocable to this state.
(b) Net rent and royalties from tangible personal property are
allocable to this state:
(1) If and to the extent that the property is utilized in this
state, or
(2) In their entirety if the taxpayer's commercial domicile is in
this state and the taxpayer is not organized under the laws of or
taxable in the state in which the property is utilized.
(c) The extent of utilization of tangible personal property in a
state is determined by multiplying the rents and royalties by a
fraction, the numerator of which is the number of days of physical
location of the property in the state during the rental or royalty
period in the taxable year and the denominator of which is the number
of days of physical location of the property everywhere during all
rental or royalty periods in the taxable year. If the physical
location of the property during the rental or royalty period is
unknown or unascertainable by the taxpayer, tangible personal
property is utilized in the state in which the property was located
at the time the rental or royalty payer obtained possession.
25125. (a) Capital gains and losses from sales of real property
located in this state are allocable to this state.
(b) Capital gains and losses from sales of tangible personal
property are allocable to this state if:
(1) The property had a situs in this state at the time of the
sale, or
(2) The taxpayer's commercial domicile is in this state and the
taxpayer is not taxable in the state in which the property had a
situs.
(c) Except in the case of the sale of a partnership interest,
capital gains and losses from sales of intangible personal property
are allocable to this state if the taxpayer's commercial domicile is
in this state.
(d) Gain or loss on the sale of a partnership interest is
allocable to this state in the ratio of the original cost of
partnership tangible property in the state to the original cost of
partnership tangible property everywhere, determined at the time of
the sale. In the event that more than 50 percent of the value of
partnership's assets consist of intangibles, gain or loss from the
sale of the partnership interest is allocated to this state in
accordance with the sales factor of the partnership for its first
full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.
25126. Interest and dividends are allocable to this state if the
taxpayer's commercial domicile is in this state.
25127. (a) Patent and copyright royalties are allocable to this
state:
(1) If and to the extent that the patent or copyright is utilized
by the payor in this state, or
(2) If and to the extent that the patent or copyright is utilized
by the payor in a state in which the taxpayer is not taxable and the
taxpayer's commercial domicile is in this state.
(b) A patent is utilized in a state to the extent that it is
employed in production, fabrication, manufacturing, or other
processing in the state or to the extent that a patented product is
produced in the state. If the basis of receipts from patent royalties
does not permit allocation to states or if the accounting procedures
do not reflect states of utilization, the patent is utilized in the
state in which the taxpayer's commercial domicile is located.
(c) A copyright is utilized in a state to the extent that printing
or other publication originates in the state. If the basis of
receipts from copyright royalties does not permit allocation to
states or if the accounting procedures do not reflect states of
utilization, the copyright is utilized in the state in which the
taxpayer's commercial domicile is located.
25128. (a) Notwithstanding Section 38006, all business income shall
be apportioned to this state by multiplying the business income by a
fraction, the numerator of which is the property factor plus the
payroll factor plus twice the sales factor, and the denominator of
which is four, except as provided in subdivision (b) or (c).
(b) If an apportioning trade or business derives more than 50
percent of its "gross business receipts" from conducting one or more
qualified business activities, all business income of the
apportioning trade or business shall be apportioned to this state by
multiplying business income by a fraction, the numerator of which is
the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three.
(c) For purposes of this section, a "qualified business activity"
means the following:
(1) An agricultural business activity.
(2) An extractive business activity.
(3) A savings and loan activity.
(4) A banking or financial business activity.
(d) For purposes of this section:
(1) "Gross business receipts" means gross receipts described in
subdivision (e) or (f) of Section 25120 (other than gross receipts
from sales or other transactions within an apportioning trade or
business between members of a group of corporations whose income and
apportionment factors are required to be included in a combined
report under Section 25101, limited, if applicable, by Section
25110), whether or not the receipts are excluded from the sales
factor by operation of Section 25137.
(2) "Agricultural business activity" means activities relating to
any stock, dairy, poultry, fruit, furbearing animal, or truck farm,
plantation, ranch, nursery, or range. "Agricultural business activity"
also includes activities relating to cultivating the soil or raising
or harvesting any agricultural or horticultural commodity,
including, but not limited to, the raising, shearing, feeding, caring
for, training, or management of animals on a farm as well as the
handling, drying, packing, grading, or storing on a farm any
agricultural or horticultural commodity in its unmanufactured state,
but only if the owner, tenant, or operator of the farm regularly
produces more than one-half of the commodity so treated.
(3) "Extractive business activity" means activities relating to
the production, refining, or processing of oil, natural gas, or
mineral ore.
(4) "Savings and loan activity" means any activities performed by
savings and loan associations or savings banks which have been
chartered by federal or state law.
(5) "Banking or financial business activity" means activities
attributable to dealings in money or moneyed capital in substantial
competition with the business of national banks.
