State Codes and Statutes

Statutes > California > Rtc > 23701-23712

REVENUE AND TAXATION CODE
SECTION 23701-23712



23701.  Organizations which are organized and operated for nonprofit
purposes within the provisions of a specific section of this
article, or are defined in Section 23701h (relating to certain
title-holding companies) or Section 23701x (relating to certain
title-holding companies), are exempt from taxes imposed under this
part, except as provided in this article or in Article 2 (commencing
with Section 23731) of this chapter, if:
   (a) An application for exemption is submitted in the form
prescribed by the Franchise Tax Board; and
   (b) A filing fee of twenty-five dollars ($25) is paid with each
application for exemption filed with the Franchise Tax Board after
December 31, 1969; and
   (c) The Franchise Tax Board issues a determination exempting the
organization from tax.
   This section shall not prevent a determination from having
retroactive effect and does not prevent the issuance of a
determination with respect to a domestic organization which was in
existence prior to January 1, 1970, and exempt under prior law
without the submission of a formal application or payment of a filing
fee. For the purpose of this section, the term "domestic" means
created or organized under the laws of this state.
   The Franchise Tax Board may issue rulings and regulations as are
necessary and reasonable to carry out the provisions of this article.



23701a.  (a) Labor, agricultural, or horticultural organizations
other than cooperative organizations described in Section 24404 or
24405 (unless the cooperative organization is determined by the
Internal Revenue Service to be an organization described in Section
501(c)(5) of the Internal Revenue Code of 1954, as amended).
   For purposes of this section, the term "agricultural" includes the
art or science of cultivating land, harvesting crops or aquatic
resources, or raising livestock.
   (b) The amendments to this section by the act adding this
subdivision shall be applied in the computation of taxes for taxable
years beginning on or after January 1, 1983.



23701b.  A fraternal order described in Section 501(c)(8) of the
Internal Revenue Code.



23701c.  A cemetery company described in Section 501(c)(13) of the
Internal Revenue Code.



23701d.  (a) A corporation, community chest or trust, organized and
operated exclusively for religious, charitable, scientific, testing
for public safety, literary, or educational purposes, or to foster
national or international amateur sports competition (but only if no
part of its activities involved the provision of athletic facilities
or equipment), or for the prevention of cruelty to children or
animals, no part of the net earnings of which inures to the benefit
of any private shareholder or individual, no substantial part of the
activities of which is carrying on propaganda or otherwise attempting
to influence legislation, (except as otherwise provided in Section
23704.5), and which does not participate in, or intervene in
(including the publishing or distribution of statements), any
political campaign on behalf of (or in opposition to) any candidate
for public office. An organization is not organized exclusively for
exempt purposes listed above unless its assets are irrevocably
dedicated to one or more purposes listed in this section. Dedication
of assets requires that in the event of dissolution of an
organization or the impossibility of performing the specific
organizational purposes the assets would continue to be devoted to
exempt purposes. Assets shall be deemed irrevocably dedicated to
exempt purposes if the articles of organization provide that upon
dissolution the assets will be distributed to an organization which
is exempt under this section or Section 501(c)(3) of the Internal
Revenue Code or to the federal government, or to a state or local
government for public purposes; or by a provision in the articles of
organization, satisfactory to the Franchise Tax Board; that the
property will be distributed in trust for exempt purposes; or by
establishing that the assets are irrevocably dedicated to exempt
purposes by operation of law. The irrevocable dedication requirement
shall not be a sole basis for revocation of an exempt determination
made by the Franchise Tax Board prior to the effective date of this
amendment.
   (b) (1) In the case of a qualified amateur sports organization--
   (A) The requirement of subdivision (a) that no part of its
activities involves the provision of athletic facilities or equipment
shall not apply.
   (B) That organization shall not fail to meet the requirements of
subdivision (a) merely because its membership is local or regional in
nature.
   (2) For purposes of this subdivision, "qualified amateur sports
organization" means any organization organized and operated
exclusively to foster national or international amateur sports
competition if that organization is also organized and operated
primarily to conduct national or international competition in sports
or to support and develop amateur athletes for national or
international competition in sports.
   (c) (1) Notwithstanding subdivisions (a), (b), and (c) of Section
23701, an organization organized and operated for nonprofit purposes
in accordance with this section shall be exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731), upon its submission to the Franchise
Tax Board of one of the following:
   (A) A copy of the determination letter or ruling issued by the
Internal Revenue Service recognizing the organization's exemption
from federal income tax under Section 501(a) of the Internal Revenue
Code, as an organization described in Section 501(c)(3) of the
Internal Revenue Code.
   (B) A copy of the group exemption letter issued by the Internal
Revenue Service that states that both the central organization and
all of its subordinates are tax-exempt under Section 501(c)(3) of the
Internal Revenue Code and substantiation that the organization is
included in the federal group exemption letter as a subordinate
organization.
   (2) Upon receipt of the documents required in subparagraph (A) or
(B) of paragraph (1), the Franchise Tax Board shall issue an
acknowledgment that the organization is exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731). The acknowledgment may refer to the
organization's recognition by the Internal Revenue Service of
exemption from federal income tax as an organization described in
Section 501(c)(3) of the Internal Revenue Code and, if applicable,
the organization's subordinate organization status under a federal
group exemption letter. The effective date of an organization's
exemption from state income tax pursuant to this subdivision shall be
no later than the effective date of the organization's recognition
of exemption from federal income tax as an organization described in
Section 501(c)(3) of the Internal Revenue Code, or its status as a
subordinate organization under a federal group exemption letter, as
applicable.
   (3) If, for federal income tax purposes, an organization's
exemption from tax as an organization described in Section 501(c)(3)
of the Internal Revenue Code is suspended or revoked, the
organization shall notify the Franchise Tax Board of the suspension
or revocation, in the form and manner prescribed by the Franchise Tax
Board. Upon notification, the board shall suspend or revoke,
whichever is applicable, for state income tax purposes, the
organization's exemption under paragraph (1) of this subdivision.
   (4) This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an organization
that is not organized or operated in accordance with this chapter or
Section 501(c)(3) of the Internal Revenue Code.
   (5) If the Franchise Tax Board suspends or revokes the exemption
of an organization pursuant to paragraph (3) or (4), the exemption
shall be reinstated only upon compliance with Section 23701,
regardless of whether the organization can establish exemption under
paragraph (1).
   (d) The Franchise Tax Board may prescribe rules and regulations to
implement this section.



23701e.  A business league, chamber of commerce, real estate board,
or a board of trade described in Section 501(c)(6) of the Internal
Revenue Code, except that the phrase "or professional football
leagues (whether or not administering a pension fund for football
players)" shall not apply.



23701f.  (a) A civic league, social welfare organization, or local
organization of employees described in Section 501(c)(4) of the
Internal Revenue Code, except as otherwise provided.
   (b) An organization is not organized exclusively for exempt
purposes under Section 501(c)(4) of the Internal Revenue Code unless
its assets are irrevocably dedicated to one or more purposes listed
in Section 501(c)(4) of the Internal Revenue Code.



23701g.  A social organization described in Section 501(c)(7) of the
Internal Revenue Code.



23701h.  (a) A corporation described in Section 501(c)(2) of the
Internal Revenue Code, relating to certain title-holding companies.
   (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of
subdivision (b) of Section 23038, for purposes of applying Section
501(c)(2) of the Internal Revenue Code under this section, the term
"corporation" includes a limited liability company that is classified
as a partnership or as a disregarded entity.
   (2) A limited liability company that, under the authority of this
section, is exempt from the tax imposed by this part is also exempt
from the tax and fees imposed under Chapter 10.6 (commencing with
Section 17941) of Part 10.



23701i.  A voluntary employees' beneficiary association described in
Section 501(c)(9) of the Internal Revenue Code.



23701j.  A teacher's retirement fund association described in
Section 501(c)(11) of the Internal Revenue Code.



23701k.  Religious or apostolic corporations, if such corporations
have a common treasury or community treasury even if such
corporations engaged in business for the common benefit of the
members, but only if the members thereof include (at the time of
filing their returns) in their gross income their entire pro rata
shares, whether distributed or not, of the net income of the
corporation for such year. Any amount so included in the gross income
of a member shall be treated as a dividend received.



23701l.  (a) A domestic fraternal society described in Section 501
(c)(10) of the Internal Revenue Code, except as otherwise provided.
   (b) For purposes of this section, the term "domestic" means
created or organized in the United States or under the law of the
United States or of any state or territory therein.



23701n.  (a) A supplemental unemployment compensation trust
described in Section 501(c)(17) of the Internal Revenue Code, except
as otherwise provided.
   (b) The following references in Section 501(c)(17)(E) of the
Internal Revenue Code shall be modified as follows:
   (1) The phrase "under Section 23701" shall be substituted for the
phrase "under subsection (a)."
   (2) The phrase "Section 23701i" shall be substituted for the
phrase "paragraph (9) of this subsection."


23701p.  A trust or plan which meets the requirements of Public Law
87-792, 76 U.S. Stats. 809, approved October 10, 1962 (the
Self-Employed Individuals Tax Retirement Bill of 1962), but only if
such trust or plan is not exempt from taxation under Section 17631.




23701r.  (a) A political organization.  However, a political
organization shall be subject to tax under this part with respect to
its "political organization taxable income" and such income shall be
subject to tax as provided by Chapter 3 (commencing with Section
23501).
   (b) For purposes of this section, the political organization
taxable income of any organization for any taxable year is an amount
equal to the excess over one hundred dollars ($100) (if any) of--
   (1) The gross income for the taxable year (excluding any exempt
function income), over
   (2) The deductions allowed by this part which are directly
connected with the production of the gross income (excluding exempt
function income).
   (c) For purposes of this section, the term "exempt function income"
means any amount received as--


    (1) A contribution of money or other property,

    (2) Membership dues, a membership fee or assessment from a member
of the political organization, or

    (3) Proceeds from a political fundraising or entertainment event,
or proceeds from the sale of political campaign materials, which are
not received in the ordinary course of any trade or business,


to the extent such amount is segregated for use only for the exempt
function of the political organization.
   (d) For purposes of this part, if any political organization--


    (1) Contributes any amount to or for the use of any political
organization which is treated as exempt from tax under subdivision
(a) of this section,

    (2) Contributes any amount to or for the use of any organization
described in paragraph (1) or (2) of Section 509(a) of the Internal
Revenue Code of 1954, which is exempt from tax under Section 23701,
or

    (3) Deposits any amount in the General Fund or the Treasury of
the United States or in the General Fund of any state or local
government,


such amount shall be treated as an amount not diverted for the
personal use of the candidate or any other person. No deduction shall
be allowed under this part for the contribution or deposit of any
amount described in the preceding sentence.
   (e) For purposes of this section--
   (1) The term "political organization" means a party, committee,
association, fund, (including the trust of an individual candidate)
or other organization (whether or not incorporated) organized and
operated primarily for the purpose of directly or indirectly
accepting contributions or making expenditures, or both, for an
exempt function.
   (2) The term "exempt function" means the function of influencing
or attempting to influence the selection, nomination, election, or
appointment of any individual to any federal, state, or local public
office or office in a political organization, or the election of
Presidential or Vice Presidential electors, whether or not such
individual or electors are selected, nominated, elected, or
appointed. The term includes the making of expenditures relating to
an office described in the preceding sentence which, if incurred by
the individual, would be allowable as a deduction under Section 162
(a) of the Internal Revenue Code.
   (3) The term "contributions" has the meaning given to such term by
paragraph (2) of subdivision (b) of Section 24434.
   (4) The term "expenditures" has the meaning given to such term by
paragraph (3) of subdivision (b) of Section 24434.
   (f) For purposes of paragraph (1) of subdivision (e), a separate
segregated fund (within the meaning of Section 610 of Title 18 of the
United States Code or of any similar state statute, or within the
meaning of any state statute which permits the segregation of dues
money for exempt functions, within the meaning of paragraph (2) of
subdivision (e)) which is maintained by an organization described in
Sections 23701a through 23701p or Section 23701s which is exempt from
tax under Section 23701 shall be treated as a separate organization.
   (g) (1) For purposes of this section, a fund established and
maintained by an individual who holds, has been elected to, or is a
candidate (within the meaning of paragraph (3)) for nomination or
election to, any federal, state, or local elective public office for
use by such individual exclusively for the preparation and
circulation of such individual's newsletter shall, except as provided
in paragraph (2), be treated as if such fund constituted a political
organization.
   (2) In the case of any fund described in paragraph (1) the exempt
function shall be only the preparation and circulation of the
newsletter.
   (3) For purposes of paragraph (1), "candidate" means with respect
to any federal, state, or local elective public office, an individual
who does both of the following:
   (A) Publicly announces that he or she is a candidate for
nomination or election to that office.
   (B) Meets the qualifications prescribed by law to hold that
office.
   (h) The requirements set forth in subdivisions (a), (b) and (c) of
Section 23701 shall not apply to a political organization or
newsletter fund described in this section. However, in the case of a
corporation incorporated or organized in this state or qualified to
do business in this state, such corporation shall either pay the
minimum tax provided in Section 23153 or obtain a certificate of
exemption from the Franchise Tax Board before the corporation files
with the Secretary of State its articles of incorporation or a duly
certified copy thereof.
   (i) The requirements set forth in Section 23772 or Section 23774
shall not apply to a political organization or newsletter fund.
Further, the requirements set forth in Sections 18505, 18506, and
18601 shall not apply to a political organization or newsletter fund
described in this section, except that if it has political
organization taxable income for any taxable year, the political
organization shall be required to file income tax returns or
statements as determined by the Franchise Tax Board under Chapter 3
(commencing with Section 23501).


23701s.  (a) An employee-funded pension trust described in Section
501(c)(18) of the Internal Revenue Code, except as otherwise
provided.
   (b) The last sentence in Section 501(c)(18) of the Internal
Revenue Code, relating to excess contributions under Section 4979,
shall not apply.



23701t.  (a) A homeowners' association organized and operated to
provide for the acquisition, construction, management, maintenance,
and care of residential association property if all of the following
apply:
   (1) Sixty percent or more of the gross income of the organization
for the taxable year consists solely of amounts received as
membership dues, fees, and assessments from either of the following:
   (A) Tenant-stockholders or owners of residential units,
residences, or lots.
   (B) Owners of time-share rights to use, or time-share ownership
interests in, association property in the case of a time-share
association.
   (2) Ninety percent or more of the expenditures of the organization
for the taxable year are expenditures for the acquisition,
construction, management, maintenance, and care of association
property and, in the case of a time-share association, for activities
provided to or on behalf of members of the association.
   (3) No part of the net earnings inures (other than by providing
management, maintenance, and care of association property or by a
rebate of excess membership dues, fees, or assessments) to the
benefit of any private shareholder or individual.
   (4) Amounts received as membership dues, fees, and assessments not
expended for association purposes during the taxable year are
transferred to and held in trust to provide for the management,
maintenance, and care of association property and common areas.
   (b) The term "association property" means:
   (1) Property held by the organization.
   (2) Property held in common by the members of the organization.
   (3) Property within the organization privately held by the members
of the organization.
   In the case of a time-share association, "association property"
includes property in which the time-share association, or members of
the association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related to
the time-share project.
   (c) A homeowners' association shall be subject to tax under this
part with respect to its "homeowners' association taxable income,"
and that income shall be subject to tax as provided by Chapter 3
(commencing with Section 23501).
   (1) For purposes of this section, the term "homeowners'
association taxable income" of any organization for any taxable year
means an amount equal to the excess over one hundred dollars ($100)
(if any) of--
   (A) The gross income for the taxable year (excluding any exempt
function income), over
   (B) The deductions allowed by this part which are directly
connected with the production of the gross income (excluding exempt
function income).
   (2) For purposes of this section, the term "exempt function income"
means any amount received as membership fees, dues, and assessments
from tenant-shareholders or owners of residential units, residences,
or lots, or owners of time-share rights to use, or time-share
ownership interests in, association property in the case of a
time-share association.
   (d) The term "homeowners' association" includes a condominium
management association, a residential real estate management
association, a time-share association, and a cooperative housing
corporation.
   (e) "Cooperative housing corporation" includes, but is not limited
to, a limited-equity housing cooperative, as defined in Section
33007.5 of the Health and Safety Code, organized either as a
nonprofit public benefit corporation pursuant to Part 2 (commencing
with Section 5110) of Division 2 of Title 1 of the Corporations Code,
or a nonprofit mutual benefit corporation pursuant to Part 3
(commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code.
   (f) The term "time-share association" means any organization
(other than a condominium management association) organized and
operated to provide for the acquisition, construction, management,
maintenance, and care of association property if any member thereof
holds a time-share right to use, or a time-share ownership interest
in, real property constituting association property.
   (g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.


