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2005 California Revenue and Taxation Code Sections 24341-24384.5 Article 1. Deductions
REVENUE AND TAXATION CODESECTION 24341-24384.5
24341. "Net income" means the gross income, computed under Chapter
6 (commencing with Section 24271), less the deductions allowed under
this article and Article 2 (commencing with Section 24401).
24343. (a) Section 162 of the Internal Revenue Code, relating to
trade or business expenses, shall apply, except as otherwise
provided.
(b) For purposes of applying Section 162 of the Internal Revenue
Code, any references to Section 170 of the Internal Revenue Code
shall be modified to refer to Sections 24357 to 24359.1, inclusive,
of this part.
24343.2. Whereas, the people of the State of California desire to
promote and achieve tax equity and fairness among all the state's
citizens and further desire to conform to the public policy of
nondiscrimination, the Legislature hereby enacts the following for
these reasons and for no other purpose:
(a) No deduction shall be allowed under Section 24343 for expenses
incurred by a taxpayer with respect to expenditures made at, or
payments made to, a club which restricts membership or the use of its
services or facilities on the basis of age, sex, race, religion,
color, ancestry, or national origin.
(b) A club described in subdivision (a) holding an alcoholic
beverage license pursuant to Division 9 (commencing with Section
23000) of the Business and Professions Code, except a club holding an
alcoholic beverage license pursuant to Section 23425 thereof, shall
provide on each receipt furnished to a taxpayer a printed statement
as follows:
"The expenditures covered by this receipt are nondeductible for
state income tax purposes or franchise tax purposes."
(c) For purposes of this section:
(1) "Expenses" means those expenses otherwise deductible under
Section 24343, except for subdivision (a), and includes, but is not
limited to, club membership dues and assessments, food and beverage
expenses, expenses for services furnished by the club, and
reimbursements or salary adjustments to officers or employees for any
of the preceding expenses.
(2) "Club" means a club as defined in Division 9 (commencing with
Section 23000) of the Business and Professions Code, except a club as
defined in Section 23425 thereof.
24343.3. Any employer contribution to a medical savings account, as
defined in Section 220 of the Internal Revenue Code, relating to
medical savings accounts, if otherwise deductible under this part,
shall be allowed only for the taxable year in which paid.
24343.5. (a) In addition to the deduction allowed by Section 24343,
a deduction shall be allowed to an employer as an ordinary and
necessary expense paid or incurred during the taxable year in
carrying on any trade or business for those expenses involved in any
of the following ridesharing arrangements:
(1) Subsidizing employees commuting in vanpools.
(2) Subsidizing employees commuting in private commuter buses or
buspools.
(3) Subsidizing monthly transit passes for its employees or for
use by the employee's dependents, except that no deduction shall be
allowed for transit passes issued for the use of elementary and
secondary school students.
(4) Subsidizing employees commuting in subscription taxipools.
(5) Subsidizing employees commuting in a carpool.
(6) In the case of an employer who offers free parking to its
employees, offering a cash equivalent to employees who do not require
parking, including a parking cash-out program, as defined by
subdivision (f) of Section 65088.1 of the Government Code.
(7) Providing free or preferential parking to carpools, vanpools,
or any other vehicle used in a ridesharing arrangement.
(8) Making facility improvements to encourage employees, for the
purpose of commuting from their homes, to participate in ridesharing
arrangements, to use bicycles, or to walk. These facility
improvements may include, but are not limited to, any of the
following: the construction of bus shelters; the installation of
bicycle racks and other bicycle-related facilities, such as showers
and locker rooms; and parking lot modifications to provide carpools,
vanpools, or buspools with preferential treatment. The cost of these
facility improvements shall be allowed as a depreciation deduction.
Notwithstanding subdivision (c), the depreciation deduction shall
be allowable over a 36-month period.
(9) Providing company commuter van or bus service to its employees
and to others for commuting from their homes, but not for
transportation required as part of the employer's business
activities, except as otherwise provided in this section. The
capital costs of providing this service shall not be an eligible
deduction under this section.
(10) Providing to employees transportation services which are
required as part of the employer's business activities to the extent
that the transportation would be provided by employees without
reimbursement in the absence of an employer-sponsored ridesharing
incentive program. The capital costs of providing this service shall
not be an eligible deduction under this section.
(b) For purposes of this section:
(1) "Employer" means either of the following:
(A) A taxpayer for whom services are performed by employees,
except entities which are not subject to tax under this part.
(B) A taxpayer which is a private or public educational
institution which enrolls students at higher than the secondary
level.
(2) "Employee" means either of the following:
(A) An individual who performs service for an employer for more
than eight hours per week for remuneration.
(B) Any commuting student, as defined in paragraph (3).
(3) "Commuting student" means a registered full-time student at a
college, university, or other postsecondary educational institution,
who lives apart from the property which is designated as the
"employment site" for the purpose of this section, and who travels
between his or her residence and the designated employment site on a
regular, though not necessarily daily, basis.
(4) "Employer-sponsored ridesharing incentive program" means a
program undertaken by an employer either alone or in cooperation with
other employers to encourage or provide, or both, fiscal other
incentives to employees to make the home-to-work commute trip by any
mode other than the single-occupant motor vehicle.
(5) "Company commuter bus or van" means a highway vehicle which
meets all of the following criteria:
(A) Has at least seven or more persons commuting on a daily basis
to and from work.
(B) At least 50 percent of the mileage of which can be reasonably
expected to be used for the purpose of transporting employees to and
from work.
(C) Is acquired by the taxpayer on or after the date of enactment
of this legislation.
(6) "Vanpool" means seven or more persons commuting on a daily
basis to and from work by means of a vehicle with a seating
arrangement designed to carry 7 to 15 adult persons.
(7) "Monthly transit pass" means any bulk purchase of transit
rides that entitles the purchaser to 40 or more rides per month,
whether at a discount rate or the base fare rate.
(8) "Transit" means transportation service for use by the general
public that utilizes buses, railcars, or ferries with a seating
capacity of 16 or more persons.
(9) "Subscription taxipool" means a type of service in which
employers or groups of employees contract with a public or private
taxi operator to provide daily commuter service for a group of
preassembled subscribers on a prepaid or daily-fare basis, following
a relatively fixed route and schedule tailored to meet the needs of
the subscribers.
(10) "Ridesharing arrangement" means the transportation of persons
in a motor vehicle where that transportation is incidental to
another purpose of the driver. The term includes ridesharing
arrangements known as carpools, vanpools, and buspools.
(11) "Carpool" means two or more persons commuting on a daily
basis to and from work by means of a vehicle with a seating
arrangement designed to carry less than seven adults, including the
driver.
(12) "Buspool" means 16 or more persons commuting on a daily basis
to and from work by means of a vehicle with a seating arrangement
designed to carry more than 15 adult passengers.
(13) "Private commuter bus" means a highway vehicle which meets
all of the following criteria:
(A) Has a seating capacity of at least seven adults, including the
driver.
(B) At least 50 percent of the mileage of which can be reasonably
expected to be used for the purpose of transporting employees to and
from work.
(C) Is acquired by the taxpayer on or after the date of enactment
of this section.
(D) With respect to which the taxpayer makes an election under
this paragraph on its return for the taxable year in which the
vehicle is placed in service.
24343.7. Section 162(k)(2)(A)(ii) of the Internal Revenue Code
shall not apply.
24344. (a) Section 163 of the Internal Revenue Code, relating to
interest, shall apply, except as otherwise provided.
(b) If income of the taxpayer which is derived from or
attributable to sources within this state is determined pursuant to
Section 25101 or 25110, the interest deductible shall be an amount
equal to interest income subject to apportionment by formula, plus
the amount, if any, by which the balance of interest expense exceeds
interest and dividend income (except dividends deductible under
Section 24402 and dividends subject to the deductions provided for in
Section 24411 to the extent of those deductions) not subject to
apportionment by formula. Interest expense not included in the
preceding sentence shall be directly offset against interest and
dividend income (except dividends deductible under Section 24402 and
dividends subject to the deductions provided for in Section 24411 to
the extent of those deductions) not subject to apportionment by
formula.