(6) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
(7) Paragraph (4) of subdivision (c) shall apply only if the
Franchise Tax Board adopts the Proposed Multistate Tax Commission
Formula for the Uniform Apportionment of Net Income from Financial
Institutions, or its substantial equivalent, and shall become
operative upon the same operative date as the adopted formula.
(8) In any case where the income and apportionment factors of two
or more savings associations or corporations are required to be
included in a combined report under Section 25101, limited, if
applicable, by Section 25110, both of the following shall apply:
(A) The application of the more than 50 percent test of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business of the group.
(B) The entire business income of the group shall be apportioned
in accordance with either subdivision (a) or (b), or subdivision (b)
of Section 25128.5, as applicable.
25128.5. (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011, any apportioning trade or
business, other than an apportioning trade or business described in
subdivision (b) of Section 25128, may make an irrevocable annual
election on an original timely filed return, in the manner and form
prescribed by the Franchise Tax Board to apportion its income in
accordance with this section, and not in accordance with Section
25128.
(b) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011, all business income of an apportioning
trade or business making an election described in subdivision (a)
shall be apportioned to this state by multiplying the business income
by the sales factor.
(c) The Franchise Tax Board is authorized to issue regulations
necessary or appropriate regarding the making of an election under
this section, including regulations that are consistent with rules
prescribed for making an election under Section 25113.
25129. The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used during the taxable year.
25130. Property owned by the taxpayer is valued at its original
cost. Property rented by the taxpayer is valued at eight times the
net annual rental rate. Net annual rental rate is the annual rental
rate paid by the taxpayer less any annual rental rate received by the
taxpayer from subrentals.
25131. The average value of property shall be determined by
averaging the values at the beginning and ending of the taxable year
but the Franchise Tax Board may require the averaging of monthly
values during the taxable year if reasonably required to reflect
properly the average value of the taxpayer's property.
25132. The payroll factor is a fraction, the numerator of which is
the total amount paid in this state during the taxable year by the
taxpayer for compensation, and the denominator of which is the total
compensation paid everywhere during the taxable year.
25133. Compensation is paid in this state if:
(a) The individual's service is performed entirely within the
state; or
(b) The individual's service is performed both within and without
the state, but the service performed without the state is incidental
to the individual's service within the state; or
(c) Some of the service is performed in the state and (1) the base
of operations or, if there is no base of operations, the place from
which the service is directed or controlled is in the state, or (2)
the base of operations or the place from which the service is
directed or controlled is not in any state in which some part of the
service is performed, but the individual's residence is in this
state.
25134. The sales factor is a fraction, the numerator of which is
the total sales of the taxpayer in this state during the taxable
year, and the denominator of which is the total sales of the taxpayer
everywhere during the taxable year.
25135. (a) Sales of tangible personal property are in this state
if:
(1) The property is delivered or shipped to a purchaser, other
than the United States government, within this state regardless of
the f.o.b. point or other conditions of the sale.
(2) The property is shipped from an office, store, warehouse,
factory, or other place of storage in this state and (A) the
purchaser is the United States government or (B) the taxpayer is not
taxable in the state of the purchaser.
(b) For taxable years beginning on or after January 1, 2011, for
purposes of determining whether sales are in this state and included
in the numerator of the sales factor, all sales of the combined
reporting group properly assigned to this state under this section
shall be included in the sales factor numerator for this state
regardless of whether the member of the combined reporting group
making the sale is subject to the taxes imposed under Chapter 2
(commencing with Section 23101) or Chapter 3 (commencing with Section
23501) of this part. All sales not assigned to this state pursuant
to subdivision (a) shall not be included in the sales factor
numerator for this state if a member of the combined reporting group
of the taxpayer is taxable in the state of the purchaser.
(c) The Franchise Tax Board may prescribe regulations as necessary
or appropriate to carry out the purposes of this section.
25136. (a) For taxable years beginning before January 1, 2011, and
for taxable years beginning on or after January 1, 2011, for which
Section 25128.5 is operative and an election under subdivision (a) of
Section 25128.5 has not been made, sales, other than sales of
tangible personal property, are in this state if:
(1) The income-producing activity is performed in this state; or
(2) The income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity
is performed in this state than in any other state, based on costs
of performance.
(3) This subdivision shall apply, and subdivision (b) shall not
apply, for any taxable year beginning on or after January 1, 2011,
for which Section 25128.5 is not operative for any taxpayer subject
to the tax imposed under this part.
(b) For taxable years beginning on or after January 1, 2011:
(1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the service in this
state.
(2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.
(3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
(4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
(5) (A) If Section 25128.5 is operative, then this subdivision
shall apply in lieu of subdivision (a) for any taxable year for which
an election has been made under subdivision (a) of Section 25128.5.
(B) If Section 25128.5 is not operative, then this subdivision
shall not apply and subdivision (a) shall apply for any taxpayer
subject to the tax imposed under this part.