23701u.  An organization is operated exclusively for exempt purposes
listed in Section 23701f and its net earnings are devoted
exclusively to charitable purposes if that organization is a
nonprofit public benefit corporation organized under Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code, and if the specific and primary purpose for which
the corporation is formed is to render financial assistance to
government by financing, refinancing, acquiring, constructing,
improving, leasing, selling, or otherwise conveying property of any
kind to government. This financing ability shall be limited to the
issuance of certificates of participation, or similar security
arrangements.
   For purposes of this section, "government" means the State of
California, a city, city and county, county, school district, board
of education, public corporation, hospital district, and any other
special district.
   An organization is not organized exclusively for the exempt
purposes referred to in the first paragraph unless its assets are
irrevocably dedicated to one or more purposes listed in Section
23701f.
   Dedication of assets requires that in the event of dissolution of
an organization or the impossibility of performing the specific
organizational purposes, including default of lease payments, the
assets would continue to be devoted to exempt purposes. Assets shall
be deemed irrevocably dedicated to exempt purposes if the articles of
organization provide that upon dissolution the assets will be
distributed to an organization which is exempt under this section,
Section 23701d, or Section 23701f, or under Section 501(c)(3) or
Section 501(c)(4) of the Internal Revenue Code or to the federal
government, or to a state or local government for public purposes; or
by a provision in the articles of organization, satisfactory to the
Franchise Tax Board, that the property will be distributed in trust
for exempt purposes; or by establishing that the assets are
irrevocably dedicated to exempt purposes by operation of law. Any
organization that has had its exemption revoked by the Franchise Tax
Board for failure to comply with Section 23701f may request a further
review of its status under this section.



23701v.  (a) An organization of owners of manufactured homes or
mobilehomes, who are tenants in a mobilehome park, formed for the
purpose of purchasing the mobilehome park to convert it to
condominium, stock cooperative, or other resident ownership
interests.
   (b) An organization shall not fail to meet the requirements of
subdivision (a) merely because it manages, maintains, or cares for
the mobilehome park it has purchased.



23701w.  A veteran's organization, as defined by Section 501(c)(19)
of the Internal Revenue Code.



23701x.  (a) A corporation or trust described in Section 501(c)(25)
of the Internal Revenue Code, relating to certain title-holding
companies.
   (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of
subdivision (b) of Section 23038, for purposes of applying Section
501(c)(25) of the Internal Revenue Code under this section, the term
"corporation" includes a limited liability company that is classified
as a partnership or as a disregarded entity.
   (2) A limited liability company that, under the authority of this
section, is exempt from the tax imposed by this part is also exempt
from the tax and fees imposed under Chapter 10.6 (commencing with
Section 17941) of Part 10.



23701y.  A credit union as defined in Section 14002 of the Financial
Code. In addition, those credit unions are exempt from all other
taxes and licenses, state, county, and municipal, imposed upon those
credit unions, except taxes upon their real property, local utility
user taxes, sales and use taxes, state energy resources surcharges,
state emergency telephone users surcharges, unrelated business income
taxes pursuant to Section 23731, motor vehicle and other vehicle
registration license fees, and any other tax or license fee imposed
by the state upon vehicles, motor vehicles, or the operation thereof.



23701z.  An organization established pursuant to Section 5005.1 of
the Corporations Code by three or more corporations as an arrangement
for the pooling of self-insured claims or losses of those
corporations.


23702.  Section 502 of the Internal Revenue Code, relating to feeder
organizations, shall apply, except as otherwise provided.
   (a) Exemption shall not be allowed to any organization on the
basis that all of its profits are payable to another organization
exempt from taxation under either Section 501 of the Internal Revenue
Code or this article, if that business activity is being conducted
by a separate organization.
   (b) The reference to Section 501 of the Internal Revenue Code,
relating to exemption, shall be modified to refer to Section 23701.
   (c) The reference to Sections 512 and 512(b)(3) of the Internal
Revenue Code, relating to the exclusion of the deriving of rents from
the definition of "trade or business," shall be modified to refer to
Section 23732.


23703.  (a) No exemption shall be allowed under this article to any
charitable corporation as defined in Sections 12582.1 and 12583 of
the Government Code for any year or years for which it fails to file
with the Attorney General, on or before the due date, any
registration or periodic report required by Article 7 (commencing
with Section 12580) of Chapter 6, Part 2, Division 3, Title 2, of the
Government Code.
   (b) The exemption shall be disallowed under this section only
after the Attorney General has notified the Franchise Tax Board in
writing that a charitable corporation subject to the provisions of
subdivision (a) has failed to file any such registration or periodic
report on or before the due date thereof.
   (c) If an exemption is disallowed under this section, such
exemption may be reinstated when the registration or periodic reports
are filed; however, any such charitable corporation shall pay the
minimum tax provided for by Section 23153 for any year or years for
which its exemption was disallowed under this section.
   (d) No exemption shall be disallowed under this section for
taxable years commencing before January 1, 1962.
   (e) The Franchise Tax Board may make any regulations which it
deems necessary to effectuate the purposes of this section.




23703.5.  Section 501(p) of the Internal Revenue Code, relating to
suspension of tax-exempt status of terrorist organizations, shall
apply, except as otherwise provided:
   (a) References to Section 501(a) of the Internal Revenue Code
shall be modified to refer to Section 23701.
   (b) Section 501(p)(4) of the Internal Revenue Code is modified by
substituting the phrase "under Part 10 (commencing with Section
17001) and this part" for the phrase "under any provision of this
title, including Sections 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), and 2522" contained therein.
   (c) This section shall apply only during the period described in
Section 501(p)(3) of the Internal Revenue Code that the federal tax
exemption of the organization described in Section 501(p)(2) of the
Internal Revenue Code is suspended for federal income tax purposes
under Section 501(p)(1) of the Internal Revenue Code.
   (d) Section 501(p)(5) of the Internal Revenue Code shall not apply
and in lieu thereof, notwithstanding any other provision of law, no
organization or other person may challenge a suspension under this
section, a designation or identification described in Section 501(p)
(2) of the Internal Revenue Code, the period of suspension described
in Section 501(p)(3) of the Internal Revenue Code, or a denial of a
deduction under Section 501(p)(4) of the Internal Revenue Code as
modified in subdivision (b) in any administrative or judicial
proceeding relating to the California tax liability of the
organization or other person.
   (e) (1) Credit or refund (with interest) with respect to an
overpayment shall be made if all of the following apply with respect
to that overpayment:
   (A) The tax exemption of any organization described in Section 501
(p)(2) of the Internal Revenue Code is suspended under this section.
   (B) Each designation and identification described in Section 501
(p)(2) of the Internal Revenue Code which has been made with respect
to that organization is determined to be erroneous under Section 501
(p)(6) of the Internal Revenue Code for federal income tax purposes.
   (C) The erroneous designations and identifications result in an
overpayment of income tax for any taxable year by that organization.
   (2) If the credit or refund of any overpayment of tax described in
subparagraph (C) of paragraph (1) is prevented at any time by the
operation of any law or rule of law (including res judicata), the
credit or refund may nevertheless be allowed or made if the claim
therefor is filed before the close of the one-year period beginning
on the date of the last determination described in subparagraph (B)
of paragraph (1).
   (f) This section shall apply to designations made before, on, or
after November 11, 2003.



23703.7.  Section 501(q) of the Internal Revenue Code, relating to
special rules for credit counseling organizations, shall apply,
except as otherwise provided.
   (a) The phrase "Section 23701" shall be substituted for
"subsection (a)" in Section 501(q)(1) of the Internal Revenue Code.
   (b) The phrase "described in Section 23701d or Section 23701f"
shall be substituted for "described in paragraph (3) or (4) of
subsection (c)" in Section 501(q)(1) of the Internal Revenue Code.
   (c) The phrase "described in Section 23701d and exempt from tax
under Section 23701" shall be substituted for "described in
subsection (c)(3) and exempt from tax under subsection (a)" in each
place that it appears in Section 501(q)(1)(E) of the Internal Revenue
Code.
   (d) The phrase "described in Section 23701d shall not be exempt
from tax under Section 23701" shall be substituted for "described in
paragraph (3) of subsection (c) shall not be exempt from tax under
subsection (a)" in Section 501(q)(2)(A) of the Internal Revenue Code.
   (e) The phrase "described in Section 23701d and exempt from tax
under Section 23701 on January 1, 2009," shall be substituted for
"described in paragraph (3) of subsection (c) and exempt from tax
under subsection (a) on the date of the enactment of this subsection"
in Section 501(q)(2)(B)(ii) of the Internal Revenue Code.
   (f) The phrase "January 1, 2010," shall be substituted for "the
date of the enactment of this subsection" in Section 501(q)(2)(B)(ii)
(I) of the Internal Revenue Code.
   (g) The phrase "described in Section 23701f shall not be exempt
from tax under Section 23701" shall be substituted for "described in
paragraph (4) of subsection (c) shall not be exempt from tax under
subsection (a)" in Section 501(q)(3) of the Internal Revenue Code.



23704.  Section 501(e) of the Internal Revenue Code, relating to
cooperative hospital service organizations, shall apply, except as
otherwise provided.
   (a) References to Section 501(c)(3) of the Internal Revenue Code,
relating to charitable organizations, shall be modified to refer to
Section 23701d.
   (b) References to Section 501(a) of the Internal Revenue Code,
relating to exemptions, shall be modified to refer to Section 23701.
   (c) The services which may be provided under Section 501(e)(1) of
the Internal Revenue Code shall include laundry services.
   (d) Section 501(e)(1)(B)(iii) of the Internal Revenue Code is
modified by substituting the phrase "owned and operated by the United
States, the State, or a county or political subdivision thereof, or
an agency or instrumentality of any of the foregoing" for the phrase
"owned and operated by the United States, a State, the District of
Columbia, or a possession of the United States, or a political
subdivision or an agency or instrumentality of any of the foregoing."
   (e) References to Section 170(b)(1)(A)(iii) of the Internal
Revenue Code, relating to the deductibility of contributions to
hospitals, shall be modified to refer to subdivision (e) of Section
23736.


23704.3.  Section 501(o) of the Internal Revenue Code, relating to
treatment of hospitals participating in provider-sponsored
organizations, shall apply, except that the reference to Section 501
(c)(3) of the Internal Revenue Code, relating to charitable
organizations, shall be modified to refer to Section 23701d.



23704.4.  Section 501(k) of the Internal Revenue Code, relating to
the treatment of certain organizations providing care of children,
shall apply, except as otherwise provided.
   (a) The reference to Section 501(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.
   (b) The reference to Section 2522(a)(2) of the Internal Revenue
Code, relating to the computation of taxable gifts or Internal
Revenue Code Section 2055, relating to transfers for public,
charitable, and religious uses, shall not apply.



23704.5.  Section 501(h) of the Internal Revenue Code, relating to
expenditures by public charities engaged in activities to influence
legislation, shall apply, except as otherwise provided.
   (a) The reference to Section 501(a) of the Internal Revenue Code,
relating to exemption from taxation, shall be modified to refer to
Section 23701.
   (b) The reference to Section 501(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.



23704.6.  Section 504 of the Internal Revenue Code, relating to
status after organization ceases to qualify for exemption under
Section 501(c)(3) because of substantial lobbying or because of
political activities, shall apply, except as otherwise provided.
   (a) The reference to Section 501(a) of the Internal Revenue Code,
relating to exemption from taxation, shall be modified to refer to
Section 23701.
   (b) The reference to Section 501a(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.
   (c) The reference to Section 501(c)(4) of the Internal Revenue
Code, relating to civic leagues, social welfare organizations, and
local associations of employees, shall be modified to refer to
Section 23701f.


23705.  (a) (1) An organization described in Section 23701i
(voluntary employee's beneficiary associations) or 23701q (qualified
group legal service plans) which is part of a plan of an employer
shall not be exempt from tax under Section 23701, unless that plan
meets the requirements of Section 505(b) of the Internal Revenue
Code.
   (2) Paragraph (1) shall not apply to any organization described in
Section 505(a)(2) of the Internal Revenue Code.
   (b) A copy of any notice filed with the Secretary of the Treasury,
pursuant to Section 505(c) of the Internal Revenue Code, relating to
application for tax-exempt status, shall be filed at the same time
and in the same manner with the Franchise Tax Board.



23706.  Any exemption from the bank and corporation franchise tax
under Chapter 2 (commencing with Section 23101) or the corporation
income tax under Chapter 3 (commencing with Section 23501), granted
by any California statute on or after January 1, 1985, for an
organization which is an instrumentality of this state, shall be
provided for in this part of the code.



23707.  (a) Except as provided in subdivision (b), the status of any
organization as a private foundation shall be terminated only if--
   (1) Such organization notifies the Franchise Tax Board (at such
time and in such manner as the Franchise Tax Board may by regulations
prescribe) of its intent to accomplish such termination, or
   (2) Such organization has been terminated by the Attorney General
of this state or by action taken pursuant to Section 507 of the
Internal Revenue Code.
   (b) (1) The status as a private foundation of any organization
shall be terminated if--
   (A) Such organization distributes all of its net assets to one or
more organizations described below (other than clauses (vii), (viii),
(ix) or (x)) each of which has been in existence and so described
for a continuous period of at least 60 calendar months immediately
preceding such distribution and exempt from tax under Section 23701d
of the Revenue and Taxation Code or Section 501(c)(3) of the Internal
Revenue Code during the last 60 months, or--
   (i) A church or a convention or association of churches,
   (ii) An educational organization which normally maintains a
regular faculty and curriculum and normally has a regularly enrolled
body of pupils or students in attendance at the place where its
educational activities are regularly carried on,
   (iii) An organization the principal purpose or functions of which
are the providing of medical or hospital care or medical education or
medical research, if the organization is a hospital, or if the
organization is a medical research organization directly engaged in
the continuous active conduct of medical research in conjunction with
a hospital, and during the calendar year in which the contribution
is made such organization is committed to spend such contributions
for such research before January 1 of the fifth calendar year which
begins after the date such contribution is made.
   (iv) An organization which normally receives a substantial part of
its support (exclusive of income received in the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under Section 23701d) from the United States or any state or
political subdivision thereof or from direct or indirect
contributions from the general public, and which is organized and
operated exclusively to receive, hold, invest, and administer
property and to make expenditures to or for the benefit of a college
or university which is an organization referred to in clause (ii) of
this subparagraph and which is an agency or instrumentality of a
state or political subdivision thereof, or which is owned or operated
by a state or political subdivision thereof or by an agency or
instrumentality of one or more states or political subdivisions,
   (v) A governmental unit referred to in Section 170(c)(1) of the
Internal Revenue Code,
   (vi) An organization referred to in Section 170(c)(2) of the
Internal Revenue Code which normally receives a substantial part of
its support (exclusive of income received in the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under Section 23701d) from a governmental unit referred to in Section
170(c)(1) of the Internal Revenue Code or from direct or indirect
contributions from the general public,
   (vii) A private operating foundation (as defined in Section 4942
(j) (3) of the Internal Revenue Code),
   (viii) Any other private foundation (as defined in Section 509(a)
of the Internal Revenue Code) which, not later than the 15th day of
the third month after the close of the foundation's taxable year in
which contributions are received, makes qualifying distributions (as
defined in Section 4942(g) of the Internal Revenue Code, as amended
by P.L. 94-455, without regard to paragraph (3) thereof), which are
treated, after the application of Section 4942(g)(3) of the Internal
Revenue Code as distributions out of corpus (in accordance with
Section 4942(h) of the Internal Revenue Code) in an amount equal to
100 percent of such contributions, and with respect to which the
taxpayer maintains adequate records or other sufficient evidence from
the foundation showing that the foundation made such qualifying
distributions,
   (ix) A private foundation all of the contributions to which are
pooled in a common fund and which would be described in paragraph (3)
of Section 509(a) of the Internal Revenue Code but for the right of
any substantial contributor (hereafter in this clause called "donor")
or his spouse to designate annually the recipients, from among
organizations described in paragraph (1) of Section 509(a) of the
Internal Revenue Code, of the income attributable to the donor's
contribution to the fund and to direct (by deed or by will) the
payment, to an organization described in such paragraph (1), of the
corpus in the common fund shall apply only if all the income of the
common fund is required to be (and is) distributed to one or more
organizations described in such paragraph (1) not later than the 15th
day of the third month after the close of the taxable year in which
the income is realized by the fund and only if all of the corpus
attributable to any donor's contribution to the fund is required to
be (and is) distributed to one or more of such organizations not
later than one year after his death or after the death of his
surviving spouse if she has the right to designate the recipients of
such corpus, and
   (x) An organization described in paragraph (2) or (3) of Section
509(a) of the Internal Revenue Code.
   (B) Such organization meets the requirements of Section 507(b)(1)
(B) or paragraph (1), (2), or (3) of Section 509(a) of the Internal
Revenue Code, whichever applies, and furnishes copies of its federal
notice of termination of its private foundation status to the
Franchise Tax Board.
   (2) For purposes of this part, in the case of a transfer of assets
of any private foundation to another private foundation pursuant to
any liquidation, merger, redemption, recapitalization, or other
adjustment, organization, or reorganization, the transferee
foundation shall not be treated as a newly created organization.