(c) (1) Notwithstanding subdivision (b) and subject to paragraph
(2), interest expense allowable under Section 163 of the Internal
Revenue Code that is incurred for purposes of foreign investments may
be offset against dividends deductible under Section 24411.
(2) For taxable years beginning on or after January 1, 1997, the
amount of interest computed pursuant to paragraph (1) shall be
multiplied by the same percentage used to determine the dividend
deduction under Section 24411 to determine that amount of interest
that may be offset as provided in paragraph (1).
(d) Section 7210(b) of Public Law 101-239, relating to the
effective date for limitation on deduction for certain interest paid
to a related person, shall apply.
(e) Section 163(j)(6)(C) of the Internal Revenue Code, relating to
treatment of an affiliated group, is modified to apply to all
members of a combined report filed under Section 25101.
24344.5. (a) A deduction, determined in accordance with Section 163
(e) of the Internal Revenue Code, shall be allowed to the issuer of
an original issue discount bond.
(b) For taxable years beginning on or after January 1, 1987, and
before the taxable year in which the debt obligation matures or is
sold, exchanged, or otherwise disposed, the amount deductible under
this part shall be the same as the amount deductible on the federal
tax return.
(c) The difference between the amount deductible on the federal
tax return and the amount allowable under this part, with respect to
obligations issued after December 31, 1984, for taxable years
beginning before January 1, 1987, shall be allowed as a deduction in
the taxable year in which the debt obligation matures or is sold,
exchanged, or otherwise disposed.
(d) The provisions of Section 7202(c) of Public Law 101-239,
relating to the effective date for treatment of certain high yield
original issue discount obligations, shall apply.
24344.7. The amendments to Section 163 of the Internal Revenue Code
made by Section 13228 of the Revenue Reconciliation Act of 1993
(P.L. 103-66), relating to modification to limitation on deduction
for certain interest, shall apply to taxable years beginning on or
after January 1, 1996.
24345. A deduction shall be allowed for taxes or licenses paid or
accrued during the taxable year, except:
(a) Taxes paid to the state under this part.
(b) Taxes on or according to or measured by income or profits paid
or accrued within the taxable year imposed by the authority of any
of the following:
(1) The Government of the United States or any foreign country.
(2) Any state, territory, county, school district, municipality,
or other taxing subdivision of any state or territory.
(c) Taxes assessed against local benefits of a kind tending to
increase the value of the property assessed, but this does not
exclude the allowance as a deduction of so much of the taxes assessed
against local benefits as is properly allocable to maintenance or
interest charges. Nor does this exclude the allowance of any
irrigation or other water district taxes or assessments which are
levied for the payment of the principal of any improvement or other
bonds for which a general assessment on all lands within the district
is levied as distinguished from a special assessment levied on part
of the area within the district.
(d) Federal stamp taxes (not described in subdivision (b) or (c));
but this subdivision shall not prevent such taxes from being
deducted under Section 24343 (relating to trade or business
expenses).
(e) State and local general sales or use taxes. However, there
shall be allowed as a deduction, state and local sales or use taxes
which are paid or accrued within the taxable year in carrying on a
trade or business or an activity described in Section 212 of the
Internal Revenue Code (relating to expenses for production of
income). Notwithstanding the preceding sentence, any sales or use
tax (except where a tax credit is claimed under Section 23612.2)
which is paid or accrued by the taxpayer in connection with an
acquisition or disposition of property shall be treated as part of
the cost of the acquired property or, in the case of a disposition,
as a reduction in the amount realized on the disposition.
(f) For purposes of subdivision (b), "taxes on or according to or
measure by income" shall include any taxes imposed on a dividend that
is eliminated from the income of the recipient under Section 25106.
24346. (a) For purposes of subdivision (a) of Section 24345, if
real property is sold during any real property tax year, then--
(1) So much of the real property tax as is properly allocable to
that part of the year which ends on the day before the date of the
sale shall be treated as a tax imposed on the seller; and
(2) So much of that tax as is properly allocable to that part of
the year which begins on the date of the sale shall be treated as a
tax imposed on the purchaser.
(b) (1) In the case of any sale of real property; if-- (A) A
corporation may not, by reason of its method of accounting, deduct
any amount for taxes unless paid; and (B) The other party to the
sale is (under the law imposing the real property tax) liable for the
real property tax for the real property tax year; then for purposes
of subdivision (a) of Section 24345 the corporation shall be treated
as having paid, on the date of the sale, so much of the tax as, under
subdivision (a), is treated as imposed on the corporation. For
purposes of the preceding sentence, if neither party is liable for
the tax, then the party holding the property at the time the tax
becomes a lien on the property shall be considered liable for the
real property tax for the real property tax year.
(2) Subdivision (a) shall apply to taxable years beginning after
December 31, 1960, but only in the case of sales after December 31,
1960.
(3) Subdivision (a) shall not apply to any real property tax, to
the extent that the tax was allowable as a deduction under the Bank
and Corporation Tax Law of 1954 to the seller for a taxable year
which began before January 1, 1961.
(4) In the case of any sale of real property, if the corporation's
net income for the taxable year during which the sale occurs is
computed under an accrual method of accounting, and if no election
under subdivision (b) of Section 24681 (relating to the accrual of
real property taxes) applies, then, for purposes of subdivision (a)
of Section 24345, that portion of the tax that--
(A) Is treated, under subdivision (a), as imposed on the
corporation; and
(B) May not, by reason of the corporation's method of accounting,
be deducted by the corporation for any taxable year, shall be treated
as having accrued on the date of the sale.
24347. For taxable years beginning on or after January 1, 1990, all
of the following shall apply:
(a) Section 165 of the Internal Revenue Code, relating to losses.
(b) Section 166 of the Internal Revenue Code, relating to bad
debts, except that the deduction of a savings and loan association,
bank or financial corporation shall be determined under Section
24348.
(c) (1) Section 582 of the Internal Revenue Code, relating to bad
debts, losses, and gains with respect to securities held by financial
institutions.
(2) Section 582(c)(2)(C) of the Internal Revenue Code, relating to
limitations on foreign banks, but only to foreign corporations that
have in effect for the taxable year a water's edge election under
Section 25110.
24347.4. (a) Section 165(i) of the Internal Revenue Code, relating
to disaster losses, is modified to additionally provide that an
appraisal for the purpose of obtaining a loan of federal funds or a
loan guarantee from the federal government as a result of a
presidentially declared disaster (as defined by Section 1033(h)(3) of
the Internal Revenue Code) may be used to establish the amount of
any loss described in Section 165(i)(1) or (2) of the Internal
Revenue Code to the extent provided in regulations or other guidance
of the Secretary of the Treasury under Section 165(i)(4) of the
Internal Revenue Code (as added by Section 912 of Public Law 105-34).
(b) This section shall apply on and after August 5, 1997.
24347.5. (a) An excess disaster loss, as defined in subdivision
(c), shall be carried to other taxable years as provided in
subdivision (b), with respect to losses resulting from any of the
following disasters:
(1) Forest fire or any other related casualty occurring in 1985 in
California.
(2) Storm, flooding, or any other related casualty occurring in
1986 in California.
(3) Any loss sustained during 1987 as a result of a forest fire or
any other related casualty.
(4) Earthquake, aftershock, or any other related casualty
occurring in October 1987 in California.
(5) Earthquake, aftershock, or any other related casualty
occurring in October 1989 in California.
(6) Any loss sustained during 1990 as a result of fire or any
other related casualty in California.
(7) Any loss sustained as a result of the Oakland/Berkeley Fire of
1991, or any other related casualty.
(8) Any loss sustained as a result of storm, flooding, or any
other related casualty occurring in February 1992 in California.
(9) Earthquake, aftershock, or any other related casualty
occurring in April 1992 in the County of Humboldt.
(10) Riots, arson, or any other related casualty occurring in
April or May 1992 in California.