(C) Notwithstanding subparagraphs (A) or (B), this subdivision
shall apply for purposes of paragraph (2) of subdivision (b) of
Section 23101.
(c) The Franchise Tax Board may prescribe those regulations as
necessary or appropriate to carry out the purposes of subdivision
(b).
25137. If the allocation and apportionment provisions of this act
do not fairly represent the extent of the taxpayer's business
activity in this state, the taxpayer may petition for or the
Franchise Tax Board may require, in respect to all or any part of the
taxpayer's business activity, if reasonable:
(a) Separate accounting;
(b) The exclusion of any one or more of the factors;
(c) The inclusion of one or more additional factors which will
fairly represent the taxpayer's business activity in this state; or
(d) The employment of any other method to effectuate an equitable
allocation and apportionment of the taxpayer's income.
25138. This act shall be so construed as to effectuate its general
purpose to make uniform the law of those states which enact it.
Enactment of Article IV of the Multistate Tax Compact (as set forth
in Section 38006 of the code) pertaining to the allocation and
apportionment of income shall be construed as a reenactment of
Sections 25120 to 25137, inclusive, without any inference that a
change in interpretation is implied by such enactment.
25139. Sections 25120 to 25139, inclusive, may be cited as the
Uniform Division of Income for Tax Purposes Act.
25140. Accounting procedures shall be adopted which will separately
reflect the revenues attributable to dividends received by
corporations having commercial domiciles in this state.
In view of pending litigation concerning the proper treatment of
intercompany dividends, it is not intended by enactment of this act
that any inference be drawn from it in such litigation.
25141. (a) For purposes of this section, the following definitions
shall apply:
(1) "Entity" means an individual, corporation, association,
partnership, limited liability company, estate, trust, or any
combination thereof.
(2) "Person" means an individual or corporation.
(3) "Professional athletic team" means any entity which has all of
the following characteristics:
(A) Employs concurrently during the taxable year five or more
persons, who are compensated for being participating members of an
athletic team engaging in public contests.
(B) Is a member of a league composed of at least five entities
which are engaged in the operation of an athletic team and which are
located in this and other states or in other countries.
(C) Has total minimum paid attendance in the aggregate for all
contests wherever played during the taxable year of 40,000 persons.
(D) Has minimum gross income in the taxable year of one hundred
thousand dollars ($100,000).
(b) For purposes of this chapter, a team shall be considered to
have its operations based in the state or country in which the team
derives its territorial rights under the rules of the league of which
it is a member.
(c) The business income of a professional athletic team derived
directly or indirectly from its operations as a professional athletic
team shall be allocated to this state pursuant to the following
three-factor formula:
(1) Computation of the property factor under Section 25129:
(A) For a team that has its operations based in this state, the
average value of all real and tangible personal property, wherever
located, and owned or rented and used during the taxable year, shall
be deemed to have been owned or rented and used in this state during
the taxable year.
(B) For a team that has its operations based outside of this
state, the average value of all real and tangible personal property,
wherever located, and owned or rented and used during the taxable
year, shall be deemed to have been owned or rented and used outside
this state during the taxable year.
(2) Computation of the payroll factor under Section 25132:
(A) For a team that has its operations based in this state, the
total compensation paid everywhere during the taxable year shall be
deemed to have been paid in this state during the taxable year.
(B) For a team that has its operations based outside of this
state, the total compensation paid everywhere during the taxable year
shall be deemed to have been paid outside this state during the
taxable year.
(3) Computation of the sales factor under Section 25134:
(A) For a team that has its operations based in this state, the
total sales everywhere during the taxable year shall be deemed to
have been made in this state during the taxable year.
(B) For a team that has its operations based outside of this
state, the total sales everywhere during the taxable year shall be
deemed to have been made outside this state during the taxable year.
(d) If any team that has its operations based in this state is
required to allocate or apportion a part of its business income
derived directly or indirectly from its operations as a professional
athletic team to another state or country by the laws, regulations,
or requirements of the other state or country and pays an income or
franchise tax measured by income thereon as a result of the
allocation or apportionment, then all of the following shall apply:
(1) The business income of the team otherwise subject to this
section shall be reduced for purposes of this section by the amount
of the business income which is allocated or apportioned to and taxed
by the other state or country.
(2) This section shall not apply to any team in the same league
that has its operations based in the other state or country, and the
business income of any such team derived directly or indirectly from
its operations as a professional athletic team shall be allocated or
apportioned to this state in a manner consistent with the method of
allocation or apportionment imposed by the other state or country on
the business income of the team that has its operations based in this
state.
(e) For purposes of the minimum tax imposed under Sections 23151
and 23151.1, an entity which operates a professional athletic team
shall be treated as a corporation. The liability under Sections 23151
and 23151.1 of any corporation owning any portion or share of an
entity shall be satisfied by payment of the minimum tax by that
entity, if the corporation is not otherwise doing business in this
state.