23708.  (a) For the purposes of this part, unless otherwise
indicated in context, the term "an organization exempt from tax"
shall mean an organization which has satisfied the provisions of
Section 23701.
   (b) Except as provided in subdivision (c), any organization
(including an organization in existence on December 31, 1970) which
is described in Section 23701d and which does not notify the
Franchise Tax Board at such time and such manner as the Franchise Tax
Board may prescribe, that it is not a private foundation shall be
presumed to be a private foundation. The time prescribed for giving
notice under this subdivision shall not expire before the 90th day
after the day on which the regulations first prescribed under this
subdivision become final.
   (c) Subdivision (b) shall not apply to--
   (1) Churches, their integrated auxiliaries, and conventions or
associations of churches, or
   (2) Any organization which is not a private foundation (as defined
in Section 23709).
   (3) The Franchise Tax Board may by regulations exempt (to the
extent and subject to such conditions as may be prescribed in such
regulations) from the provisions of subdivision (b)--
   (A) Educational organizations which normally maintain a regular
faculty and curriculum and normally have a regularly enrolled body of
pupils or students in attendance at the place where their
educational activities are regularly carried on; and
   (B) Any other class of organizations with respect to which the
Franchise Tax Board determines that full compliance with the
provisions of subdivision (b) is not necessary to the efficient
administration of the provisions of this title relating to private
foundations.
   (d) (1) No gift or bequest made to an organization upon which the
tax provided by Section 507(c) of the Internal Revenue Code has been
imposed shall be allowed as a deduction under Section 24357, if such
gift or bequest is made--
   (A) By any person after notification of termination is made under
Section 507(a) of the Internal Revenue Code, or
   (B) By a substantial contributor (as defined in Section 507(d)(2)
of the Internal Revenue Code) in his taxable year which includes the
first day on which action is taken by such organization which
culminates in the imposition of tax under Section 507(c) of the
Internal Revenue Code and any subsequent taxable year.
   (2) No gift or bequest made to an organization shall be allowed as
a deduction under Section 24357, if such gift or bequest is made--
   (A) To a private foundation or trust described in Section 4947 of
the Internal Revenue Code in a taxable year for which it fails to
meet the requirements of subdivision (e) of this section (determined
without regard to subparagraphs (B) and (C) of paragraph (2) of
subdivision (e) of this section), or
   (B) To any organization that has not established its exemption
under Section 23701d or Section 501(c)(3) of the Internal Revenue
Code for the period concerned.
   (3) Paragraph (1) shall not apply if the entire amount of the
unpaid portion of the tax imposed under Section 507(c) of the
Internal Revenue Code is abated.
   (e) (1) A private foundation shall not be exempt from taxation
under Section 23701d unless its governing instrument includes
provisions the effects of which are--
   (A) To require its income for each taxable year to be distributed
at such time and in such manner as not to subject the foundation to
tax under Section 4942 of the Internal Revenue Code, as amended by
P.L. 94-455, and
   (B) To prohibit the foundation from engaging in any act of
self-dealing (as defined in Section 4941 of the Internal Revenue
Code) from retaining any excess business holdings (as defined in
Section 4943 of the Internal Revenue Code), from making any
investments in such manner as to subject the foundation to tax under
Section 4944 of the Internal Revenue Code.
   (2) In the case of any organization organized before January 1,
1970, paragraph (1) shall not apply--
   (A) To any taxable year beginning before January 1, 1972,
   (B) To any period after December 31, 1971, during the pendency of
any judicial proceeding begun before January 1, 1972, by the private
foundation which is necessary to reform, or to excuse such foundation
from compliance with, its governing instrument or any other
instrument in order to meet the requirements of paragraph (1), and
   (C) To any period after the termination of any judicial proceeding
described in subparagraph (B) during which its governing instrument
or any other instrument does not permit it to meet the requirements
of paragraph (1).
   (3) This subdivision shall not apply to require the inclusion in
governing instruments of any provisions inconsistent with this
subdivision.
   (f) Notwithstanding any of the requirements of this section, if
they are determined to be met under federal law they are also met for
state purposes.



23709.  (a) For the purposes of this part the term "private
foundation" means a domestic or foreign organization defined in the
Internal Revenue Code as a private foundation.
   (b) For the purposes of this part, if an organization is a private
foundation (within the meaning of subdivision (a)) on December 31,
1970, or becomes a private foundation on any subsequent date, such
organization shall be treated as a private foundation for all periods
after December 31, 1970, or after such subsequent date, unless its
status as such is terminated.
   (c) For purposes of this part, an organization the status of which
as a private foundation is terminated shall be treated as an
organization created on the day after the date of such termination,
except in the case of a transfer of assets of any private foundation
to another private foundation pursuant to any liquidation, merger,
redemption, recapitalization, or other adjustment, organization, or
reorganization, the transferee shall not be treated as a newly
created organization.
   (d) For purposes of this part, the term "support" includes (but is
not limited to)--


    (1) Gifts, grants, contributions, or membership fees,

    (2) Gross receipts from admissions, sales of merchandise,
performance of services, or furnishing of facilities in any activity
which is not an unrelated trade or business (within the meaning of
Section 23734),

    (3) Net income from unrelated business activities, whether or not
such activities are carried on regularly as a trade or business,

    (4) Gross investment income (as defined in subdivision (e)),

    (5) Tax revenues levied for the benefit of an organization and
either paid to or expended on behalf of such organization, and

    (6) The value of services or facilities (exclusive of services or
facilities generally furnished to the public without charge)
furnished by a governmental unit referred to in Section 170(c)(1) of
the Internal Revenue Code to an organization without charge.


Such term does not include any gain from the sale or other
disposition of property which would be considered as gain from the
sale or exchange of a capital asset, or the value of exemption from
any federal, state, or local tax or any similar benefit.
   (e) For purposes of this section, the term "gross investment
income" means the gross amount of income from interest, dividends,
rents, and royalties, but not including any such income to the extent
included in computing the tax imposed by Section 23731.



23710.  Any organization exempted from taxes imposed under this part
pursuant to the provisions of this article shall not be disqualified
for such exemption on the basis that it conducts bingo games
pursuant to Section 326.5 of the Penal Code, provided that the
proceeds from those games are used exclusively for charitable
purposes.



23711.  Section 529 of the Internal Revenue Code, relating to
qualified state tuition programs, shall apply, except as otherwise
provided.
   (a) Section 529(a) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" in lieu of the phrase "under this
subtitle."
   (2) By substituting "Article 2 (commencing with Section 23731)" in
lieu of "section 511."
   (b) A copy of the report required to be filed with the Secretary
of the Treasury under Section 529(d) of the Internal Revenue Code
shall be filed with the Franchise Tax Board at the same time and in
the same manner as specified in that section.



23711.5.  The Golden State Scholarshare Trust, established pursuant
to Article 19 (commencing with Section 69980) of Chapter 2 of Part 42
of the Education Code, is an instrumentality of this state and the
income of the Scholarshare trust shall be exempt from taxes imposed
under this part. The Scholarshare trust is established and shall be
maintained as a qualified state tuition program as defined in Section
529 of the Internal Revenue Code.



23712.  Section 530 of the Internal Revenue Code, relating to
Coverdell education savings accounts, shall apply, except as
otherwise provided.
   (a) Section 530(a) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" for the phrase "under this subtitle."
   (2) By substituting "Article 2 (commencing with Section 23731)"
for "section 511."
   (b) For taxable years beginning before January 1, 2002, Section
530(b)(1) of the Internal Revenue Code, relating to Coverdell
education savings account, is modified to additionally require that
upon the date that the designated beneficiary becomes 30 years of
age, any balance to the credit of the beneficiary shall be
distributed within 30 days after the date the beneficiary becomes 30
years of age to that beneficiary.
   (c) Section 530(d) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) in the manner as provided in Section 72(b) of the
Internal Revenue Code, as modified by Part 10" for the phrase "in the
manner as provided in Section 72(b)" in Section 530(d)(1) of the
Internal Revenue Code.
   (2) (A) By substituting the phrase "tax imposed by Part 10
(commencing with Section 17001)" for the phrase "tax imposed by this
chapter" in Section 530(d)(4)(A) of the Internal Revenue Code.
   (B) By substituting the phrase "increased by 2 1/2 percent" for
the phrase "increased by 10 percent" in Section 530(d)(4)(A) of the
Internal Revenue Code.
   (C) By substituting the phrase "shall be included in the
contributor's gross income under Part 10 (commencing with Section
17001) or this part" for the phrase "shall be included in gross
income" in Section 530(d)(4)(C) of the Internal Revenue Code.
   (D) For taxable years beginning before January 1, 2005:
   (i) By additionally providing that Section 530(d)(4)(A) of the
Internal Revenue Code shall not apply if the payment or distribution
is made on account of the attendance of the designated beneficiary at
the United States Military Academy, the United States Naval Academy,
the United States Air Force Academy, the United States Coast Guard
Academy, or the United States Merchant Marine Academy, to the extent
that the amount of the payment or distribution does not exceed the
costs of advanced education (as defined by Section 2005(e)(3) of
Title 10 of the United States Code, as in effect on November 11,
2003) attributable to that attendance.
   (ii) The amendments made to this section by Section 12 of Chapter
552 of the Statutes of 2004 shall apply to taxable years beginning
after December 31, 2002.
   (d) For purposes of Part 10 (commencing with Section 17001) and
this part, in the case of a custodial account treated as a trust by
reason of Section 530(g) of the Internal Revenue Code, the custodian
of that account shall be treated as the trustee thereof.
   (e) A copy of the report, which is required to be filed with the
Secretary of the Treasury under Section 530(h) of the Internal
Revenue Code, shall be filed with the Franchise Tax Board at the same
time and in the same manner as specified in that section.
   (f) Section 109(d)(2) of Public Law 110-245, relating to
application of amendments to deaths from injuries occurring on or
after October 7, 2001, and before enactment, shall apply, except as
otherwise provided.

State Codes and Statutes

Statutes > California > Rtc > 23701-23712

REVENUE AND TAXATION CODE
SECTION 23701-23712



23701.  Organizations which are organized and operated for nonprofit
purposes within the provisions of a specific section of this
article, or are defined in Section 23701h (relating to certain
title-holding companies) or Section 23701x (relating to certain
title-holding companies), are exempt from taxes imposed under this
part, except as provided in this article or in Article 2 (commencing
with Section 23731) of this chapter, if:
   (a) An application for exemption is submitted in the form
prescribed by the Franchise Tax Board; and
   (b) A filing fee of twenty-five dollars ($25) is paid with each
application for exemption filed with the Franchise Tax Board after
December 31, 1969; and
   (c) The Franchise Tax Board issues a determination exempting the
organization from tax.
   This section shall not prevent a determination from having
retroactive effect and does not prevent the issuance of a
determination with respect to a domestic organization which was in
existence prior to January 1, 1970, and exempt under prior law
without the submission of a formal application or payment of a filing
fee. For the purpose of this section, the term "domestic" means
created or organized under the laws of this state.
   The Franchise Tax Board may issue rulings and regulations as are
necessary and reasonable to carry out the provisions of this article.



23701a.  (a) Labor, agricultural, or horticultural organizations
other than cooperative organizations described in Section 24404 or
24405 (unless the cooperative organization is determined by the
Internal Revenue Service to be an organization described in Section
501(c)(5) of the Internal Revenue Code of 1954, as amended).
   For purposes of this section, the term "agricultural" includes the
art or science of cultivating land, harvesting crops or aquatic
resources, or raising livestock.
   (b) The amendments to this section by the act adding this
subdivision shall be applied in the computation of taxes for taxable
years beginning on or after January 1, 1983.



23701b.  A fraternal order described in Section 501(c)(8) of the
Internal Revenue Code.



23701c.  A cemetery company described in Section 501(c)(13) of the
Internal Revenue Code.



23701d.  (a) A corporation, community chest or trust, organized and
operated exclusively for religious, charitable, scientific, testing
for public safety, literary, or educational purposes, or to foster
national or international amateur sports competition (but only if no
part of its activities involved the provision of athletic facilities
or equipment), or for the prevention of cruelty to children or
animals, no part of the net earnings of which inures to the benefit
of any private shareholder or individual, no substantial part of the
activities of which is carrying on propaganda or otherwise attempting
to influence legislation, (except as otherwise provided in Section
23704.5), and which does not participate in, or intervene in
(including the publishing or distribution of statements), any
political campaign on behalf of (or in opposition to) any candidate
for public office. An organization is not organized exclusively for
exempt purposes listed above unless its assets are irrevocably
dedicated to one or more purposes listed in this section. Dedication
of assets requires that in the event of dissolution of an
organization or the impossibility of performing the specific
organizational purposes the assets would continue to be devoted to
exempt purposes. Assets shall be deemed irrevocably dedicated to
exempt purposes if the articles of organization provide that upon
dissolution the assets will be distributed to an organization which
is exempt under this section or Section 501(c)(3) of the Internal
Revenue Code or to the federal government, or to a state or local
government for public purposes; or by a provision in the articles of
organization, satisfactory to the Franchise Tax Board; that the
property will be distributed in trust for exempt purposes; or by
establishing that the assets are irrevocably dedicated to exempt
purposes by operation of law. The irrevocable dedication requirement
shall not be a sole basis for revocation of an exempt determination
made by the Franchise Tax Board prior to the effective date of this
amendment.
   (b) (1) In the case of a qualified amateur sports organization--
   (A) The requirement of subdivision (a) that no part of its
activities involves the provision of athletic facilities or equipment
shall not apply.
   (B) That organization shall not fail to meet the requirements of
subdivision (a) merely because its membership is local or regional in
nature.
   (2) For purposes of this subdivision, "qualified amateur sports
organization" means any organization organized and operated
exclusively to foster national or international amateur sports
competition if that organization is also organized and operated
primarily to conduct national or international competition in sports
or to support and develop amateur athletes for national or
international competition in sports.
   (c) (1) Notwithstanding subdivisions (a), (b), and (c) of Section
23701, an organization organized and operated for nonprofit purposes
in accordance with this section shall be exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731), upon its submission to the Franchise
Tax Board of one of the following:
   (A) A copy of the determination letter or ruling issued by the
Internal Revenue Service recognizing the organization's exemption
from federal income tax under Section 501(a) of the Internal Revenue
Code, as an organization described in Section 501(c)(3) of the
Internal Revenue Code.
   (B) A copy of the group exemption letter issued by the Internal
Revenue Service that states that both the central organization and
all of its subordinates are tax-exempt under Section 501(c)(3) of the
Internal Revenue Code and substantiation that the organization is
included in the federal group exemption letter as a subordinate
organization.
   (2) Upon receipt of the documents required in subparagraph (A) or
(B) of paragraph (1), the Franchise Tax Board shall issue an
acknowledgment that the organization is exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731). The acknowledgment may refer to the
organization's recognition by the Internal Revenue Service of
exemption from federal income tax as an organization described in
Section 501(c)(3) of the Internal Revenue Code and, if applicable,
the organization's subordinate organization status under a federal
group exemption letter. The effective date of an organization's
exemption from state income tax pursuant to this subdivision shall be
no later than the effective date of the organization's recognition
of exemption from federal income tax as an organization described in
Section 501(c)(3) of the Internal Revenue Code, or its status as a
subordinate organization under a federal group exemption letter, as
applicable.
   (3) If, for federal income tax purposes, an organization's
exemption from tax as an organization described in Section 501(c)(3)
of the Internal Revenue Code is suspended or revoked, the
organization shall notify the Franchise Tax Board of the suspension
or revocation, in the form and manner prescribed by the Franchise Tax
Board. Upon notification, the board shall suspend or revoke,
whichever is applicable, for state income tax purposes, the
organization's exemption under paragraph (1) of this subdivision.
   (4) This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an organization
that is not organized or operated in accordance with this chapter or
Section 501(c)(3) of the Internal Revenue Code.
   (5) If the Franchise Tax Board suspends or revokes the exemption
of an organization pursuant to paragraph (3) or (4), the exemption
shall be reinstated only upon compliance with Section 23701,
regardless of whether the organization can establish exemption under
paragraph (1).
   (d) The Franchise Tax Board may prescribe rules and regulations to
implement this section.