(11) Any loss sustained as a result of the earthquakes or any
other related casualty that occurred in the County of San Bernardino
in June and July of 1992.
(12) Any loss sustained as a result of the Fountain Fire that
occurred in the County of Shasta, or as a result of either of the
fires in the Counties of Calaveras and Trinity that occurred in
August 1992, or any other related casualty.
(13) Any loss sustained as a result of storm, flooding, or any
other related casualty that occurred in the Counties of Alpine,
Contra Costa, Fresno, Humboldt, Imperial, Lassen, Los Angeles,
Madera, Mendocino, Modoc, Monterey, Napa, Orange, Plumas, Riverside,
San Bernardino, San Diego, Santa Barbara, Sierra, Siskiyou, Sonoma,
Tehama, Trinity, and Tulare, and the City of Fillmore in January
1993.
(14) Any loss sustained as a result of a fire that occurred in the
Counties of Los Angeles, Orange, Riverside, San Bernardino, San
Diego, and Ventura, during October or November of 1993, or any other
related casualty.
(15) Any loss sustained as a result of the earthquake,
aftershocks, or any other related casualty that occurred in the
Counties of Los Angeles, Orange, and Ventura on or after January 17,
1994.
(16) Any loss sustained as a result of a fire that occurred in the
County of San Luis Obispo during August of 1994, or any other
related casualty.
(17) Any loss sustained as a result of the storms or flooding
occurring in 1995, or any other related casualty, sustained in any
county of this state subject to a disaster declaration with respect
to the storms and flooding.
(18) Any loss sustained as a result of the storms or flooding
occurring in December 1996 or January 1997, or any related casualty,
sustained in any county of this state subject to a disaster
declaration with respect to the storms or flooding.
(19) Any loss sustained as a result of the storms or flooding
occurring in February 1998, or any related casualty, sustained in any
county of this state subject to a disaster declaration with respect
to the storms or flooding.
(20) Any loss sustained as a result of a freeze occurring in the
winter of 1998-99, or any related casualty, sustained in any county
of this state subject to a disaster declaration with respect to the
freeze.
(21) Any loss sustained as a result of an earthquake occurring in
September 2000, that was included in the Governor's proclamation of a
state of emergency for the County of Napa.
(22) Any loss sustained as a result of the Middle River levee
break in San Joaquin County occurring in June 2004.
(23) Any losses sustained as a result of the fires that occurred
in the Counties of Los Angeles, San Bernardino, Riverside, San Diego,
and Ventura in October and November 2003, or as a result of floods,
mudflows, and debris flows, directly related to fires.
(24) Any losses sustained in the Counties of Santa Barbara and San
Luis Obispo as a result of the San Simeon earthquake, aftershocks,
and any other related casualties.
(25) Any losses sustained as a result of the wildfires that
occurred in Shasta County, commencing August 11, 2004, and any other
related casualty.
(26) Any loss sustained in the Counties of Kern, Los Angeles,
Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and
Ventura as a result of the severe rainstorms, related flooding and
slides, and any other related casualties, that occurred in December
2004, January 2005, February 2005, March 2005, or June 2005.
(b) (1) In the case of any loss allowed under Section 165 of the
Internal Revenue Code, relating to losses, any excess disaster loss
shall be carried forward to each of the five taxable years following
the taxable year for which the loss is claimed. However, if there is
any excess disaster loss remaining after the five-year period, then
the applicable percentage, as set forth in paragraph (1) of
subdivision (b) of Section 24416, of that excess disaster loss shall
be carried forward to each of the next 10 taxable years.
(2) The entire amount of any excess disaster loss as defined in
subdivision (c) shall be carried to the earliest of the taxable years
to which, by reason of subdivision (b), the loss may be carried. The
portion of the loss which shall be carried to each of the other
taxable years shall be the excess, if any, of the amount of excess
disaster loss over the sum of the net income for each of the prior
taxable years to which that excess disaster loss is carried.
(c) "Excess disaster loss" means a disaster loss computed pursuant
to Section 165 of the Internal Revenue Code, which exceeds the net
income of the year of loss or, if the election under Section 165(i)
of the Internal Revenue Code is made, the net income of the year
preceding the loss.
(d) The provisions of this section and Section 165(i) of the
Internal Revenue Code shall be applicable to any of the losses listed
in subdivision (a) sustained in any county or city in this state
which was proclaimed by the Governor to be in a state of disaster.
(e) Any corporation subject to the provisions of Section 25101 or
25101.15 that has disaster losses pursuant to this section, shall
determine the excess disaster loss to be carried to other taxable
years under the principles specified in Section 25108 relating to net
operating losses.
(f) Losses allowable under this section may not be taken into
account in computing a net operating loss deduction under Section 172
of the Internal Revenue Code.
(g) For losses described in paragraphs (15) to (26), inclusive, of
subdivision (a), the election under Section 165(i) of the Internal
Revenue Code may be made on a return or amended return filed on or
before the due date of the return (determined with regard to
extension) for the taxable year in which the disaster occurred.
24348. (a) There shall be allowed as a deduction either of the
following:
(1) Debts which become worthless within the taxable year in an
amount not in excess of the part charged off within that taxable
year.
(2) In the case of a bank (as defined in Section 581 of the
Internal Revenue Code), in lieu of any deduction under paragraph (1),
in the discretion of the Franchise Tax Board, a reasonable addition
to a reserve for bad debts determined in accordance with Section 585
of the Internal Revenue Code, relating to reserves for losses on
loans of banks, except as otherwise provided.
(b) When satisfied that a debt is recoverable in part only, the
Franchise Tax Board may allow that debt, in an amount not in excess
of the part charged off within the taxable year, as a deduction;
provided, however, that if a portion of a debt is claimed and allowed
as a deduction in any year, no deduction shall be allowed in any
subsequent year for any portion of the debt which in any prior year
was charged off, regardless of whether claimed as a deduction in that
prior year.
(c) (1) The amendments to this section made by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2002.
(2) In the case of any bank, savings and loan association, or
financial corporation (whether a taxpayer or a member of a combined
reporting group) that maintained a reserve for bad debts for the last
taxable year beginning before January 1, 2002, and that is required
by the amendments to this section made by the act adding this
subdivision to change its method of computing reserves for bad debts,
all of the following shall apply:
(A) That change shall be treated as a change in a method of
accounting.
(B) That change shall be treated as initiated by the bank, savings
and loan association, or financial corporation (whether a taxpayer
or a member of a combined reporting group).
(C) That change shall be treated as made with the consent of the
Franchise Tax Board.
(D) The net amount of adjustments required by Article 6
(commencing with Section 24721) of Chapter 13 to be taken into
account by the bank, savings and loan association, or financial
corporation (whether a taxpayer or a member of a combined reporting
group):
(i) Shall be determined by taking into account only 50 percent of
the "applicable excess reserves" (as defined in subdivision (d)), and
(ii) As so determined, shall be taken into account on the last day
of the first taxable year beginning on or after January 1, 2002.
(iii) The amount of "applicable excess reserves" in excess of the
amount taken into account under clause (i) of this subparagraph shall
be reduced to zero and shall not be taken into account for purposes
of this part.
(d) (1) In the case of a large bank (as defined in Section 585(c)
(2) of the Internal Revenue Code), or a financial corporation that is
not allowed to use the reserve for bad debts under Section 585 of
the Internal Revenue Code, the term "applicable excess reserves"
means the balance of the reserves described in former subparagraph
(B) of paragraph (1) of subdivision (a) (prior to the amendments made
by the act adding this subdivision) as of the close of the last
taxable year beginning before January 1, 2002.
(2) In all other cases, the term "applicable excess reserves"
shall be zero and shall not be taken into account for purposes of
this part.
(e) The amount of "applicable excess reserves" not taken into
account pursuant to clause (iii) of subparagraph (D) of paragraph (2)
of subdivision (c) or paragraph (2) of subdivision (d) shall not
affect the amount of the allowable deduction under paragraph (1) of
subdivision (a).