23701e.  A business league, chamber of commerce, real estate board,
or a board of trade described in Section 501(c)(6) of the Internal
Revenue Code, except that the phrase "or professional football
leagues (whether or not administering a pension fund for football
players)" shall not apply.



23701f.  (a) A civic league, social welfare organization, or local
organization of employees described in Section 501(c)(4) of the
Internal Revenue Code, except as otherwise provided.
   (b) An organization is not organized exclusively for exempt
purposes under Section 501(c)(4) of the Internal Revenue Code unless
its assets are irrevocably dedicated to one or more purposes listed
in Section 501(c)(4) of the Internal Revenue Code.



23701g.  A social organization described in Section 501(c)(7) of the
Internal Revenue Code.



23701h.  (a) A corporation described in Section 501(c)(2) of the
Internal Revenue Code, relating to certain title-holding companies.
   (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of
subdivision (b) of Section 23038, for purposes of applying Section
501(c)(2) of the Internal Revenue Code under this section, the term
"corporation" includes a limited liability company that is classified
as a partnership or as a disregarded entity.
   (2) A limited liability company that, under the authority of this
section, is exempt from the tax imposed by this part is also exempt
from the tax and fees imposed under Chapter 10.6 (commencing with
Section 17941) of Part 10.



23701i.  A voluntary employees' beneficiary association described in
Section 501(c)(9) of the Internal Revenue Code.



23701j.  A teacher's retirement fund association described in
Section 501(c)(11) of the Internal Revenue Code.



23701k.  Religious or apostolic corporations, if such corporations
have a common treasury or community treasury even if such
corporations engaged in business for the common benefit of the
members, but only if the members thereof include (at the time of
filing their returns) in their gross income their entire pro rata
shares, whether distributed or not, of the net income of the
corporation for such year. Any amount so included in the gross income
of a member shall be treated as a dividend received.



23701l.  (a) A domestic fraternal society described in Section 501
(c)(10) of the Internal Revenue Code, except as otherwise provided.
   (b) For purposes of this section, the term "domestic" means
created or organized in the United States or under the law of the
United States or of any state or territory therein.



23701n.  (a) A supplemental unemployment compensation trust
described in Section 501(c)(17) of the Internal Revenue Code, except
as otherwise provided.
   (b) The following references in Section 501(c)(17)(E) of the
Internal Revenue Code shall be modified as follows:
   (1) The phrase "under Section 23701" shall be substituted for the
phrase "under subsection (a)."
   (2) The phrase "Section 23701i" shall be substituted for the
phrase "paragraph (9) of this subsection."


23701p.  A trust or plan which meets the requirements of Public Law
87-792, 76 U.S. Stats. 809, approved October 10, 1962 (the
Self-Employed Individuals Tax Retirement Bill of 1962), but only if
such trust or plan is not exempt from taxation under Section 17631.




23701r.  (a) A political organization.  However, a political
organization shall be subject to tax under this part with respect to
its "political organization taxable income" and such income shall be
subject to tax as provided by Chapter 3 (commencing with Section
23501).
   (b) For purposes of this section, the political organization
taxable income of any organization for any taxable year is an amount
equal to the excess over one hundred dollars ($100) (if any) of--
   (1) The gross income for the taxable year (excluding any exempt
function income), over
   (2) The deductions allowed by this part which are directly
connected with the production of the gross income (excluding exempt
function income).
   (c) For purposes of this section, the term "exempt function income"
means any amount received as--


    (1) A contribution of money or other property,

    (2) Membership dues, a membership fee or assessment from a member
of the political organization, or

    (3) Proceeds from a political fundraising or entertainment event,
or proceeds from the sale of political campaign materials, which are
not received in the ordinary course of any trade or business,


to the extent such amount is segregated for use only for the exempt
function of the political organization.
   (d) For purposes of this part, if any political organization--


    (1) Contributes any amount to or for the use of any political
organization which is treated as exempt from tax under subdivision
(a) of this section,

    (2) Contributes any amount to or for the use of any organization
described in paragraph (1) or (2) of Section 509(a) of the Internal
Revenue Code of 1954, which is exempt from tax under Section 23701,
or

    (3) Deposits any amount in the General Fund or the Treasury of
the United States or in the General Fund of any state or local
government,


such amount shall be treated as an amount not diverted for the
personal use of the candidate or any other person. No deduction shall
be allowed under this part for the contribution or deposit of any
amount described in the preceding sentence.
   (e) For purposes of this section--
   (1) The term "political organization" means a party, committee,
association, fund, (including the trust of an individual candidate)
or other organization (whether or not incorporated) organized and
operated primarily for the purpose of directly or indirectly
accepting contributions or making expenditures, or both, for an
exempt function.
   (2) The term "exempt function" means the function of influencing
or attempting to influence the selection, nomination, election, or
appointment of any individual to any federal, state, or local public
office or office in a political organization, or the election of
Presidential or Vice Presidential electors, whether or not such
individual or electors are selected, nominated, elected, or
appointed. The term includes the making of expenditures relating to
an office described in the preceding sentence which, if incurred by
the individual, would be allowable as a deduction under Section 162
(a) of the Internal Revenue Code.
   (3) The term "contributions" has the meaning given to such term by
paragraph (2) of subdivision (b) of Section 24434.
   (4) The term "expenditures" has the meaning given to such term by
paragraph (3) of subdivision (b) of Section 24434.
   (f) For purposes of paragraph (1) of subdivision (e), a separate
segregated fund (within the meaning of Section 610 of Title 18 of the
United States Code or of any similar state statute, or within the
meaning of any state statute which permits the segregation of dues
money for exempt functions, within the meaning of paragraph (2) of
subdivision (e)) which is maintained by an organization described in
Sections 23701a through 23701p or Section 23701s which is exempt from
tax under Section 23701 shall be treated as a separate organization.
   (g) (1) For purposes of this section, a fund established and
maintained by an individual who holds, has been elected to, or is a
candidate (within the meaning of paragraph (3)) for nomination or
election to, any federal, state, or local elective public office for
use by such individual exclusively for the preparation and
circulation of such individual's newsletter shall, except as provided
in paragraph (2), be treated as if such fund constituted a political
organization.
   (2) In the case of any fund described in paragraph (1) the exempt
function shall be only the preparation and circulation of the
newsletter.
   (3) For purposes of paragraph (1), "candidate" means with respect
to any federal, state, or local elective public office, an individual
who does both of the following:
   (A) Publicly announces that he or she is a candidate for
nomination or election to that office.
   (B) Meets the qualifications prescribed by law to hold that
office.
   (h) The requirements set forth in subdivisions (a), (b) and (c) of
Section 23701 shall not apply to a political organization or
newsletter fund described in this section. However, in the case of a
corporation incorporated or organized in this state or qualified to
do business in this state, such corporation shall either pay the
minimum tax provided in Section 23153 or obtain a certificate of
exemption from the Franchise Tax Board before the corporation files
with the Secretary of State its articles of incorporation or a duly
certified copy thereof.
   (i) The requirements set forth in Section 23772 or Section 23774
shall not apply to a political organization or newsletter fund.
Further, the requirements set forth in Sections 18505, 18506, and
18601 shall not apply to a political organization or newsletter fund
described in this section, except that if it has political
organization taxable income for any taxable year, the political
organization shall be required to file income tax returns or
statements as determined by the Franchise Tax Board under Chapter 3
(commencing with Section 23501).


23701s.  (a) An employee-funded pension trust described in Section
501(c)(18) of the Internal Revenue Code, except as otherwise
provided.
   (b) The last sentence in Section 501(c)(18) of the Internal
Revenue Code, relating to excess contributions under Section 4979,
shall not apply.



23701t.  (a) A homeowners' association organized and operated to
provide for the acquisition, construction, management, maintenance,
and care of residential association property if all of the following
apply:
   (1) Sixty percent or more of the gross income of the organization
for the taxable year consists solely of amounts received as
membership dues, fees, and assessments from either of the following:
   (A) Tenant-stockholders or owners of residential units,
residences, or lots.
   (B) Owners of time-share rights to use, or time-share ownership
interests in, association property in the case of a time-share
association.
   (2) Ninety percent or more of the expenditures of the organization
for the taxable year are expenditures for the acquisition,
construction, management, maintenance, and care of association
property and, in the case of a time-share association, for activities
provided to or on behalf of members of the association.
   (3) No part of the net earnings inures (other than by providing
management, maintenance, and care of association property or by a
rebate of excess membership dues, fees, or assessments) to the
benefit of any private shareholder or individual.
   (4) Amounts received as membership dues, fees, and assessments not
expended for association purposes during the taxable year are
transferred to and held in trust to provide for the management,
maintenance, and care of association property and common areas.
   (b) The term "association property" means:
   (1) Property held by the organization.
   (2) Property held in common by the members of the organization.
   (3) Property within the organization privately held by the members
of the organization.
   In the case of a time-share association, "association property"
includes property in which the time-share association, or members of
the association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related to
the time-share project.
   (c) A homeowners' association shall be subject to tax under this
part with respect to its "homeowners' association taxable income,"
and that income shall be subject to tax as provided by Chapter 3
(commencing with Section 23501).
   (1) For purposes of this section, the term "homeowners'
association taxable income" of any organization for any taxable year
means an amount equal to the excess over one hundred dollars ($100)
(if any) of--
   (A) The gross income for the taxable year (excluding any exempt
function income), over
   (B) The deductions allowed by this part which are directly
connected with the production of the gross income (excluding exempt
function income).
   (2) For purposes of this section, the term "exempt function income"
means any amount received as membership fees, dues, and assessments
from tenant-shareholders or owners of residential units, residences,
or lots, or owners of time-share rights to use, or time-share
ownership interests in, association property in the case of a
time-share association.
   (d) The term "homeowners' association" includes a condominium
management association, a residential real estate management
association, a time-share association, and a cooperative housing
corporation.
   (e) "Cooperative housing corporation" includes, but is not limited
to, a limited-equity housing cooperative, as defined in Section
33007.5 of the Health and Safety Code, organized either as a
nonprofit public benefit corporation pursuant to Part 2 (commencing
with Section 5110) of Division 2 of Title 1 of the Corporations Code,
or a nonprofit mutual benefit corporation pursuant to Part 3
(commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code.
   (f) The term "time-share association" means any organization
(other than a condominium management association) organized and
operated to provide for the acquisition, construction, management,
maintenance, and care of association property if any member thereof
holds a time-share right to use, or a time-share ownership interest
in, real property constituting association property.
   (g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.


23701u.  An organization is operated exclusively for exempt purposes
listed in Section 23701f and its net earnings are devoted
exclusively to charitable purposes if that organization is a
nonprofit public benefit corporation organized under Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code, and if the specific and primary purpose for which
the corporation is formed is to render financial assistance to
government by financing, refinancing, acquiring, constructing,
improving, leasing, selling, or otherwise conveying property of any
kind to government. This financing ability shall be limited to the
issuance of certificates of participation, or similar security
arrangements.
   For purposes of this section, "government" means the State of
California, a city, city and county, county, school district, board
of education, public corporation, hospital district, and any other
special district.
   An organization is not organized exclusively for the exempt
purposes referred to in the first paragraph unless its assets are
irrevocably dedicated to one or more purposes listed in Section
23701f.
   Dedication of assets requires that in the event of dissolution of
an organization or the impossibility of performing the specific
organizational purposes, including default of lease payments, the
assets would continue to be devoted to exempt purposes. Assets shall
be deemed irrevocably dedicated to exempt purposes if the articles of
organization provide that upon dissolution the assets will be
distributed to an organization which is exempt under this section,
Section 23701d, or Section 23701f, or under Section 501(c)(3) or
Section 501(c)(4) of the Internal Revenue Code or to the federal
government, or to a state or local government for public purposes; or
by a provision in the articles of organization, satisfactory to the
Franchise Tax Board, that the property will be distributed in trust
for exempt purposes; or by establishing that the assets are
irrevocably dedicated to exempt purposes by operation of law. Any
organization that has had its exemption revoked by the Franchise Tax
Board for failure to comply with Section 23701f may request a further
review of its status under this section.



23701v.  (a) An organization of owners of manufactured homes or
mobilehomes, who are tenants in a mobilehome park, formed for the
purpose of purchasing the mobilehome park to convert it to
condominium, stock cooperative, or other resident ownership
interests.
   (b) An organization shall not fail to meet the requirements of
subdivision (a) merely because it manages, maintains, or cares for
the mobilehome park it has purchased.



23701w.  A veteran's organization, as defined by Section 501(c)(19)
of the Internal Revenue Code.



23701x.  (a) A corporation or trust described in Section 501(c)(25)
of the Internal Revenue Code, relating to certain title-holding
companies.
   (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of
subdivision (b) of Section 23038, for purposes of applying Section
501(c)(25) of the Internal Revenue Code under this section, the term
"corporation" includes a limited liability company that is classified
as a partnership or as a disregarded entity.
   (2) A limited liability company that, under the authority of this
section, is exempt from the tax imposed by this part is also exempt
from the tax and fees imposed under Chapter 10.6 (commencing with
Section 17941) of Part 10.



23701y.  A credit union as defined in Section 14002 of the Financial
Code. In addition, those credit unions are exempt from all other
taxes and licenses, state, county, and municipal, imposed upon those
credit unions, except taxes upon their real property, local utility
user taxes, sales and use taxes, state energy resources surcharges,
state emergency telephone users surcharges, unrelated business income
taxes pursuant to Section 23731, motor vehicle and other vehicle
registration license fees, and any other tax or license fee imposed
by the state upon vehicles, motor vehicles, or the operation thereof.



23701z.  An organization established pursuant to Section 5005.1 of
the Corporations Code by three or more corporations as an arrangement
for the pooling of self-insured claims or losses of those
corporations.


23702.  Section 502 of the Internal Revenue Code, relating to feeder
organizations, shall apply, except as otherwise provided.
   (a) Exemption shall not be allowed to any organization on the
basis that all of its profits are payable to another organization
exempt from taxation under either Section 501 of the Internal Revenue
Code or this article, if that business activity is being conducted
by a separate organization.
   (b) The reference to Section 501 of the Internal Revenue Code,
relating to exemption, shall be modified to refer to Section 23701.
   (c) The reference to Sections 512 and 512(b)(3) of the Internal
Revenue Code, relating to the exclusion of the deriving of rents from
the definition of "trade or business," shall be modified to refer to
Section 23732.


23703.  (a) No exemption shall be allowed under this article to any
charitable corporation as defined in Sections 12582.1 and 12583 of
the Government Code for any year or years for which it fails to file
with the Attorney General, on or before the due date, any
registration or periodic report required by Article 7 (commencing
with Section 12580) of Chapter 6, Part 2, Division 3, Title 2, of the
Government Code.
   (b) The exemption shall be disallowed under this section only
after the Attorney General has notified the Franchise Tax Board in
writing that a charitable corporation subject to the provisions of
subdivision (a) has failed to file any such registration or periodic
report on or before the due date thereof.
   (c) If an exemption is disallowed under this section, such
exemption may be reinstated when the registration or periodic reports
are filed; however, any such charitable corporation shall pay the
minimum tax provided for by Section 23153 for any year or years for
which its exemption was disallowed under this section.
   (d) No exemption shall be disallowed under this section for
taxable years commencing before January 1, 1962.
   (e) The Franchise Tax Board may make any regulations which it
deems necessary to effectuate the purposes of this section.




23703.5.  Section 501(p) of the Internal Revenue Code, relating to
suspension of tax-exempt status of terrorist organizations, shall
apply, except as otherwise provided:
   (a) References to Section 501(a) of the Internal Revenue Code
shall be modified to refer to Section 23701.
   (b) Section 501(p)(4) of the Internal Revenue Code is modified by
substituting the phrase "under Part 10 (commencing with Section
17001) and this part" for the phrase "under any provision of this
title, including Sections 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), and 2522" contained therein.
   (c) This section shall apply only during the period described in
Section 501(p)(3) of the Internal Revenue Code that the federal tax
exemption of the organization described in Section 501(p)(2) of the
Internal Revenue Code is suspended for federal income tax purposes
under Section 501(p)(1) of the Internal Revenue Code.
   (d) Section 501(p)(5) of the Internal Revenue Code shall not apply
and in lieu thereof, notwithstanding any other provision of law, no
organization or other person may challenge a suspension under this
section, a designation or identification described in Section 501(p)
(2) of the Internal Revenue Code, the period of suspension described
in Section 501(p)(3) of the Internal Revenue Code, or a denial of a
deduction under Section 501(p)(4) of the Internal Revenue Code as
modified in subdivision (b) in any administrative or judicial
proceeding relating to the California tax liability of the
organization or other person.
   (e) (1) Credit or refund (with interest) with respect to an
overpayment shall be made if all of the following apply with respect
to that overpayment:
   (A) The tax exemption of any organization described in Section 501
(p)(2) of the Internal Revenue Code is suspended under this section.
   (B) Each designation and identification described in Section 501
(p)(2) of the Internal Revenue Code which has been made with respect
to that organization is determined to be erroneous under Section 501
(p)(6) of the Internal Revenue Code for federal income tax purposes.
   (C) The erroneous designations and identifications result in an
overpayment of income tax for any taxable year by that organization.
   (2) If the credit or refund of any overpayment of tax described in
subparagraph (C) of paragraph (1) is prevented at any time by the
operation of any law or rule of law (including res judicata), the
credit or refund may nevertheless be allowed or made if the claim
therefor is filed before the close of the one-year period beginning
on the date of the last determination described in subparagraph (B)
of paragraph (1).
   (f) This section shall apply to designations made before, on, or
after November 11, 2003.



23703.7.  Section 501(q) of the Internal Revenue Code, relating to
special rules for credit counseling organizations, shall apply,
except as otherwise provided.
   (a) The phrase "Section 23701" shall be substituted for
"subsection (a)" in Section 501(q)(1) of the Internal Revenue Code.
   (b) The phrase "described in Section 23701d or Section 23701f"
shall be substituted for "described in paragraph (3) or (4) of
subsection (c)" in Section 501(q)(1) of the Internal Revenue Code.
   (c) The phrase "described in Section 23701d and exempt from tax
under Section 23701" shall be substituted for "described in
subsection (c)(3) and exempt from tax under subsection (a)" in each
place that it appears in Section 501(q)(1)(E) of the Internal Revenue
Code.
   (d) The phrase "described in Section 23701d shall not be exempt
from tax under Section 23701" shall be substituted for "described in
paragraph (3) of subsection (c) shall not be exempt from tax under
subsection (a)" in Section 501(q)(2)(A) of the Internal Revenue Code.
   (e) The phrase "described in Section 23701d and exempt from tax
under Section 23701 on January 1, 2009," shall be substituted for
"described in paragraph (3) of subsection (c) and exempt from tax
under subsection (a) on the date of the enactment of this subsection"
in Section 501(q)(2)(B)(ii) of the Internal Revenue Code.
   (f) The phrase "January 1, 2010," shall be substituted for "the
date of the enactment of this subsection" in Section 501(q)(2)(B)(ii)
(I) of the Internal Revenue Code.
   (g) The phrase "described in Section 23701f shall not be exempt
from tax under Section 23701" shall be substituted for "described in
paragraph (4) of subsection (c) shall not be exempt from tax under
subsection (a)" in Section 501(q)(3) of the Internal Revenue Code.



23704.  Section 501(e) of the Internal Revenue Code, relating to
cooperative hospital service organizations, shall apply, except as
otherwise provided.
   (a) References to Section 501(c)(3) of the Internal Revenue Code,
relating to charitable organizations, shall be modified to refer to
Section 23701d.
   (b) References to Section 501(a) of the Internal Revenue Code,
relating to exemptions, shall be modified to refer to Section 23701.
   (c) The services which may be provided under Section 501(e)(1) of
the Internal Revenue Code shall include laundry services.
   (d) Section 501(e)(1)(B)(iii) of the Internal Revenue Code is
modified by substituting the phrase "owned and operated by the United
States, the State, or a county or political subdivision thereof, or
an agency or instrumentality of any of the foregoing" for the phrase
"owned and operated by the United States, a State, the District of
Columbia, or a possession of the United States, or a political
subdivision or an agency or instrumentality of any of the foregoing."
   (e) References to Section 170(b)(1)(A)(iii) of the Internal
Revenue Code, relating to the deductibility of contributions to
hospitals, shall be modified to refer to subdivision (e) of Section
23736.


23704.3.  Section 501(o) of the Internal Revenue Code, relating to
treatment of hospitals participating in provider-sponsored
organizations, shall apply, except that the reference to Section 501
(c)(3) of the Internal Revenue Code, relating to charitable
organizations, shall be modified to refer to Section 23701d.



23704.4.  Section 501(k) of the Internal Revenue Code, relating to
the treatment of certain organizations providing care of children,
shall apply, except as otherwise provided.
   (a) The reference to Section 501(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.
   (b) The reference to Section 2522(a)(2) of the Internal Revenue
Code, relating to the computation of taxable gifts or Internal
Revenue Code Section 2055, relating to transfers for public,
charitable, and religious uses, shall not apply.



23704.5.  Section 501(h) of the Internal Revenue Code, relating to
expenditures by public charities engaged in activities to influence
legislation, shall apply, except as otherwise provided.
   (a) The reference to Section 501(a) of the Internal Revenue Code,
relating to exemption from taxation, shall be modified to refer to
Section 23701.
   (b) The reference to Section 501(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.



23704.6.  Section 504 of the Internal Revenue Code, relating to
status after organization ceases to qualify for exemption under
Section 501(c)(3) because of substantial lobbying or because of
political activities, shall apply, except as otherwise provided.
   (a) The reference to Section 501(a) of the Internal Revenue Code,
relating to exemption from taxation, shall be modified to refer to
Section 23701.
   (b) The reference to Section 501a(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.
   (c) The reference to Section 501(c)(4) of the Internal Revenue
Code, relating to civic leagues, social welfare organizations, and
local associations of employees, shall be modified to refer to
Section 23701f.


23705.  (a) (1) An organization described in Section 23701i
(voluntary employee's beneficiary associations) or 23701q (qualified
group legal service plans) which is part of a plan of an employer
shall not be exempt from tax under Section 23701, unless that plan
meets the requirements of Section 505(b) of the Internal Revenue
Code.
   (2) Paragraph (1) shall not apply to any organization described in
Section 505(a)(2) of the Internal Revenue Code.
   (b) A copy of any notice filed with the Secretary of the Treasury,
pursuant to Section 505(c) of the Internal Revenue Code, relating to
application for tax-exempt status, shall be filed at the same time
and in the same manner with the Franchise Tax Board.



23706.  Any exemption from the bank and corporation franchise tax
under Chapter 2 (commencing with Section 23101) or the corporation
income tax under Chapter 3 (commencing with Section 23501), granted
by any California statute on or after January 1, 1985, for an
organization which is an instrumentality of this state, shall be
provided for in this part of the code.



23707.  (a) Except as provided in subdivision (b), the status of any
organization as a private foundation shall be terminated only if--
   (1) Such organization notifies the Franchise Tax Board (at such
time and in such manner as the Franchise Tax Board may by regulations
prescribe) of its intent to accomplish such termination, or
   (2) Such organization has been terminated by the Attorney General
of this state or by action taken pursuant to Section 507 of the
Internal Revenue Code.
   (b) (1) The status as a private foundation of any organization
shall be terminated if--
   (A) Such organization distributes all of its net assets to one or
more organizations described below (other than clauses (vii), (viii),
(ix) or (x)) each of which has been in existence and so described
for a continuous period of at least 60 calendar months immediately
preceding such distribution and exempt from tax under Section 23701d
of the Revenue and Taxation Code or Section 501(c)(3) of the Internal
Revenue Code during the last 60 months, or--
   (i) A church or a convention or association of churches,
   (ii) An educational organization which normally maintains a
regular faculty and curriculum and normally has a regularly enrolled
body of pupils or students in attendance at the place where its
educational activities are regularly carried on,
   (iii) An organization the principal purpose or functions of which
are the providing of medical or hospital care or medical education or
medical research, if the organization is a hospital, or if the
organization is a medical research organization directly engaged in
the continuous active conduct of medical research in conjunction with
a hospital, and during the calendar year in which the contribution
is made such organization is committed to spend such contributions
for such research before January 1 of the fifth calendar year which
begins after the date such contribution is made.
   (iv) An organization which normally receives a substantial part of
its support (exclusive of income received in the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under Section 23701d) from the United States or any state or
political subdivision thereof or from direct or indirect
contributions from the general public, and which is organized and
operated exclusively to receive, hold, invest, and administer
property and to make expenditures to or for the benefit of a college
or university which is an organization referred to in clause (ii) of
this subparagraph and which is an agency or instrumentality of a
state or political subdivision thereof, or which is owned or operated
by a state or political subdivision thereof or by an agency or
instrumentality of one or more states or political subdivisions,
   (v) A governmental unit referred to in Section 170(c)(1) of the
Internal Revenue Code,
   (vi) An organization referred to in Section 170(c)(2) of the
Internal Revenue Code which normally receives a substantial part of
its support (exclusive of income received in the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under Section 23701d) from a governmental unit referred to in Section
170(c)(1) of the Internal Revenue Code or from direct or indirect
contributions from the general public,
   (vii) A private operating foundation (as defined in Section 4942
(j) (3) of the Internal Revenue Code),
   (viii) Any other private foundation (as defined in Section 509(a)
of the Internal Revenue Code) which, not later than the 15th day of
the third month after the close of the foundation's taxable year in
which contributions are received, makes qualifying distributions (as
defined in Section 4942(g) of the Internal Revenue Code, as amended
by P.L. 94-455, without regard to paragraph (3) thereof), which are
treated, after the application of Section 4942(g)(3) of the Internal
Revenue Code as distributions out of corpus (in accordance with
Section 4942(h) of the Internal Revenue Code) in an amount equal to
100 percent of such contributions, and with respect to which the
taxpayer maintains adequate records or other sufficient evidence from
the foundation showing that the foundation made such qualifying
distributions,
   (ix) A private foundation all of the contributions to which are
pooled in a common fund and which would be described in paragraph (3)
of Section 509(a) of the Internal Revenue Code but for the right of
any substantial contributor (hereafter in this clause called "donor")
or his spouse to designate annually the recipients, from among
organizations described in paragraph (1) of Section 509(a) of the
Internal Revenue Code, of the income attributable to the donor's
contribution to the fund and to direct (by deed or by will) the
payment, to an organization described in such paragraph (1), of the
corpus in the common fund shall apply only if all the income of the
common fund is required to be (and is) distributed to one or more
organizations described in such paragraph (1) not later than the 15th
day of the third month after the close of the taxable year in which
the income is realized by the fund and only if all of the corpus
attributable to any donor's contribution to the fund is required to
be (and is) distributed to one or more of such organizations not
later than one year after his death or after the death of his
surviving spouse if she has the right to designate the recipients of
such corpus, and
   (x) An organization described in paragraph (2) or (3) of Section
509(a) of the Internal Revenue Code.
   (B) Such organization meets the requirements of Section 507(b)(1)
(B) or paragraph (1), (2), or (3) of Section 509(a) of the Internal
Revenue Code, whichever applies, and furnishes copies of its federal
notice of termination of its private foundation status to the
Franchise Tax Board.
   (2) For purposes of this part, in the case of a transfer of assets
of any private foundation to another private foundation pursuant to
any liquidation, merger, redemption, recapitalization, or other
adjustment, organization, or reorganization, the transferee
foundation shall not be treated as a newly created organization.



23708.  (a) For the purposes of this part, unless otherwise
indicated in context, the term "an organization exempt from tax"
shall mean an organization which has satisfied the provisions of
Section 23701.
   (b) Except as provided in subdivision (c), any organization
(including an organization in existence on December 31, 1970) which
is described in Section 23701d and which does not notify the
Franchise Tax Board at such time and such manner as the Franchise Tax
Board may prescribe, that it is not a private foundation shall be
presumed to be a private foundation. The time prescribed for giving
notice under this subdivision shall not expire before the 90th day
after the day on which the regulations first prescribed under this
subdivision become final.
   (c) Subdivision (b) shall not apply to--
   (1) Churches, their integrated auxiliaries, and conventions or
associations of churches, or
   (2) Any organization which is not a private foundation (as defined
in Section 23709).
   (3) The Franchise Tax Board may by regulations exempt (to the
extent and subject to such conditions as may be prescribed in such
regulations) from the provisions of subdivision (b)--
   (A) Educational organizations which normally maintain a regular
faculty and curriculum and normally have a regularly enrolled body of
pupils or students in attendance at the place where their
educational activities are regularly carried on; and
   (B) Any other class of organizations with respect to which the
Franchise Tax Board determines that full compliance with the
provisions of subdivision (b) is not necessary to the efficient
administration of the provisions of this title relating to private
foundations.
   (d) (1) No gift or bequest made to an organization upon which the
tax provided by Section 507(c) of the Internal Revenue Code has been
imposed shall be allowed as a deduction under Section 24357, if such
gift or bequest is made--
   (A) By any person after notification of termination is made under
Section 507(a) of the Internal Revenue Code, or
   (B) By a substantial contributor (as defined in Section 507(d)(2)
of the Internal Revenue Code) in his taxable year which includes the
first day on which action is taken by such organization which
culminates in the imposition of tax under Section 507(c) of the
Internal Revenue Code and any subsequent taxable year.
   (2) No gift or bequest made to an organization shall be allowed as
a deduction under Section 24357, if such gift or bequest is made--
   (A) To a private foundation or trust described in Section 4947 of
the Internal Revenue Code in a taxable year for which it fails to
meet the requirements of subdivision (e) of this section (determined
without regard to subparagraphs (B) and (C) of paragraph (2) of
subdivision (e) of this section), or
   (B) To any organization that has not established its exemption
under Section 23701d or Section 501(c)(3) of the Internal Revenue
Code for the period concerned.
   (3) Paragraph (1) shall not apply if the entire amount of the
unpaid portion of the tax imposed under Section 507(c) of the
Internal Revenue Code is abated.
   (e) (1) A private foundation shall not be exempt from taxation
under Section 23701d unless its governing instrument includes
provisions the effects of which are--
   (A) To require its income for each taxable year to be distributed
at such time and in such manner as not to subject the foundation to
tax under Section 4942 of the Internal Revenue Code, as amended by
P.L. 94-455, and
   (B) To prohibit the foundation from engaging in any act of
self-dealing (as defined in Section 4941 of the Internal Revenue
Code) from retaining any excess business holdings (as defined in
Section 4943 of the Internal Revenue Code), from making any
investments in such manner as to subject the foundation to tax under
Section 4944 of the Internal Revenue Code.
   (2) In the case of any organization organized before January 1,
1970, paragraph (1) shall not apply--
   (A) To any taxable year beginning before January 1, 1972,
   (B) To any period after December 31, 1971, during the pendency of
any judicial proceeding begun before January 1, 1972, by the private
foundation which is necessary to reform, or to excuse such foundation
from compliance with, its governing instrument or any other
instrument in order to meet the requirements of paragraph (1), and
   (C) To any period after the termination of any judicial proceeding
described in subparagraph (B) during which its governing instrument
or any other instrument does not permit it to meet the requirements
of paragraph (1).
   (3) This subdivision shall not apply to require the inclusion in
governing instruments of any provisions inconsistent with this
subdivision.
   (f) Notwithstanding any of the requirements of this section, if
they are determined to be met under federal law they are also met for
state purposes.