24349. (a) There shall be allowed as a depreciation deduction a
reasonable allowance for the exhaustion, wear and tear (including a
reasonable allowance for obsolescence)--
(1) Of property used in the trade or business; or
(2) Of property held for the production of income.
(b) Except as otherwise provided in subdivision (c), for taxable
years ending after December 31, 1958, the term "reasonable allowance"
as used in subdivision (a) shall include, but shall not be limited
to, an allowance computed in accordance with regulations prescribed
by the Franchise Tax Board, under any of the following methods:
(1) The straight-line method.
(2) The declining balance method, using a rate not exceeding twice
the rate that would have been used had the annual allowance been
computed under the method described in paragraph (1).
(3) The sum of the years-digits method.
(4) Any other consistent method productive of an annual allowance
that, when added to all allowances for the period commencing with the
taxpayer's use of the property and including the taxable year, does
not, during the first two-thirds of the useful life of the property,
exceed the total of those allowances that would have been used had
those allowances been computed under the method described in
paragraph (2).
Nothing in this subdivision shall be construed to limit or reduce
an allowance otherwise allowable under subdivision (a).
(c) Any grapevine replaced in a vineyard in California in a
taxable year beginning on or after January 1, 1992, as a direct
result of a phylloxera infestation in that vineyard, and any
grapevine replaced in a vineyard in California in a taxable year
beginning on or after January 1, 1997, as a direct result of Pierce's
disease in that vineyard, shall have a useful life of five years,
except that it shall have a class life of 10 years for purposes of
depreciation under Section 168(g)(2) of the Internal Revenue Code
where the taxpayer has made an election under Section 263A(d)(3) of
the Internal Revenue Code not to capitalize costs of the infested
vineyard. Every taxpayer claiming a deduction under this section with
respect to a grapevine as described in this subdivision shall obtain
a written certification from an independent state-certified
integrated pest management adviser, or a state agricultural
commissioner or adviser, that specifies that the replanting was
necessary to restore a vineyard infested with phylloxera or Pierce's
disease. The taxpayer shall retain the certification for future audit
purposes.
(d) For purposes of this part, the deduction for property leased
to governments and other tax-exempt entities, as defined in Section
168(h) of the Internal Revenue Code, shall be limited to the amount
determined under Section 168(g) of the Internal Revenue Code,
relating to alternative depreciation system for certain property.
(e) (1) In the case of any building erected or improvements made
on leased property, if the building or improvement is property to
which this section applies, the depreciation deduction shall be
determined under the provisions of this section.
(2) An improvement shall be treated for purposes of determining
gain or loss under this part as disposed of by the lessor when so
disposed of or abandoned if both of the following occur:
(A) The improvement is made by the lessor of leased property for
the lessee of that property.
(B) The improvement is irrevocably disposed of or abandoned by the
lessor at the termination of the lease by the lessee.
This subdivision shall not apply to any property to which Section
168 of the Internal Revenue Code does not apply for federal purposes
by reason of Section 168(f) of the Internal Revenue Code. Any
election made under Section 168(f)(1) of the Internal Revenue Code
for federal purposes with respect to that property shall be treated
as a binding election for state purposes under this subdivision with
respect to that same property and no separate election under
subdivision (e) of Section 23051.5 with respect to that property
shall be allowed.
(3) (A) In determining a lease term, both of the following shall
apply:
(i) There shall be taken into account options to renew.
(ii) Two or more successive leases which are part of the same
transaction (or a series of related transactions) with respect to the
same or substantially similar property shall be treated as one
lease.
(B) For purposes of clause (i) of subparagraph (A), in the case of
nonresidential real property or residential rental property, there
shall not be taken into account any option to renew at fair market
value determined at the time of renewal.
(f) (1) Section 167(g) of the Internal Revenue Code, relating to
depreciation under income forecast method, shall apply except as
otherwise provided.
(2) Section 167(g)(2)(C) of the Internal Revenue Code is modified
by substituting "Section 19521" in lieu of "Section 460(b)(7)" of the
Internal Revenue Code.
(3) Section 167(g)(5)(D) of the Internal Revenue Code is modified
by substituting "Part 10.2 (commencing with Section 18401) (other
than Article 2 (commencing with Section 19021) and Sections 19142 to
19150, inclusive)" in lieu of "Subtitle F (other than Sections 6654
and 6655)."
(4) Section 167(g)(5)(E) of the Internal Revenue Code, relating to
treatment of distribution costs, shall not apply.
(5) Section 167(g)(7) of the Internal Revenue Code, relating to
treatment of participations and residuals, shall not apply.
24349.1. (a) Section 280F of the Internal Revenue Code, relating to
limitations on depreciation for luxury automobiles and certain
property used for personal purposes, shall apply, except as otherwise
provided.
(b) Except as provided in subdivision (c), Section 280F of the
Internal Revenue Code shall be modified as follows:
(1) The terms "deduction" or "recovery deduction," relating to
amounts allowable as a deduction under Section 168 of the Internal
Revenue Code, mean the amount allowable as a deduction for
depreciation under this part.
(2) The term "recovery period," relating to property under Section
168 of the Internal Revenue Code, means the class life asset
depreciation range allowable under this part.
(3) The provisions of Section 280F of the Internal Revenue Code
which relate to the investment tax credit shall not be applicable for
purposes of this part.
(c) Paragraphs (1) and (2) of subdivision (b) shall not apply to
Section 24356.7 property.
24350. Paragraphs (2), (3), and (4) of Section 24349(b) shall apply
only in the case of property (other than intangible property)
described in Section 24349(a) with a useful life of three years or
more--
(a) The construction, reconstruction, or erection of which is
completed after December 31, 1958, and then only to that portion of
the basis which is properly attributable to such construction,
reconstruction, or erection after December 31, 1958; or
(b) Acquired after December 31, 1958, if the original use of such
property commences with the taxpayer and commences after such date.
24351. Where, under regulations prescribed by the Franchise Tax
Board, the taxpayer and the Franchise Tax Board have, after the date
of enactment of this section, entered into an agreement in writing
specifically dealing with the useful life and rate of depreciation of
any property, the rate so agreed upon shall be binding on both the
taxpayer and the Franchise Tax Board in the absence of facts or
circumstances not taken into consideration in the adoption of such
agreement. The responsibility of establishing the existence of such
facts and circumstances shall rest with the party initiating the
modification. Any change in the agreed rate and useful life
specified in the agreement shall not be effective for taxable years
before the taxable year in which notice in writing by certified mail
or registered mail is served by the party to the agreement initiating
such change.
24352. In the absence of an agreement under Section 24351
containing a provision to the contrary, a taxpayer may at any time
elect in accordance with regulations prescribed by the Franchise Tax
Board to change from the method of depreciation described in Section
24349(b)(2) to the method described in Section 24349(b)(1).
24352.5. (a) Under regulations prescribed by the Franchise Tax
Board, a taxpayer may, for purposes of computing the allowance under
Section 24349 with respect to personal property, reduce the amount
taken into account as salvage value by an amount which does not
exceed 10 percent of the basis of such property (as determined under
Section 24353 as of the time as of which such salvage value is
required to be determined).
(b) For purposes of this section, the term "personal property"
means depreciable personal property (other than livestock) with a
useful life of three years or more.
24353. (a) The basis on which exhaustion, wear and tear, and
obsolescence are to be allowed in respect of any property shall be
the adjusted basis provided in Section 24911 for the purpose of
determining the gain on the sale or other disposition of the
property.
(b) If any property is acquired subject to a lease, each of the
following shall apply:
(1) No portion of the adjusted basis shall be allocated to the
leasehold interest.
(2) The entire adjusted basis shall be taken into account in
determining the depreciation deduction, if any, with respect to the
property subject to lease.
24354. In the case of property held by one person for life with
remainder to another person, the deduction shall be computed as if
the life tenant were the absolute owner of the property and shall be
allowed to the life tenant. In the case of property held in trust,
the allowable deduction shall be apportioned between the income
beneficiaries and the trustee in accordance with the pertinent
provisions of the instrument creating the trust, or, in the absence
of such provisions on the basis of the trust income allocable to
each.