23709.  (a) For the purposes of this part the term "private
foundation" means a domestic or foreign organization defined in the
Internal Revenue Code as a private foundation.
   (b) For the purposes of this part, if an organization is a private
foundation (within the meaning of subdivision (a)) on December 31,
1970, or becomes a private foundation on any subsequent date, such
organization shall be treated as a private foundation for all periods
after December 31, 1970, or after such subsequent date, unless its
status as such is terminated.
   (c) For purposes of this part, an organization the status of which
as a private foundation is terminated shall be treated as an
organization created on the day after the date of such termination,
except in the case of a transfer of assets of any private foundation
to another private foundation pursuant to any liquidation, merger,
redemption, recapitalization, or other adjustment, organization, or
reorganization, the transferee shall not be treated as a newly
created organization.
   (d) For purposes of this part, the term "support" includes (but is
not limited to)--


    (1) Gifts, grants, contributions, or membership fees,

    (2) Gross receipts from admissions, sales of merchandise,
performance of services, or furnishing of facilities in any activity
which is not an unrelated trade or business (within the meaning of
Section 23734),

    (3) Net income from unrelated business activities, whether or not
such activities are carried on regularly as a trade or business,

    (4) Gross investment income (as defined in subdivision (e)),

    (5) Tax revenues levied for the benefit of an organization and
either paid to or expended on behalf of such organization, and

    (6) The value of services or facilities (exclusive of services or
facilities generally furnished to the public without charge)
furnished by a governmental unit referred to in Section 170(c)(1) of
the Internal Revenue Code to an organization without charge.


Such term does not include any gain from the sale or other
disposition of property which would be considered as gain from the
sale or exchange of a capital asset, or the value of exemption from
any federal, state, or local tax or any similar benefit.
   (e) For purposes of this section, the term "gross investment
income" means the gross amount of income from interest, dividends,
rents, and royalties, but not including any such income to the extent
included in computing the tax imposed by Section 23731.



23710.  Any organization exempted from taxes imposed under this part
pursuant to the provisions of this article shall not be disqualified
for such exemption on the basis that it conducts bingo games
pursuant to Section 326.5 of the Penal Code, provided that the
proceeds from those games are used exclusively for charitable
purposes.



23711.  Section 529 of the Internal Revenue Code, relating to
qualified state tuition programs, shall apply, except as otherwise
provided.
   (a) Section 529(a) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" in lieu of the phrase "under this
subtitle."
   (2) By substituting "Article 2 (commencing with Section 23731)" in
lieu of "section 511."
   (b) A copy of the report required to be filed with the Secretary
of the Treasury under Section 529(d) of the Internal Revenue Code
shall be filed with the Franchise Tax Board at the same time and in
the same manner as specified in that section.



23711.5.  The Golden State Scholarshare Trust, established pursuant
to Article 19 (commencing with Section 69980) of Chapter 2 of Part 42
of the Education Code, is an instrumentality of this state and the
income of the Scholarshare trust shall be exempt from taxes imposed
under this part. The Scholarshare trust is established and shall be
maintained as a qualified state tuition program as defined in Section
529 of the Internal Revenue Code.



23712.  Section 530 of the Internal Revenue Code, relating to
Coverdell education savings accounts, shall apply, except as
otherwise provided.
   (a) Section 530(a) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" for the phrase "under this subtitle."
   (2) By substituting "Article 2 (commencing with Section 23731)"
for "section 511."
   (b) For taxable years beginning before January 1, 2002, Section
530(b)(1) of the Internal Revenue Code, relating to Coverdell
education savings account, is modified to additionally require that
upon the date that the designated beneficiary becomes 30 years of
age, any balance to the credit of the beneficiary shall be
distributed within 30 days after the date the beneficiary becomes 30
years of age to that beneficiary.
   (c) Section 530(d) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) in the manner as provided in Section 72(b) of the
Internal Revenue Code, as modified by Part 10" for the phrase "in the
manner as provided in Section 72(b)" in Section 530(d)(1) of the
Internal Revenue Code.
   (2) (A) By substituting the phrase "tax imposed by Part 10
(commencing with Section 17001)" for the phrase "tax imposed by this
chapter" in Section 530(d)(4)(A) of the Internal Revenue Code.
   (B) By substituting the phrase "increased by 2 1/2 percent" for
the phrase "increased by 10 percent" in Section 530(d)(4)(A) of the
Internal Revenue Code.
   (C) By substituting the phrase "shall be included in the
contributor's gross income under Part 10 (commencing with Section
17001) or this part" for the phrase "shall be included in gross
income" in Section 530(d)(4)(C) of the Internal Revenue Code.
   (D) For taxable years beginning before January 1, 2005:
   (i) By additionally providing that Section 530(d)(4)(A) of the
Internal Revenue Code shall not apply if the payment or distribution
is made on account of the attendance of the designated beneficiary at
the United States Military Academy, the United States Naval Academy,
the United States Air Force Academy, the United States Coast Guard
Academy, or the United States Merchant Marine Academy, to the extent
that the amount of the payment or distribution does not exceed the
costs of advanced education (as defined by Section 2005(e)(3) of
Title 10 of the United States Code, as in effect on November 11,
2003) attributable to that attendance.
   (ii) The amendments made to this section by Section 12 of Chapter
552 of the Statutes of 2004 shall apply to taxable years beginning
after December 31, 2002.
   (d) For purposes of Part 10 (commencing with Section 17001) and
this part, in the case of a custodial account treated as a trust by
reason of Section 530(g) of the Internal Revenue Code, the custodian
of that account shall be treated as the trustee thereof.
   (e) A copy of the report, which is required to be filed with the
Secretary of the Treasury under Section 530(h) of the Internal
Revenue Code, shall be filed with the Franchise Tax Board at the same
time and in the same manner as specified in that section.
   (f) Section 109(d)(2) of Public Law 110-245, relating to
application of amendments to deaths from injuries occurring on or
after October 7, 2001, and before enactment, shall apply, except as
otherwise provided.


State Codes and Statutes

State Codes and Statutes

Statutes > California > Rtc > 23701-23712

REVENUE AND TAXATION CODE
SECTION 23701-23712



23701.  Organizations which are organized and operated for nonprofit
purposes within the provisions of a specific section of this
article, or are defined in Section 23701h (relating to certain
title-holding companies) or Section 23701x (relating to certain
title-holding companies), are exempt from taxes imposed under this
part, except as provided in this article or in Article 2 (commencing
with Section 23731) of this chapter, if:
   (a) An application for exemption is submitted in the form
prescribed by the Franchise Tax Board; and
   (b) A filing fee of twenty-five dollars ($25) is paid with each
application for exemption filed with the Franchise Tax Board after
December 31, 1969; and
   (c) The Franchise Tax Board issues a determination exempting the
organization from tax.
   This section shall not prevent a determination from having
retroactive effect and does not prevent the issuance of a
determination with respect to a domestic organization which was in
existence prior to January 1, 1970, and exempt under prior law
without the submission of a formal application or payment of a filing
fee. For the purpose of this section, the term "domestic" means
created or organized under the laws of this state.
   The Franchise Tax Board may issue rulings and regulations as are
necessary and reasonable to carry out the provisions of this article.



23701a.  (a) Labor, agricultural, or horticultural organizations
other than cooperative organizations described in Section 24404 or
24405 (unless the cooperative organization is determined by the
Internal Revenue Service to be an organization described in Section
501(c)(5) of the Internal Revenue Code of 1954, as amended).
   For purposes of this section, the term "agricultural" includes the
art or science of cultivating land, harvesting crops or aquatic
resources, or raising livestock.
   (b) The amendments to this section by the act adding this
subdivision shall be applied in the computation of taxes for taxable
years beginning on or after January 1, 1983.



23701b.  A fraternal order described in Section 501(c)(8) of the
Internal Revenue Code.



23701c.  A cemetery company described in Section 501(c)(13) of the
Internal Revenue Code.



23701d.  (a) A corporation, community chest or trust, organized and
operated exclusively for religious, charitable, scientific, testing
for public safety, literary, or educational purposes, or to foster
national or international amateur sports competition (but only if no
part of its activities involved the provision of athletic facilities
or equipment), or for the prevention of cruelty to children or
animals, no part of the net earnings of which inures to the benefit
of any private shareholder or individual, no substantial part of the
activities of which is carrying on propaganda or otherwise attempting
to influence legislation, (except as otherwise provided in Section
23704.5), and which does not participate in, or intervene in
(including the publishing or distribution of statements), any
political campaign on behalf of (or in opposition to) any candidate
for public office. An organization is not organized exclusively for
exempt purposes listed above unless its assets are irrevocably
dedicated to one or more purposes listed in this section. Dedication
of assets requires that in the event of dissolution of an
organization or the impossibility of performing the specific
organizational purposes the assets would continue to be devoted to
exempt purposes. Assets shall be deemed irrevocably dedicated to
exempt purposes if the articles of organization provide that upon
dissolution the assets will be distributed to an organization which
is exempt under this section or Section 501(c)(3) of the Internal
Revenue Code or to the federal government, or to a state or local
government for public purposes; or by a provision in the articles of
organization, satisfactory to the Franchise Tax Board; that the
property will be distributed in trust for exempt purposes; or by
establishing that the assets are irrevocably dedicated to exempt
purposes by operation of law. The irrevocable dedication requirement
shall not be a sole basis for revocation of an exempt determination
made by the Franchise Tax Board prior to the effective date of this
amendment.
   (b) (1) In the case of a qualified amateur sports organization--
   (A) The requirement of subdivision (a) that no part of its
activities involves the provision of athletic facilities or equipment
shall not apply.
   (B) That organization shall not fail to meet the requirements of
subdivision (a) merely because its membership is local or regional in
nature.
   (2) For purposes of this subdivision, "qualified amateur sports
organization" means any organization organized and operated
exclusively to foster national or international amateur sports
competition if that organization is also organized and operated
primarily to conduct national or international competition in sports
or to support and develop amateur athletes for national or
international competition in sports.
   (c) (1) Notwithstanding subdivisions (a), (b), and (c) of Section
23701, an organization organized and operated for nonprofit purposes
in accordance with this section shall be exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731), upon its submission to the Franchise
Tax Board of one of the following:
   (A) A copy of the determination letter or ruling issued by the
Internal Revenue Service recognizing the organization's exemption
from federal income tax under Section 501(a) of the Internal Revenue
Code, as an organization described in Section 501(c)(3) of the
Internal Revenue Code.
   (B) A copy of the group exemption letter issued by the Internal
Revenue Service that states that both the central organization and
all of its subordinates are tax-exempt under Section 501(c)(3) of the
Internal Revenue Code and substantiation that the organization is
included in the federal group exemption letter as a subordinate
organization.
   (2) Upon receipt of the documents required in subparagraph (A) or
(B) of paragraph (1), the Franchise Tax Board shall issue an
acknowledgment that the organization is exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731). The acknowledgment may refer to the
organization's recognition by the Internal Revenue Service of
exemption from federal income tax as an organization described in
Section 501(c)(3) of the Internal Revenue Code and, if applicable,
the organization's subordinate organization status under a federal
group exemption letter. The effective date of an organization's
exemption from state income tax pursuant to this subdivision shall be
no later than the effective date of the organization's recognition
of exemption from federal income tax as an organization described in
Section 501(c)(3) of the Internal Revenue Code, or its status as a
subordinate organization under a federal group exemption letter, as
applicable.
   (3) If, for federal income tax purposes, an organization's
exemption from tax as an organization described in Section 501(c)(3)
of the Internal Revenue Code is suspended or revoked, the
organization shall notify the Franchise Tax Board of the suspension
or revocation, in the form and manner prescribed by the Franchise Tax
Board. Upon notification, the board shall suspend or revoke,
whichever is applicable, for state income tax purposes, the
organization's exemption under paragraph (1) of this subdivision.
   (4) This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an organization
that is not organized or operated in accordance with this chapter or
Section 501(c)(3) of the Internal Revenue Code.
   (5) If the Franchise Tax Board suspends or revokes the exemption
of an organization pursuant to paragraph (3) or (4), the exemption
shall be reinstated only upon compliance with Section 23701,
regardless of whether the organization can establish exemption under
paragraph (1).
   (d) The Franchise Tax Board may prescribe rules and regulations to
implement this section.



23701e.  A business league, chamber of commerce, real estate board,
or a board of trade described in Section 501(c)(6) of the Internal
Revenue Code, except that the phrase "or professional football
leagues (whether or not administering a pension fund for football
players)" shall not apply.



23701f.  (a) A civic league, social welfare organization, or local
organization of employees described in Section 501(c)(4) of the
Internal Revenue Code, except as otherwise provided.
   (b) An organization is not organized exclusively for exempt
purposes under Section 501(c)(4) of the Internal Revenue Code unless
its assets are irrevocably dedicated to one or more purposes listed
in Section 501(c)(4) of the Internal Revenue Code.



23701g.  A social organization described in Section 501(c)(7) of the
Internal Revenue Code.



23701h.  (a) A corporation described in Section 501(c)(2) of the
Internal Revenue Code, relating to certain title-holding companies.
   (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of
subdivision (b) of Section 23038, for purposes of applying Section
501(c)(2) of the Internal Revenue Code under this section, the term
"corporation" includes a limited liability company that is classified
as a partnership or as a disregarded entity.
   (2) A limited liability company that, under the authority of this
section, is exempt from the tax imposed by this part is also exempt
from the tax and fees imposed under Chapter 10.6 (commencing with
Section 17941) of Part 10.



23701i.  A voluntary employees' beneficiary association described in
Section 501(c)(9) of the Internal Revenue Code.



23701j.  A teacher's retirement fund association described in
Section 501(c)(11) of the Internal Revenue Code.



23701k.  Religious or apostolic corporations, if such corporations
have a common treasury or community treasury even if such
corporations engaged in business for the common benefit of the
members, but only if the members thereof include (at the time of
filing their returns) in their gross income their entire pro rata
shares, whether distributed or not, of the net income of the
corporation for such year. Any amount so included in the gross income
of a member shall be treated as a dividend received.



23701l.  (a) A domestic fraternal society described in Section 501
(c)(10) of the Internal Revenue Code, except as otherwise provided.
   (b) For purposes of this section, the term "domestic" means
created or organized in the United States or under the law of the
United States or of any state or territory therein.



23701n.  (a) A supplemental unemployment compensation trust
described in Section 501(c)(17) of the Internal Revenue Code, except
as otherwise provided.
   (b) The following references in Section 501(c)(17)(E) of the
Internal Revenue Code shall be modified as follows:
   (1) The phrase "under Section 23701" shall be substituted for the
phrase "under subsection (a)."
   (2) The phrase "Section 23701i" shall be substituted for the
phrase "paragraph (9) of this subsection."


23701p.  A trust or plan which meets the requirements of Public Law
87-792, 76 U.S. Stats. 809, approved October 10, 1962 (the
Self-Employed Individuals Tax Retirement Bill of 1962), but only if
such trust or plan is not exempt from taxation under Section 17631.




23701r.  (a) A political organization.  However, a political
organization shall be subject to tax under this part with respect to
its "political organization taxable income" and such income shall be
subject to tax as provided by Chapter 3 (commencing with Section
23501).
   (b) For purposes of this section, the political organization
taxable income of any organization for any taxable year is an amount
equal to the excess over one hundred dollars ($100) (if any) of--
   (1) The gross income for the taxable year (excluding any exempt
function income), over
   (2) The deductions allowed by this part which are directly
connected with the production of the gross income (excluding exempt
function income).
   (c) For purposes of this section, the term "exempt function income"
means any amount received as--


    (1) A contribution of money or other property,

    (2) Membership dues, a membership fee or assessment from a member
of the political organization, or

    (3) Proceeds from a political fundraising or entertainment event,
or proceeds from the sale of political campaign materials, which are
not received in the ordinary course of any trade or business,


to the extent such amount is segregated for use only for the exempt
function of the political organization.
   (d) For purposes of this part, if any political organization--


    (1) Contributes any amount to or for the use of any political
organization which is treated as exempt from tax under subdivision
(a) of this section,

    (2) Contributes any amount to or for the use of any organization
described in paragraph (1) or (2) of Section 509(a) of the Internal
Revenue Code of 1954, which is exempt from tax under Section 23701,
or

    (3) Deposits any amount in the General Fund or the Treasury of
the United States or in the General Fund of any state or local
government,


such amount shall be treated as an amount not diverted for the
personal use of the candidate or any other person. No deduction shall
be allowed under this part for the contribution or deposit of any
amount described in the preceding sentence.
   (e) For purposes of this section--
   (1) The term "political organization" means a party, committee,
association, fund, (including the trust of an individual candidate)
or other organization (whether or not incorporated) organized and
operated primarily for the purpose of directly or indirectly
accepting contributions or making expenditures, or both, for an
exempt function.
   (2) The term "exempt function" means the function of influencing
or attempting to influence the selection, nomination, election, or
appointment of any individual to any federal, state, or local public
office or office in a political organization, or the election of
Presidential or Vice Presidential electors, whether or not such
individual or electors are selected, nominated, elected, or
appointed. The term includes the making of expenditures relating to
an office described in the preceding sentence which, if incurred by
the individual, would be allowable as a deduction under Section 162
(a) of the Internal Revenue Code.
   (3) The term "contributions" has the meaning given to such term by
paragraph (2) of subdivision (b) of Section 24434.
   (4) The term "expenditures" has the meaning given to such term by
paragraph (3) of subdivision (b) of Section 24434.
   (f) For purposes of paragraph (1) of subdivision (e), a separate
segregated fund (within the meaning of Section 610 of Title 18 of the
United States Code or of any similar state statute, or within the
meaning of any state statute which permits the segregation of dues
money for exempt functions, within the meaning of paragraph (2) of
subdivision (e)) which is maintained by an organization described in
Sections 23701a through 23701p or Section 23701s which is exempt from
tax under Section 23701 shall be treated as a separate organization.
   (g) (1) For purposes of this section, a fund established and
maintained by an individual who holds, has been elected to, or is a
candidate (within the meaning of paragraph (3)) for nomination or
election to, any federal, state, or local elective public office for
use by such individual exclusively for the preparation and
circulation of such individual's newsletter shall, except as provided
in paragraph (2), be treated as if such fund constituted a political
organization.
   (2) In the case of any fund described in paragraph (1) the exempt
function shall be only the preparation and circulation of the
newsletter.
   (3) For purposes of paragraph (1), "candidate" means with respect
to any federal, state, or local elective public office, an individual
who does both of the following:
   (A) Publicly announces that he or she is a candidate for
nomination or election to that office.
   (B) Meets the qualifications prescribed by law to hold that
office.
   (h) The requirements set forth in subdivisions (a), (b) and (c) of
Section 23701 shall not apply to a political organization or
newsletter fund described in this section. However, in the case of a
corporation incorporated or organized in this state or qualified to
do business in this state, such corporation shall either pay the
minimum tax provided in Section 23153 or obtain a certificate of
exemption from the Franchise Tax Board before the corporation files
with the Secretary of State its articles of incorporation or a duly
certified copy thereof.
   (i) The requirements set forth in Section 23772 or Section 23774
shall not apply to a political organization or newsletter fund.
Further, the requirements set forth in Sections 18505, 18506, and
18601 shall not apply to a political organization or newsletter fund
described in this section, except that if it has political
organization taxable income for any taxable year, the political
organization shall be required to file income tax returns or
statements as determined by the Franchise Tax Board under Chapter 3
(commencing with Section 23501).


23701s.  (a) An employee-funded pension trust described in Section
501(c)(18) of the Internal Revenue Code, except as otherwise
provided.
   (b) The last sentence in Section 501(c)(18) of the Internal
Revenue Code, relating to excess contributions under Section 4979,
shall not apply.



23701t.  (a) A homeowners' association organized and operated to
provide for the acquisition, construction, management, maintenance,
and care of residential association property if all of the following
apply:
   (1) Sixty percent or more of the gross income of the organization
for the taxable year consists solely of amounts received as
membership dues, fees, and assessments from either of the following:
   (A) Tenant-stockholders or owners of residential units,
residences, or lots.
   (B) Owners of time-share rights to use, or time-share ownership
interests in, association property in the case of a time-share
association.
   (2) Ninety percent or more of the expenditures of the organization
for the taxable year are expenditures for the acquisition,
construction, management, maintenance, and care of association
property and, in the case of a time-share association, for activities
provided to or on behalf of members of the association.
   (3) No part of the net earnings inures (other than by providing
management, maintenance, and care of association property or by a
rebate of excess membership dues, fees, or assessments) to the
benefit of any private shareholder or individual.
   (4) Amounts received as membership dues, fees, and assessments not
expended for association purposes during the taxable year are
transferred to and held in trust to provide for the management,
maintenance, and care of association property and common areas.
   (b) The term "association property" means:
   (1) Property held by the organization.
   (2) Property held in common by the members of the organization.
   (3) Property within the organization privately held by the members
of the organization.
   In the case of a time-share association, "association property"
includes property in which the time-share association, or members of
the association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related to
the time-share project.
   (c) A homeowners' association shall be subject to tax under this
part with respect to its "homeowners' association taxable income,"
and that income shall be subject to tax as provided by Chapter 3
(commencing with Section 23501).
   (1) For purposes of this section, the term "homeowners'
association taxable income" of any organization for any taxable year
means an amount equal to the excess over one hundred dollars ($100)
(if any) of--
   (A) The gross income for the taxable year (excluding any exempt
function income), over
   (B) The deductions allowed by this part which are directly
connected with the production of the gross income (excluding exempt
function income).
   (2) For purposes of this section, the term "exempt function income"
means any amount received as membership fees, dues, and assessments
from tenant-shareholders or owners of residential units, residences,
or lots, or owners of time-share rights to use, or time-share
ownership interests in, association property in the case of a
time-share association.
   (d) The term "homeowners' association" includes a condominium
management association, a residential real estate management
association, a time-share association, and a cooperative housing
corporation.
   (e) "Cooperative housing corporation" includes, but is not limited
to, a limited-equity housing cooperative, as defined in Section
33007.5 of the Health and Safety Code, organized either as a
nonprofit public benefit corporation pursuant to Part 2 (commencing
with Section 5110) of Division 2 of Title 1 of the Corporations Code,
or a nonprofit mutual benefit corporation pursuant to Part 3
(commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code.
   (f) The term "time-share association" means any organization
(other than a condominium management association) organized and
operated to provide for the acquisition, construction, management,
maintenance, and care of association property if any member thereof
holds a time-share right to use, or a time-share ownership interest
in, real property constituting association property.
   (g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.


23701u.  An organization is operated exclusively for exempt purposes
listed in Section 23701f and its net earnings are devoted
exclusively to charitable purposes if that organization is a
nonprofit public benefit corporation organized under Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code, and if the specific and primary purpose for which
the corporation is formed is to render financial assistance to
government by financing, refinancing, acquiring, constructing,
improving, leasing, selling, or otherwise conveying property of any
kind to government. This financing ability shall be limited to the
issuance of certificates of participation, or similar security
arrangements.
   For purposes of this section, "government" means the State of
California, a city, city and county, county, school district, board
of education, public corporation, hospital district, and any other
special district.
   An organization is not organized exclusively for the exempt
purposes referred to in the first paragraph unless its assets are
irrevocably dedicated to one or more purposes listed in Section
23701f.
   Dedication of assets requires that in the event of dissolution of
an organization or the impossibility of performing the specific
organizational purposes, including default of lease payments, the
assets would continue to be devoted to exempt purposes. Assets shall
be deemed irrevocably dedicated to exempt purposes if the articles of
organization provide that upon dissolution the assets will be
distributed to an organization which is exempt under this section,
Section 23701d, or Section 23701f, or under Section 501(c)(3) or
Section 501(c)(4) of the Internal Revenue Code or to the federal
government, or to a state or local government for public purposes; or
by a provision in the articles of organization, satisfactory to the
Franchise Tax Board, that the property will be distributed in trust
for exempt purposes; or by establishing that the assets are
irrevocably dedicated to exempt purposes by operation of law. Any
organization that has had its exemption revoked by the Franchise Tax
Board for failure to comply with Section 23701f may request a further
review of its status under this section.



23701v.  (a) An organization of owners of manufactured homes or
mobilehomes, who are tenants in a mobilehome park, formed for the
purpose of purchasing the mobilehome park to convert it to
condominium, stock cooperative, or other resident ownership
interests.
   (b) An organization shall not fail to meet the requirements of
subdivision (a) merely because it manages, maintains, or cares for
the mobilehome park it has purchased.



23701w.  A veteran's organization, as defined by Section 501(c)(19)
of the Internal Revenue Code.



23701x.  (a) A corporation or trust described in Section 501(c)(25)
of the Internal Revenue Code, relating to certain title-holding
companies.
   (b) (1) Notwithstanding subparagraph (B) of paragraph (2) of
subdivision (b) of Section 23038, for purposes of applying Section
501(c)(25) of the Internal Revenue Code under this section, the term
"corporation" includes a limited liability company that is classified
as a partnership or as a disregarded entity.
   (2) A limited liability company that, under the authority of this
section, is exempt from the tax imposed by this part is also exempt
from the tax and fees imposed under Chapter 10.6 (commencing with
Section 17941) of Part 10.



23701y.  A credit union as defined in Section 14002 of the Financial
Code. In addition, those credit unions are exempt from all other
taxes and licenses, state, county, and municipal, imposed upon those
credit unions, except taxes upon their real property, local utility
user taxes, sales and use taxes, state energy resources surcharges,
state emergency telephone users surcharges, unrelated business income
taxes pursuant to Section 23731, motor vehicle and other vehicle
registration license fees, and any other tax or license fee imposed
by the state upon vehicles, motor vehicles, or the operation thereof.



23701z.  An organization established pursuant to Section 5005.1 of
the Corporations Code by three or more corporations as an arrangement
for the pooling of self-insured claims or losses of those
corporations.


23702.  Section 502 of the Internal Revenue Code, relating to feeder
organizations, shall apply, except as otherwise provided.
   (a) Exemption shall not be allowed to any organization on the
basis that all of its profits are payable to another organization
exempt from taxation under either Section 501 of the Internal Revenue
Code or this article, if that business activity is being conducted
by a separate organization.
   (b) The reference to Section 501 of the Internal Revenue Code,
relating to exemption, shall be modified to refer to Section 23701.
   (c) The reference to Sections 512 and 512(b)(3) of the Internal
Revenue Code, relating to the exclusion of the deriving of rents from
the definition of "trade or business," shall be modified to refer to
Section 23732.


23703.  (a) No exemption shall be allowed under this article to any
charitable corporation as defined in Sections 12582.1 and 12583 of
the Government Code for any year or years for which it fails to file
with the Attorney General, on or before the due date, any
registration or periodic report required by Article 7 (commencing
with Section 12580) of Chapter 6, Part 2, Division 3, Title 2, of the
Government Code.
   (b) The exemption shall be disallowed under this section only
after the Attorney General has notified the Franchise Tax Board in
writing that a charitable corporation subject to the provisions of
subdivision (a) has failed to file any such registration or periodic
report on or before the due date thereof.
   (c) If an exemption is disallowed under this section, such
exemption may be reinstated when the registration or periodic reports
are filed; however, any such charitable corporation shall pay the
minimum tax provided for by Section 23153 for any year or years for
which its exemption was disallowed under this section.
   (d) No exemption shall be disallowed under this section for
taxable years commencing before January 1, 1962.
   (e) The Franchise Tax Board may make any regulations which it
deems necessary to effectuate the purposes of this section.




23703.5.  Section 501(p) of the Internal Revenue Code, relating to
suspension of tax-exempt status of terrorist organizations, shall
apply, except as otherwise provided:
   (a) References to Section 501(a) of the Internal Revenue Code
shall be modified to refer to Section 23701.
   (b) Section 501(p)(4) of the Internal Revenue Code is modified by
substituting the phrase "under Part 10 (commencing with Section
17001) and this part" for the phrase "under any provision of this
title, including Sections 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), and 2522" contained therein.
   (c) This section shall apply only during the period described in
Section 501(p)(3) of the Internal Revenue Code that the federal tax
exemption of the organization described in Section 501(p)(2) of the
Internal Revenue Code is suspended for federal income tax purposes
under Section 501(p)(1) of the Internal Revenue Code.
   (d) Section 501(p)(5) of the Internal Revenue Code shall not apply
and in lieu thereof, notwithstanding any other provision of law, no
organization or other person may challenge a suspension under this
section, a designation or identification described in Section 501(p)
(2) of the Internal Revenue Code, the period of suspension described
in Section 501(p)(3) of the Internal Revenue Code, or a denial of a
deduction under Section 501(p)(4) of the Internal Revenue Code as
modified in subdivision (b) in any administrative or judicial
proceeding relating to the California tax liability of the
organization or other person.
   (e) (1) Credit or refund (with interest) with respect to an
overpayment shall be made if all of the following apply with respect
to that overpayment:
   (A) The tax exemption of any organization described in Section 501
(p)(2) of the Internal Revenue Code is suspended under this section.
   (B) Each designation and identification described in Section 501
(p)(2) of the Internal Revenue Code which has been made with respect
to that organization is determined to be erroneous under Section 501
(p)(6) of the Internal Revenue Code for federal income tax purposes.
   (C) The erroneous designations and identifications result in an
overpayment of income tax for any taxable year by that organization.
   (2) If the credit or refund of any overpayment of tax described in
subparagraph (C) of paragraph (1) is prevented at any time by the
operation of any law or rule of law (including res judicata), the
credit or refund may nevertheless be allowed or made if the claim
therefor is filed before the close of the one-year period beginning
on the date of the last determination described in subparagraph (B)
of paragraph (1).
   (f) This section shall apply to designations made before, on, or
after November 11, 2003.



23703.7.  Section 501(q) of the Internal Revenue Code, relating to
special rules for credit counseling organizations, shall apply,
except as otherwise provided.
   (a) The phrase "Section 23701" shall be substituted for
"subsection (a)" in Section 501(q)(1) of the Internal Revenue Code.
   (b) The phrase "described in Section 23701d or Section 23701f"
shall be substituted for "described in paragraph (3) or (4) of
subsection (c)" in Section 501(q)(1) of the Internal Revenue Code.
   (c) The phrase "described in Section 23701d and exempt from tax
under Section 23701" shall be substituted for "described in
subsection (c)(3) and exempt from tax under subsection (a)" in each
place that it appears in Section 501(q)(1)(E) of the Internal Revenue
Code.
   (d) The phrase "described in Section 23701d shall not be exempt
from tax under Section 23701" shall be substituted for "described in
paragraph (3) of subsection (c) shall not be exempt from tax under
subsection (a)" in Section 501(q)(2)(A) of the Internal Revenue Code.
   (e) The phrase "described in Section 23701d and exempt from tax
under Section 23701 on January 1, 2009," shall be substituted for
"described in paragraph (3) of subsection (c) and exempt from tax
under subsection (a) on the date of the enactment of this subsection"
in Section 501(q)(2)(B)(ii) of the Internal Revenue Code.
   (f) The phrase "January 1, 2010," shall be substituted for "the
date of the enactment of this subsection" in Section 501(q)(2)(B)(ii)
(I) of the Internal Revenue Code.
   (g) The phrase "described in Section 23701f shall not be exempt
from tax under Section 23701" shall be substituted for "described in
paragraph (4) of subsection (c) shall not be exempt from tax under
subsection (a)" in Section 501(q)(3) of the Internal Revenue Code.



23704.  Section 501(e) of the Internal Revenue Code, relating to
cooperative hospital service organizations, shall apply, except as
otherwise provided.
   (a) References to Section 501(c)(3) of the Internal Revenue Code,
relating to charitable organizations, shall be modified to refer to
Section 23701d.
   (b) References to Section 501(a) of the Internal Revenue Code,
relating to exemptions, shall be modified to refer to Section 23701.
   (c) The services which may be provided under Section 501(e)(1) of
the Internal Revenue Code shall include laundry services.
   (d) Section 501(e)(1)(B)(iii) of the Internal Revenue Code is
modified by substituting the phrase "owned and operated by the United
States, the State, or a county or political subdivision thereof, or
an agency or instrumentality of any of the foregoing" for the phrase
"owned and operated by the United States, a State, the District of
Columbia, or a possession of the United States, or a political
subdivision or an agency or instrumentality of any of the foregoing."
   (e) References to Section 170(b)(1)(A)(iii) of the Internal
Revenue Code, relating to the deductibility of contributions to
hospitals, shall be modified to refer to subdivision (e) of Section
23736.


23704.3.  Section 501(o) of the Internal Revenue Code, relating to
treatment of hospitals participating in provider-sponsored
organizations, shall apply, except that the reference to Section 501
(c)(3) of the Internal Revenue Code, relating to charitable
organizations, shall be modified to refer to Section 23701d.



23704.4.  Section 501(k) of the Internal Revenue Code, relating to
the treatment of certain organizations providing care of children,
shall apply, except as otherwise provided.
   (a) The reference to Section 501(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.
   (b) The reference to Section 2522(a)(2) of the Internal Revenue
Code, relating to the computation of taxable gifts or Internal
Revenue Code Section 2055, relating to transfers for public,
charitable, and religious uses, shall not apply.