24354.1. (a) Except as provided in subdivisions (b) and (c) of this
section, in the case of property of the type defined in Section 1250
(c) of the Internal Revenue Code, subdivision (b) of Section 24349
shall not apply and the term "reasonable allowance" as used in
subdivision (a) of Section 24349 shall include an allowance computed
in accordance with regulations prescribed by the Franchise Tax Board,
under any of the following methods: (1) The straight line method,
(2) The declining balance method, using a rate not exceeding 150
percent of the rate which would have been used had the annual
allowance been computed under the method described in paragraph (1),
or (3) Any other consistent method productive of an annual
allowance which, when added to all allowances for the period
commencing with the taxpayer's use of the property and including the
taxable year, does not, during the first two-thirds of the useful
life of the property, exceed the total of such allowances which would
have been used had such allowances been computed under the method
described in paragraph (2). Nothing in this subdivision shall be
construed to limit or reduce an allowance otherwise allowable under
subdivision (a) of Section 24349 except where allowable solely by
reason of paragraph (2), (3), or (4) of subdivision (b) of Section
24349.
(b) (1) Subdivision (a) of this section shall not apply, and
subdivision (b) of Section 24349 shall apply in any taxable year, to
a building or structure--
(A) Which is residential rental property located within the United
States or any of its possessions, or located within a foreign
country if a method of depreciation for such property comparable to
the method provided in paragraph (2) or (3) of subdivision (b) of
Section 24349 is provided by the laws of such country and
(B) The original use of which commences with the taxpayer. In the
case of residential rental property located within a foreign
country, the original use of which commences with the taxpayer, if
the allowance for depreciation provided under the laws of such
country for such property is greater than that provided under
subdivision (a) of this section, but less than that provided under
subdivision (b) of Section 24349, the allowance for depreciation
under subdivision (b) of Section 24349 shall be limited to the amount
provided under the laws of such country.
(2) For purposes of paragraph (1), a building or structure shall
be considered to be residential rental property for any taxable year
only if 80 percent or more of the gross rental income from such
building or structure for such year is rental income from dwelling
units (within the meaning of paragraph (3) of subdivision (c) of
Section 24354.2. For purposes of the preceding sentence, if any
portion of such building or structure is occupied by the taxpayer,
the gross rental income from such building or structure shall include
the rental value of the portion so occupied.
(3) Any change in the computation of the allowance for
depreciation for any taxable year, permitted or required by reason of
the application of paragraph (1), shall not be considered a change
in a method of accounting.
(c) Subdivision (a) of this section shall not apply, and
subdivision (b) of Section 24349 shall apply, in the case of
property--
(1) The construction, reconstruction, or erection of which was
begun before January 1, 1971, or
(2) For which a written contract entered into before January 1,
1971, with respect to any part of the construction, reconstruction,
or erection or for the permanent financing thereof, was on January 1,
1971, and at all times thereafter, binding on the taxpayer.
(d) Except as provided in subdivision (e), in the case of property
of the type defined in Section 1250(c) of the Internal Revenue Code
acquired after December 31, 1970, the original use of which does not
commence with the taxpayer, the allowance for depreciation under
Sections 24349 to 24354.2, inclusive, shall be limited to an amount
computed under--
(1) The straight line method, or
(2) Any other method determined by the Franchise Tax Board to
result in a reasonable allowance under subdivision (a) of Section
24349, not including--
(A) Any declining balance method,
(B) The sum of the years-digits method, or
(C) Any other method allowable solely by reason of the application
of paragraph (4) of subdivision (b) of Section 24349 or paragraph
(3) of subdivision (a) of this section.
(e) In the case of property of the type defined in Section 1250(c)
of the Internal Revenue Code which is residential rental property
(as defined in paragraph (2) of subdivision (b)) acquired after
December 31, 1970, having a useful life of 20 years or more, the
original use of which does not commence with the taxpayer, the
allowance for depreciation under Sections 24349 to 24354.2,
inclusive, shall be limited to an amount computed under--
(1) The straight line method,
(2) The declining balance method, using a rate not exceeding 125
percent of the rate which would have been used had the annual
allowance been computed under the method described in paragraph (1),
or
(3) Any other method determined by the Franchise Tax Board to
result in a reasonable allowance under subdivision (a) of Section
24349, not including--
(A) The sum of the years-digits method,
(B) Any declining balance method using a rate in excess of the
rate permitted under paragraph (2), or
(C) Any other method allowable solely by reason of the application
of paragraph (4) of subdivision (b) of Section 24349 or paragraph
(3) of subdivision (a) of this section.
(f) (1) For purposes of subdivisions (b), (d), and (e), if
property of the type defined in Section 1250(c) of the Internal
Revenue Code which is not property described in subdivision (a) of
Section 24349 when its original use commences, becomes property
described in subdivision (a) of Section 24349 after December 31,
1970, such property shall not be treated as property the original use
of which commences with the taxpayer.
(2) Subdivisions (d) and (e) shall not apply in the case of
property of the type defined in Section 1250(c) of the Internal
Revenue Code, acquired after December 31, 1970, pursuant to a written
contract for the acquisition of such property or for the permanent
financing thereof, which was, on December 31, 1970, and at all times
thereafter, binding on the taxpayer.
(g) This section shall not apply to public utility property which
means property used predominantly in the trade or business of the
furnishing or sale of-- (1) Electrical energy, water, or sewage
disposal services, (2) Gas or steam through a local distribution
system, (3) Telephone services, or other communication services if
furnished or sold by the Communications Satellite Corporation for
purposes authorized by the Communications Satellite Act of 1962 (47
U.S.C. 701), or (4) Transportation of gas or steam by pipeline, if
the rates for such furnishing or sale, as the case may be, have been
established or approved by a state or political subdivision thereof,
by any agency or instrumentality of the United States, or by a public
service or public utility commission or other similar body of any
state or political subdivision thereof.
24355. Section 167(f) of the Internal Revenue Code, relating to
treatment of property excluded from Section 197, shall apply, except
as otherwise provided.
24355.3. For purposes of computing the depreciation deduction
pursuant to Section 24349, the useful life of any motor sports
entertainment complex, as defined in Section 168(i)(15) of the
Internal Revenue Code, shall be seven years.
24355.4. For purposes of computing the depreciation deduction under
Section 24349, a class life of four years shall be used for any
qualified rent-to-own property as defined in Section 168(i)(14) of
the Internal Revenue Code.
24355.4. For purposes of computing the depreciation deduction
pursuant to Section 24349, the useful life of any Alaska natural gas
pipeline, as defined in Section 168(i)(16) of the Internal Revenue
Code, shall be seven years.
24355.5. (a) Section 197 of the Internal Revenue Code, relating to
amortization of goodwill and certain other intangibles, shall apply,
except as otherwise provided.
(b) (1) Section 13261(g) of the Revenue Reconciliation Act of 1993
(P.L. 103-66), relating to effective dates, shall apply, except as
otherwise provided.
(2) (A) If a taxpayer has, at any time, made an election for
federal purposes under Section 13261(g)(2) of the Revenue
Reconciliation Act of 1993 (P.L. 103-66), relating to election to
have amendments apply to property acquired after July 25, 1991, or
Section 13261(g)(3) of that act, relating to elective binding
contract exception, a separate election for state purposes shall not
be allowed under paragraph (3) of subdivision (e) of Section 23051.5
and the federal election shall be binding for purposes of this part.
(B) If a taxpayer has not made an election for federal purposes
under Section 13261(g)(2) of the Revenue Reconciliation Act of 1993
(P.L. 103-66), relating to election to have amendments apply to
property acquired after July 25, 1991, or Section 13261(g)(3) of that
act, relating to elective binding contract exception, with respect
to property acquired before August 11, 1993, then the taxpayer shall
not be allowed to make an election under Section 13261(g) of the
Revenue Reconciliation Act of 1993 (P.L. 103-66), for purposes of
this part, with respect to that property.
(c) Notwithstanding any other provision of this section, each of
the following shall apply:
(1) No deduction shall be allowed under this section for any
taxable year beginning prior to January 1, 1994.
(2) No inference is intended with respect to the allowance or
denial of any deduction for amortization in any taxable year
beginning before January 1, 1994.
(3) In the case of an intangible that was acquired in an taxable
year beginning before January 1, 1994, the amount to be amortized
shall not exceed the adjusted basis of that intangible as of the
first day of the first taxable year beginning on or after January 1,
1994, and that amount shall be amortized ratably over the period
beginning with the first month of the first taxable year beginning on
or after January 1, 1994, and ending 15 years after the month in
which the intangible was acquired.
24356. (a) (1) In the case of Section 24356 property, the term
"reasonable allowance" as used in subdivision (a) of Section 24349,
may, at the election of the taxpayer, include an allowance, for the
first taxable year for which a deduction is allowable under Sections
24349 through 24354 to the taxpayer with respect to such property, of
20 percent of the cost of that property.
(2) If in any one taxable year the cost of Section 24349 property
with respect to which the taxpayer may elect an allowance under
paragraph (1) for that taxable year exceeds ten thousand dollars
($10,000), then paragraph (1) shall apply with respect to those items
selected by the taxpayer, but only to the extent of an aggregate
cost of ten thousand dollars ($10,000).
(b) (1) In lieu of subdivision (a), Section 179 of the Internal
Revenue Code, relating to the election to expense certain depreciable
business assets, shall apply, except as otherwise provided.
(2) Section 179(b)(1) of the Internal Revenue Code, relating to
the dollar limitation, shall not apply and in lieu thereof, the
aggregate cost that may be taken into account under Section 179(a) of
the Internal Revenue Code, for any taxable year, shall not exceed
twenty-five thousand dollars ($25,000).
(3) Section 179(b)(2) of the Internal Revenue Code, relating to
the reduction in the dollar limitation, shall not apply and in lieu
thereof, the limitation under paragraph (2), for any taxable year,
shall be reduced, but not below zero, by the amount by which the cost
of Section 179 property, as defined in Section 179(d)(1) of the
Internal Revenue Code, except as otherwise provided, that is placed
in service during the taxable year, exceeds two hundred thousand
dollars ($200,000).
(4) Section 179 of the Internal Revenue Code is modified to
provide that the "aggregate amount disallowed" referred to in Section
179(b)(3)(B) of the Internal Revenue Code shall be computed under
this part as that section read on the date the property generating
the amount disallowed was placed in service.
(5) Section 179(b)(5) of the Internal Revenue Code, relating to
inflation adjustments, shall not apply.
(6) The last sentence in Section 179(c)(2) of the Internal Revenue
Code, relating to irrevocable elections, shall not apply.
(7) Section 179(d)(1)(A)(ii) of the Internal Revenue Code,
relating to computer software, shall not apply.
(c) (1) The election under this section for any taxable year shall
be made within the time prescribed by law (including extensions
thereof) for filing the return for such taxable year. The election
shall be made in such manner as the Franchise Tax Board may by
regulations prescribe.
(2) Any election made under this section may not be revoked except
with the consent of the Franchise Tax Board.
(d) (1) For purposes of this section, the term "Section 24356
property" means tangible personal property--
(A) Of a character subject to the allowance for depreciation under
Sections 24349 through 24354,
(B) Acquired by purchase after December 31, 1958, for use in a
trade or business, and
(C) With a useful life (determined at the time of such
acquisition) of six years or more.
(2) For purposes of paragraph (1), the term "purchase" means any
acquisition of property, but only if--
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 24427 (but, in applying Section 267 of the Internal
Revenue Code, relating to losses, expenses, and interest with respect
to transactions between related taxpayers, for purposes of this
section, Section 267(c)(4) of the Internal Revenue Code shall be
treated as providing that the family of an individual shall include
only his or her spouse, ancestors, and lineal descendants);
(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group, and
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
acquired.
(3) For purposes of this section, the cost of property does not
include so much of the basis of such property as is determined by
reference to the basis of other property held at any time by the
person acquiring that property.
(4) For purposes of subdivision (a) and subdivision (b) of this
section--
(A) All members of an affiliated group shall be treated as one
taxpayer, and
(B) The Franchise Tax Board shall apportion the dollar limitation
contained in subdivision (a) or subdivision (b) among the members of
the affiliated group in the manner as it shall by regulations
prescribe.
(5) For purposes of paragraphs (2) and (4), the term "affiliated
group" has the meaning assigned to it by Section 1504 of the Internal
Revenue Code, except that, for those purposes, the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(6) In applying Section 24353, the adjustment under paragraph (1)
of subdivision (b) of Section 24916, resulting by reason of an
election made under this section with respect to any Section 24356
property, shall be made before any other deduction allowed by
subdivision (a) of Section 24349 is computed.
(e) The Franchise Tax Board shall prescribe those regulations as
may be necessary to carry out the purposes of this section.
24356.4. (a) For any taxable year, which includes part of the
"applicable period," as defined in paragraph (6) of subdivision (c)
of Section 23662, a small refiner (as defined in Section 23662) may
elect to treat 75 percent of qualified capital costs (as defined in
paragraph (2) of subdivision (c) of Section 23662) paid or incurred
by the taxpayer during the taxable year as expenses that are not
chargeable to a capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which paid or incurred.
(b) (1) For purposes of this part, the basis of any property shall
be reduced by the portion of the cost of that property taken into
account under subdivision (a).
(2) For purposes of Section 1245 of the Internal Revenue Code, and
corresponding section of this part, the amount of the deduction
allowable under subdivision (a) with respect to any property which is
of a character subject to the allowance for depreciation shall be
treated as a deduction allowed for depreciation under Section 167 of
the Internal Revenue Code, or the corresponding section of this part.
(c) This section is repealed on January 1, 2009.
24356.6. (a) For each taxable year beginning on or after January 1,
1998, a qualified taxpayer may elect to treat 40 percent of the cost
of any Section 24356.6 property as an expense that is not chargeable
to a capital account. Any cost so treated shall be allowed as a
deduction for the taxable year in which the qualified taxpayer places
the Section 24356.6 property in service.
(b) (1) An election under this section for any taxable year shall
do both of the following:
(A) Specify the items of Section 24356.6 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).
(B) Be made on the qualified taxpayer's original return of the tax
imposed by this part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(c) (1) For purposes of this section, "Section 24356.6 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245 (a)(3) of
the Internal Revenue Code).
(B) Purchased and placed in service by the qualified taxpayer for
exclusive use in a trade or business conducted within a targeted tax
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(C) Purchased and placed in service before the date the targeted
tax area designation expires, is revoked, is no longer binding, or
becomes inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or 707(b) of the Internal Revenue Code. However,
in applying Sections 267(b) and 267(c) for purposes of this section,
Section 267(c)(4) shall be treated as providing that the family of an
individual shall include only the individual's spouse, ancestors,
and lineal descendants.
(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group.
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from who
it is acquired.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of that property that is determined
by reference to the basis of other property held at any time by the
person acquiring that property.
(4) This section shall not apply to any property for which the
qualified taxpayer may not make an election under Section 179 of the
Internal Revenue Code because of the application of the provisions of
Section 179(d) of the Internal Revenue Code.
(5) For purposes of subdivision (b), both of the following apply:
(A) All members of an affiliated group shall be treated as one
qualified taxpayer.
(B) The qualified taxpayer shall apportion the dollar limitation
contained in subdivision (f) among the members of the affiliated
group in whatever manner the board shall prescribe.
(6) For purposes of paragraphs (2) and (5), "affiliated group"
means "affiliated group" as defined in Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(d) (1) For purposes of this section, "qualified taxpayer" means a
corporation that meets both of the following:
(A) Is engaged in conducting a trade or business within a targeted
tax area designated pursuant to Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code.
(B) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive;
4500 to 4599, inclusive, and 4700 to 5199, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(2) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any deduction under this section or
Section 17267.6 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
(e) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to claim additional depreciation
pursuant to Section 24356 with respect to any property that
constitutes Section 24356.6 property. However, the qualified
taxpayer may claim depreciation by any method permitted by Section
24349 commencing with the taxable year following the taxable year in
which Section 24356.6 property is placed in service.