23704.5.  Section 501(h) of the Internal Revenue Code, relating to
expenditures by public charities engaged in activities to influence
legislation, shall apply, except as otherwise provided.
   (a) The reference to Section 501(a) of the Internal Revenue Code,
relating to exemption from taxation, shall be modified to refer to
Section 23701.
   (b) The reference to Section 501(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.



23704.6.  Section 504 of the Internal Revenue Code, relating to
status after organization ceases to qualify for exemption under
Section 501(c)(3) because of substantial lobbying or because of
political activities, shall apply, except as otherwise provided.
   (a) The reference to Section 501(a) of the Internal Revenue Code,
relating to exemption from taxation, shall be modified to refer to
Section 23701.
   (b) The reference to Section 501a(c)(3) of the Internal Revenue
Code, relating to charitable organizations, shall be modified to
refer to Section 23701d.
   (c) The reference to Section 501(c)(4) of the Internal Revenue
Code, relating to civic leagues, social welfare organizations, and
local associations of employees, shall be modified to refer to
Section 23701f.


23705.  (a) (1) An organization described in Section 23701i
(voluntary employee's beneficiary associations) or 23701q (qualified
group legal service plans) which is part of a plan of an employer
shall not be exempt from tax under Section 23701, unless that plan
meets the requirements of Section 505(b) of the Internal Revenue
Code.
   (2) Paragraph (1) shall not apply to any organization described in
Section 505(a)(2) of the Internal Revenue Code.
   (b) A copy of any notice filed with the Secretary of the Treasury,
pursuant to Section 505(c) of the Internal Revenue Code, relating to
application for tax-exempt status, shall be filed at the same time
and in the same manner with the Franchise Tax Board.



23706.  Any exemption from the bank and corporation franchise tax
under Chapter 2 (commencing with Section 23101) or the corporation
income tax under Chapter 3 (commencing with Section 23501), granted
by any California statute on or after January 1, 1985, for an
organization which is an instrumentality of this state, shall be
provided for in this part of the code.



23707.  (a) Except as provided in subdivision (b), the status of any
organization as a private foundation shall be terminated only if--
   (1) Such organization notifies the Franchise Tax Board (at such
time and in such manner as the Franchise Tax Board may by regulations
prescribe) of its intent to accomplish such termination, or
   (2) Such organization has been terminated by the Attorney General
of this state or by action taken pursuant to Section 507 of the
Internal Revenue Code.
   (b) (1) The status as a private foundation of any organization
shall be terminated if--
   (A) Such organization distributes all of its net assets to one or
more organizations described below (other than clauses (vii), (viii),
(ix) or (x)) each of which has been in existence and so described
for a continuous period of at least 60 calendar months immediately
preceding such distribution and exempt from tax under Section 23701d
of the Revenue and Taxation Code or Section 501(c)(3) of the Internal
Revenue Code during the last 60 months, or--
   (i) A church or a convention or association of churches,
   (ii) An educational organization which normally maintains a
regular faculty and curriculum and normally has a regularly enrolled
body of pupils or students in attendance at the place where its
educational activities are regularly carried on,
   (iii) An organization the principal purpose or functions of which
are the providing of medical or hospital care or medical education or
medical research, if the organization is a hospital, or if the
organization is a medical research organization directly engaged in
the continuous active conduct of medical research in conjunction with
a hospital, and during the calendar year in which the contribution
is made such organization is committed to spend such contributions
for such research before January 1 of the fifth calendar year which
begins after the date such contribution is made.
   (iv) An organization which normally receives a substantial part of
its support (exclusive of income received in the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under Section 23701d) from the United States or any state or
political subdivision thereof or from direct or indirect
contributions from the general public, and which is organized and
operated exclusively to receive, hold, invest, and administer
property and to make expenditures to or for the benefit of a college
or university which is an organization referred to in clause (ii) of
this subparagraph and which is an agency or instrumentality of a
state or political subdivision thereof, or which is owned or operated
by a state or political subdivision thereof or by an agency or
instrumentality of one or more states or political subdivisions,
   (v) A governmental unit referred to in Section 170(c)(1) of the
Internal Revenue Code,
   (vi) An organization referred to in Section 170(c)(2) of the
Internal Revenue Code which normally receives a substantial part of
its support (exclusive of income received in the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under Section 23701d) from a governmental unit referred to in Section
170(c)(1) of the Internal Revenue Code or from direct or indirect
contributions from the general public,
   (vii) A private operating foundation (as defined in Section 4942
(j) (3) of the Internal Revenue Code),
   (viii) Any other private foundation (as defined in Section 509(a)
of the Internal Revenue Code) which, not later than the 15th day of
the third month after the close of the foundation's taxable year in
which contributions are received, makes qualifying distributions (as
defined in Section 4942(g) of the Internal Revenue Code, as amended
by P.L. 94-455, without regard to paragraph (3) thereof), which are
treated, after the application of Section 4942(g)(3) of the Internal
Revenue Code as distributions out of corpus (in accordance with
Section 4942(h) of the Internal Revenue Code) in an amount equal to
100 percent of such contributions, and with respect to which the
taxpayer maintains adequate records or other sufficient evidence from
the foundation showing that the foundation made such qualifying
distributions,
   (ix) A private foundation all of the contributions to which are
pooled in a common fund and which would be described in paragraph (3)
of Section 509(a) of the Internal Revenue Code but for the right of
any substantial contributor (hereafter in this clause called "donor")
or his spouse to designate annually the recipients, from among
organizations described in paragraph (1) of Section 509(a) of the
Internal Revenue Code, of the income attributable to the donor's
contribution to the fund and to direct (by deed or by will) the
payment, to an organization described in such paragraph (1), of the
corpus in the common fund shall apply only if all the income of the
common fund is required to be (and is) distributed to one or more
organizations described in such paragraph (1) not later than the 15th
day of the third month after the close of the taxable year in which
the income is realized by the fund and only if all of the corpus
attributable to any donor's contribution to the fund is required to
be (and is) distributed to one or more of such organizations not
later than one year after his death or after the death of his
surviving spouse if she has the right to designate the recipients of
such corpus, and
   (x) An organization described in paragraph (2) or (3) of Section
509(a) of the Internal Revenue Code.
   (B) Such organization meets the requirements of Section 507(b)(1)
(B) or paragraph (1), (2), or (3) of Section 509(a) of the Internal
Revenue Code, whichever applies, and furnishes copies of its federal
notice of termination of its private foundation status to the
Franchise Tax Board.
   (2) For purposes of this part, in the case of a transfer of assets
of any private foundation to another private foundation pursuant to
any liquidation, merger, redemption, recapitalization, or other
adjustment, organization, or reorganization, the transferee
foundation shall not be treated as a newly created organization.



23708.  (a) For the purposes of this part, unless otherwise
indicated in context, the term "an organization exempt from tax"
shall mean an organization which has satisfied the provisions of
Section 23701.
   (b) Except as provided in subdivision (c), any organization
(including an organization in existence on December 31, 1970) which
is described in Section 23701d and which does not notify the
Franchise Tax Board at such time and such manner as the Franchise Tax
Board may prescribe, that it is not a private foundation shall be
presumed to be a private foundation. The time prescribed for giving
notice under this subdivision shall not expire before the 90th day
after the day on which the regulations first prescribed under this
subdivision become final.
   (c) Subdivision (b) shall not apply to--
   (1) Churches, their integrated auxiliaries, and conventions or
associations of churches, or
   (2) Any organization which is not a private foundation (as defined
in Section 23709).
   (3) The Franchise Tax Board may by regulations exempt (to the
extent and subject to such conditions as may be prescribed in such
regulations) from the provisions of subdivision (b)--
   (A) Educational organizations which normally maintain a regular
faculty and curriculum and normally have a regularly enrolled body of
pupils or students in attendance at the place where their
educational activities are regularly carried on; and
   (B) Any other class of organizations with respect to which the
Franchise Tax Board determines that full compliance with the
provisions of subdivision (b) is not necessary to the efficient
administration of the provisions of this title relating to private
foundations.
   (d) (1) No gift or bequest made to an organization upon which the
tax provided by Section 507(c) of the Internal Revenue Code has been
imposed shall be allowed as a deduction under Section 24357, if such
gift or bequest is made--
   (A) By any person after notification of termination is made under
Section 507(a) of the Internal Revenue Code, or
   (B) By a substantial contributor (as defined in Section 507(d)(2)
of the Internal Revenue Code) in his taxable year which includes the
first day on which action is taken by such organization which
culminates in the imposition of tax under Section 507(c) of the
Internal Revenue Code and any subsequent taxable year.
   (2) No gift or bequest made to an organization shall be allowed as
a deduction under Section 24357, if such gift or bequest is made--
   (A) To a private foundation or trust described in Section 4947 of
the Internal Revenue Code in a taxable year for which it fails to
meet the requirements of subdivision (e) of this section (determined
without regard to subparagraphs (B) and (C) of paragraph (2) of
subdivision (e) of this section), or
   (B) To any organization that has not established its exemption
under Section 23701d or Section 501(c)(3) of the Internal Revenue
Code for the period concerned.
   (3) Paragraph (1) shall not apply if the entire amount of the
unpaid portion of the tax imposed under Section 507(c) of the
Internal Revenue Code is abated.
   (e) (1) A private foundation shall not be exempt from taxation
under Section 23701d unless its governing instrument includes
provisions the effects of which are--
   (A) To require its income for each taxable year to be distributed
at such time and in such manner as not to subject the foundation to
tax under Section 4942 of the Internal Revenue Code, as amended by
P.L. 94-455, and
   (B) To prohibit the foundation from engaging in any act of
self-dealing (as defined in Section 4941 of the Internal Revenue
Code) from retaining any excess business holdings (as defined in
Section 4943 of the Internal Revenue Code), from making any
investments in such manner as to subject the foundation to tax under
Section 4944 of the Internal Revenue Code.
   (2) In the case of any organization organized before January 1,
1970, paragraph (1) shall not apply--
   (A) To any taxable year beginning before January 1, 1972,
   (B) To any period after December 31, 1971, during the pendency of
any judicial proceeding begun before January 1, 1972, by the private
foundation which is necessary to reform, or to excuse such foundation
from compliance with, its governing instrument or any other
instrument in order to meet the requirements of paragraph (1), and
   (C) To any period after the termination of any judicial proceeding
described in subparagraph (B) during which its governing instrument
or any other instrument does not permit it to meet the requirements
of paragraph (1).
   (3) This subdivision shall not apply to require the inclusion in
governing instruments of any provisions inconsistent with this
subdivision.
   (f) Notwithstanding any of the requirements of this section, if
they are determined to be met under federal law they are also met for
state purposes.



23709.  (a) For the purposes of this part the term "private
foundation" means a domestic or foreign organization defined in the
Internal Revenue Code as a private foundation.
   (b) For the purposes of this part, if an organization is a private
foundation (within the meaning of subdivision (a)) on December 31,
1970, or becomes a private foundation on any subsequent date, such
organization shall be treated as a private foundation for all periods
after December 31, 1970, or after such subsequent date, unless its
status as such is terminated.
   (c) For purposes of this part, an organization the status of which
as a private foundation is terminated shall be treated as an
organization created on the day after the date of such termination,
except in the case of a transfer of assets of any private foundation
to another private foundation pursuant to any liquidation, merger,
redemption, recapitalization, or other adjustment, organization, or
reorganization, the transferee shall not be treated as a newly
created organization.
   (d) For purposes of this part, the term "support" includes (but is
not limited to)--


    (1) Gifts, grants, contributions, or membership fees,

    (2) Gross receipts from admissions, sales of merchandise,
performance of services, or furnishing of facilities in any activity
which is not an unrelated trade or business (within the meaning of
Section 23734),

    (3) Net income from unrelated business activities, whether or not
such activities are carried on regularly as a trade or business,

    (4) Gross investment income (as defined in subdivision (e)),

    (5) Tax revenues levied for the benefit of an organization and
either paid to or expended on behalf of such organization, and

    (6) The value of services or facilities (exclusive of services or
facilities generally furnished to the public without charge)
furnished by a governmental unit referred to in Section 170(c)(1) of
the Internal Revenue Code to an organization without charge.


Such term does not include any gain from the sale or other
disposition of property which would be considered as gain from the
sale or exchange of a capital asset, or the value of exemption from
any federal, state, or local tax or any similar benefit.
   (e) For purposes of this section, the term "gross investment
income" means the gross amount of income from interest, dividends,
rents, and royalties, but not including any such income to the extent
included in computing the tax imposed by Section 23731.



23710.  Any organization exempted from taxes imposed under this part
pursuant to the provisions of this article shall not be disqualified
for such exemption on the basis that it conducts bingo games
pursuant to Section 326.5 of the Penal Code, provided that the
proceeds from those games are used exclusively for charitable
purposes.



23711.  Section 529 of the Internal Revenue Code, relating to
qualified state tuition programs, shall apply, except as otherwise
provided.
   (a) Section 529(a) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" in lieu of the phrase "under this
subtitle."
   (2) By substituting "Article 2 (commencing with Section 23731)" in
lieu of "section 511."
   (b) A copy of the report required to be filed with the Secretary
of the Treasury under Section 529(d) of the Internal Revenue Code
shall be filed with the Franchise Tax Board at the same time and in
the same manner as specified in that section.



23711.5.  The Golden State Scholarshare Trust, established pursuant
to Article 19 (commencing with Section 69980) of Chapter 2 of Part 42
of the Education Code, is an instrumentality of this state and the
income of the Scholarshare trust shall be exempt from taxes imposed
under this part. The Scholarshare trust is established and shall be
maintained as a qualified state tuition program as defined in Section
529 of the Internal Revenue Code.



23712.  Section 530 of the Internal Revenue Code, relating to
Coverdell education savings accounts, shall apply, except as
otherwise provided.
   (a) Section 530(a) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" for the phrase "under this subtitle."
   (2) By substituting "Article 2 (commencing with Section 23731)"
for "section 511."
   (b) For taxable years beginning before January 1, 2002, Section
530(b)(1) of the Internal Revenue Code, relating to Coverdell
education savings account, is modified to additionally require that
upon the date that the designated beneficiary becomes 30 years of
age, any balance to the credit of the beneficiary shall be
distributed within 30 days after the date the beneficiary becomes 30
years of age to that beneficiary.
   (c) Section 530(d) of the Internal Revenue Code is modified as
follows:
   (1) By substituting the phrase "under Part 10 (commencing with
Section 17001) in the manner as provided in Section 72(b) of the
Internal Revenue Code, as modified by Part 10" for the phrase "in the
manner as provided in Section 72(b)" in Section 530(d)(1) of the
Internal Revenue Code.
   (2) (A) By substituting the phrase "tax imposed by Part 10
(commencing with Section 17001)" for the phrase "tax imposed by this
chapter" in Section 530(d)(4)(A) of the Internal Revenue Code.
   (B) By substituting the phrase "increased by 2 1/2 percent" for
the phrase "increased by 10 percent" in Section 530(d)(4)(A) of the
Internal Revenue Code.
   (C) By substituting the phrase "shall be included in the
contributor's gross income under Part 10 (commencing with Section
17001) or this part" for the phrase "shall be included in gross
income" in Section 530(d)(4)(C) of the Internal Revenue Code.
   (D) For taxable years beginning before January 1, 2005:
   (i) By additionally providing that Section 530(d)(4)(A) of the
Internal Revenue Code shall not apply if the payment or distribution
is made on account of the attendance of the designated beneficiary at
the United States Military Academy, the United States Naval Academy,
the United States Air Force Academy, the United States Coast Guard
Academy, or the United States Merchant Marine Academy, to the extent
that the amount of the payment or distribution does not exceed the
costs of advanced education (as defined by Section 2005(e)(3) of
Title 10 of the United States Code, as in effect on November 11,
2003) attributable to that attendance.
   (ii) The amendments made to this section by Section 12 of Chapter
552 of the Statutes of 2004 shall apply to taxable years beginning
after December 31, 2002.
   (d) For purposes of Part 10 (commencing with Section 17001) and
this part, in the case of a custodial account treated as a trust by
reason of Section 530(g) of the Internal Revenue Code, the custodian
of that account shall be treated as the trustee thereof.
   (e) A copy of the report, which is required to be filed with the
Secretary of the Treasury under Section 530(h) of the Internal
Revenue Code, shall be filed with the Franchise Tax Board at the same
time and in the same manner as specified in that section.
   (f) Section 109(d)(2) of Public Law 110-245, relating to
application of amendments to deaths from injuries occurring on or
after October 7, 2001, and before enactment, shall apply, except as
otherwise provided.