(f) The aggregate cost of all Section 24356.6 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amount for the taxable year of
the designation of the relevant targeted tax area and taxable years
thereafter:
The applicable
amount is:
Taxable year of designation ............. $100,000
1st taxable year thereafter ............. 100,000
2nd taxable year thereafter ............. 75,000
3rd taxable year thereafter ............. 75,000
Each taxable year thereafter ............ 50,000
(g) Any amounts deducted under subdivision (a) with respect to
Section 24356.6 property that ceases to be used in the qualified
taxpayer's trade or business within a targeted tax area at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year in
which the property ceases to be so used.
24356.7. (a) A taxpayer may elect to treat 40 percent of the cost
of any Section 24356.7 property as an expense that is not chargeable
to a capital account. Any cost so treated shall be allowed as a
deduction for the taxable year in which the taxpayer places the
Section 24356.7 property in service.
(b) (1) An election under this section for any taxable year shall
do both of the following:
(A) Specify the items of Section 24356.7 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).
(B) Be made on the taxpayer's original return of the tax imposed
by this part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(c) (1) For purposes of this section, "Section 24356.7 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245(a)(3) of the
Internal Revenue Code).
(B) Purchased and placed in service by the taxpayer for exclusive
use in a trade or business conducted within an enterprise zone
designated pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(C) Purchased and placed in service before the date the enterprise
zone designation expires, is no longer binding, or becomes
inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Sections 24427 through 24429. However, in applying Sections
24428 and 24429 for purposes of this section, subdivision (d) of
Section 24429 shall be treated as providing that the family of an
individual shall include only his or her spouse, ancestors, and
lineal descendants.
(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group.
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
it is acquired.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of that property that is determined
by reference to the basis of other property held at any time by the
person acquiring that property.
(4) This section shall not apply to any property for which the
taxpayer could not make a federal election under Section 179 of the
Internal Revenue Code because of the application of the provisions of
Section 179(d) of the Internal Revenue Code.
(5) For purposes of subdivision (b) of this section, both of the
following apply:
(A) All members of an affiliated group shall be treated as one
taxpayer.
(B) The taxpayer shall apportion the dollar limitation contained
in subdivision (f) among the members of the affiliated group in
whatever manner the board shall prescribe.
(6) For purposes of paragraphs (2) and (5), "affiliated group"
means "affiliated group" as defined in Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(d) For purposes of this section, "taxpayer" means a bank or
corporation that conducts a trade or business within an enterprise
zone designated pursuant to Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to claim additional depreciation pursuant to Section
24356 with respect to any property that constitutes Section 24356.7
property. However, the taxpayer may claim depreciation by any method
permitted by Section 24349 commencing with the taxable year
following the taxable year in which Section 24356.7 property is
placed in service.
(f) The aggregate cost of all Section 24356.7 property that may be
taken into account under subdivision (a) for any taxable years shall
not exceed the following applicable amount for the taxable year of
the designation of the relevant enterprise zone and taxable years
thereafter:
The applicable
amount is:
Taxable year of designation .... $100,000
1st taxable year thereafter .... 100,000
2nd taxable year thereafter .... 75,000
3rd taxable year thereafter .... 75,000
Each taxable year thereafter ... 50,000
(g) Any amounts deducted under subdivision (a) with respect to
Section 24356.7 property that ceases to be used in the taxpayer's
trade or business within an enterprise zone at any time before the
close of the second taxable year after the property is placed in
service shall be included in income in the taxable year in which the
property ceases to be so used.
24356.8. (a) For each taxable year beginning on or after January 1,
1995, a taxpayer may elect to treat 40 percent of the cost of any
Section 24356.8 property as an expense that is not chargeable to the
capital account. Any cost so treated shall be allowed as a deduction
for the taxable year in which the taxpayer places the Section
24356.8 property in service.
(b) (1) An election under this section for any taxable year shall
meet both of the following requirements:
(A) Specify the items of Section 24356.8 property to which the
election applies and the portion of the cost of each of those items
that is to be taken into account under subdivision (a).
(B) Be made on the taxpayer's return of the tax imposed by this
part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(c) (1) For purposes of this section, "Section 24356.8 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245(a)(3) of the
Internal Revenue Code).
(B) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(C) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or 707(b) of the Internal Revenue Code (but, in
applying Sections 267(b) and 267(c) of the Internal Revenue Code for
purposes of this section, Section 267(c)(4) of the Internal Revenue
Code shall be treated as providing that the family of an individual
shall include only his or her spouse, ancestors, and lineal
descendants).
(B) The property is not acquired by one component member of an
affiliated group from another component member of the same affiliated
group.
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
acquired.
(3) For purposes of this section, the cost of property does not
include so much of the basis of that property as is determined by
reference to the basis of other property held at any time by the
person acquiring that property.
(4) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under Section
179 of the Internal Revenue Code because of the provisions of Section
179(d) of the Internal Revenue Code.
(5) For purposes of subdivision (b), both of the following apply:
(A) All members of an affiliated group shall be treated as one
taxpayer.
(B) The taxpayer shall apportion the dollar limitation contained
in subdivision (f) among the component members of the affiliated
group in whatever manner the board shall by regulations prescribe.
(6) For purposes of paragraphs (2) and (5), "affiliated group" has
the meaning assigned to it by Section 1504 of the Internal Revenue
Code, except that, for these purposes, the phrase "more than 50
percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(7) This section shall not apply to any property described in
Section 168(f) of the Internal Revenue Code.
(8) In the case of an S corporation, the dollar limitation
contained in subdivision (f) shall be applied at the entity level and
at the shareholder level.
(d) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with the provisions of Section 7114 of the
Government Code.
(2) "Taxpayer" means a corporation that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer that first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to claim additional depreciation pursuant to Section
24356 with respect to any property that constitutes Section 24356.8
property.
(f) The aggregate cost of all Section 24356.8 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amounts for the taxable year of
the designation of the relevant LAMBRA and taxable years thereafter:
The applicable
amount is:
Taxable year of designation ....... $100,000
1st taxable year thereafter ....... 100,000
2nd taxable year thereafter ...... 75,000
3rd taxable year thereafter ........... 75,000
Each taxable year thereafter .......... 50,000
(g) This section shall apply only to property that is used
exclusively in a trade or business conducted within a LAMBRA.
(h) (1) Any amounts deducted under subdivision (a) with respect to
property that ceases to be used in the trade or business within a
LAMBRA at any time before the close of the second taxable year after
the property was placed in service shall be included in income for
that year.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (d), then the amount of the deduction previously
claimed shall be added to the taxpayer's net income for the taxpayer'
s second taxable year.
(i) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property the deduction under
Section 179 of the Internal Revenue Code, relating to an election to
expense certain depreciable business assets.
24357. (a) There shall be allowed as a deduction any charitable
contribution (as defined in Section 24359) payment of which is made
within the taxable year. A charitable contribution shall be allowable
as a deduction only if verified under regulations prescribed by the
Franchise Tax Board.
(b) (1) In the case of a corporation reporting its income on the
accrual basis, the corporation may elect to treat the contribution as
paid during that taxable year if both of the following occur:
(A) The board of directors authorizes a charitable contribution
during the taxable year.
(B) Payment of the contribution is made after the close of that
taxable year and on or before the 15th day of the third month
following the close of the taxable year.
(2) The election allowed by paragraph (1) may be made only at the
time of the filing of the return for the taxable year, and shall be
signified in the manner as the Franchise Tax Board shall by
regulations prescribe.
(c) For purposes of this section, payment of a charitable
contribution that consists of a future interest in tangible personal
property shall be treated as made only when all intervening interests
in, and rights to the actual possession or enjoyment of, the
property have expired or are held by persons other than the taxpayer
or those standing in a relationship to the taxpayer described in
Section 24428. For purposes of the preceding sentence, a fixture
which is intended to be severed from the real property shall be
treated as tangible personal property.
(d) No deduction shall be allowed under this section for traveling
expenses (including amounts expended for meals and lodging) while
away from home, whether paid directly or by reimbursement, unless
there is no significant element of personal pleasure, recreation, or
vacation in that travel.
(e) (1) Section 170(f)(8) of the Internal Revenue Code, relating
to substantiation requirement for certain contributions, shall apply,
except as otherwise provided.
(2) No deduction shall be denied under Section 170(f)(8) of the
Internal Revenue Code, relating to substantiation requirement for
certain contributions, upon a showing that the requirements in
Section 170(f)(8) of the Internal Revenue Code have been met with
respect to that contribution for federal purposes.
(f) Section 170(f)(9) of the Internal Revenue Code, relating to
the denial of the deduction for lobbying activities shall apply,
except as otherwise provided.
(g) (1) Notwithstanding any other provision of law to the
contrary, for purposes of this section and Section 24341, Section 170
of the Internal Revenue Code, as amended by Public Law 109-1, shall
be applied to allow a taxpayer to elect to treat any contribution
described in paragraph (2) made in January 2005, as if that
contribution was made on December 31, 2004, and not in January 2005.
(2) A contribution is described in this paragraph if that
contribution is a cash contribution made for the relief of victims in
areas affected by the December 26, 2004, Indian Ocean tsunami for
which a charitable contribution deduction is allowable under this
section.
24357.1. (a) The amount of any charitable contribution of property
otherwise taken into account under Section 24357 shall be reduced by
the amount of gain that would have been realized if the property
contributed had been sold by the taxpayer at its fair market value
(determined at the time of that contribution).
(b) For purposes of subdivision (a), in the case of a charitable
contribution of less than the taxpayer's entire interest in the
property contributed, the taxpayer's adjusted basis in that property
shall be allocated between the interest contributed and any interest
not contributed in accordance with regulations prescribed by the
Franchise Tax Board.
24357.2. (a) In the case of a contribution (not made by a transfer
in trust) of an interest in property which consists of less than the
taxpayer's entire interest in such property, a deduction shall be
allowed under Section 24357 only to the extent that the value of the
interest contributed would be allowable as a deduction under Section
24357 if such interest had been transferred in trust. For purposes
of this subdivision, a contribution by a taxpayer of the right to use
property shall be treated as a contribution of less than the
taxpayer's entire interest in such property.
(b) Subdivision (a) shall not apply to a contribution of--
(1) A remainder interest in a personal residence or farm,
(2) An undivided portion of the taxpayer's entire interest in
property,
(3) A qualified conservation contribution (as defined in Section
24357.7).
(c) The amendments made to this section by the 1977-78 Legislature
shall apply with respect to contributions of transfers made after
December 31, 1976, and before June 14, 1977.
(d) The amendments made to this section by the 1981-82 Regular
Session of the Legislature shall apply with respect to contributions
or transfers made in taxable years beginning on and after January 1,
1982.
24357.3. For purposes of Section 24357, in determining the value of
a remainder interest in real property, depreciation (computed on the
straight line method) and depletion of such property shall be taken
into account, and such value shall be discounted at a rate of 6
percent per annum, except that the Franchise Tax Board may prescribe
a different rate.
24357.4. If, in connection with any charitable contribution, a
liability is assumed by the recipient or by any other person, or if a
charitable contribution is of property which is subject to a
liability, then, to the extent necessary to avoid the duplication of
amounts, the amount taken into account for purposes of Section 24357
as the amount of the charitable contribution-- (a) Shall be
reduced for interest (1) which has been paid (or is to be paid) by
the taxpayer, (2) which is attributable to the liability, and (3)
which is attributable to any period after the making of the
contribution, and (b) In the case of a bond, shall be further
reduced for interest (1) which has been paid (or is to be paid) by
the taxpayer on indebtedness incurred or continued to purchase or
carry such bond, and (2) which is attributable to any period before
the making of the contribution. The reduction pursuant to
subdivision (b) shall not exceed the interest (including interest
equivalent) on the bond which is attributable to any period before
the making of the contribution and which is not (under the taxpayer's
method of accounting) includable in the gross income of the taxpayer
for any taxable year. For purposes of this section, the term "bond"
means any bond, debenture, note, or certificate or other evidence of
indebtedness.
24357.5. No deduction shall be allowed under Section 24357 for a
contribution to or for the use of an organization or trust described
in Section 4948(c)(4) of the Internal Revenue Code.
24357.6. No deduction shall be allowed under this part for an
out-of-pocket expenditure made on behalf of an organization described
in Section 24359 (other than an organization described in
subdivision (e) of Section 23704.5 (relating to churches, etc.)) if
the expenditure is made for the purpose of influencing legislation
(within the meaning of Section 23701d).
24357.7. (a) (1) For purposes of paragraph (3) of subdivision (b)
of Section 24357.2, the term "qualified conservation contribution"
means a contribution--
(A) Of a qualified real property interest,
(B) To a qualified organization,
(C) Exclusively for conservation purposes.
(2) For purposes of this subdivision, the term "qualified real
property interest" means any of the following interests in real
property:
(i) The entire interest of the donor other than a qualified
mineral interest.
(ii) A remainder interest.
(iii) A restriction (granted in perpetuity) on the use which may
be made of the real property.
(b) For purposes of subdivision (a), the term "qualified
organization" means an organization which:
(1) Is described in subdivision (a) or (b) of Section 24359, or
(2) Is described in Section 23701(d), and--
(A) Meets the requirements of Section 509(a)(2) of the Internal
Revenue Code, or
(B) Meets the requirements of Section 509(a)(3) of the Internal
Revenue Code and is controlled by an organization described in
paragraph (1) or in subparagraph (A).
(c) For purposes of this section, the term "conservation purpose"
means any of the following:
(1) The preservation of land areas for outdoor recreation by, or
the education of, the general public.
(2) The protection of a relatively natural habitat of fish,
wildlife, or plants, or similar ecosystem.
(3) The preservation of open space (including farm land and forest
land) where that preservation is for any of the following:
(A) For the scenic enjoyment of the general public.
(B) Pursuant to a clearly delineated federal, state, or local
governmental conservation policy, and will yield a significant public
benefit.
(C) The preservation of a historically important land area or a
certified historic structure.
(d) The term "certified historic structure" means any building,
structure, or land area which:
(1) Is listed in the National Register, or
(2) Is located in a registered historic district (as defined in
Section 47(c)(3)(B)) of the Internal Revenue Code and is certified by
the Secretary of the Interior to the secretary as being of historic
significance to the district.
A building, structure, or land area satisfies the preceding
sentence if it satisfies that sentence either at the time of the
transfer or on the due date (including extensions) for filing the
transferor's return under this part for the taxable year in which the
transfer is made.
(e) For purposes of this section:
(1) A contribution shall not be treated as exclusively for
conservation purposes unless the conservation purpose is protected in
perpetuity.
(2) (A) Except as provided in subparagraph (B), in the case of a
contribution of any interest where there is a retention of a
qualified mineral interest, this subdivision shall not be treated as
met if at any time there may be extraction or removal of minerals by
any surface mining method.
(B) With respect to any contribution of property in which the
ownership of the surface estate and mineral interests has been and
remains separated, paragraph (1) shall be treated as met if the
probability of surface mining occurring on that property is so remote
as to be negligible.
(f) For purposes of this section, the term "qualified mineral
interest" means--
(1) Subsurface oil, gas, or other minerals; and
(2) The right to access to those minerals.
24357.8. (a) In the case of a qualified research contribution, the
amount otherwise allowed as a deduction under Section 24357, shall be
reduced by that amount of the reduction provided by Section 24357.1
which is no greater than the sum of the following:
(1) One-half of the amount computed pursuant to Section 24357.1
(computed without regard to this paragraph).
(2) The amount (if any) by which the charitable contribution
deduction under this section for any qualified research contribution
(computed by taking into account the amount determined by paragraph
(1), but without regard to this paragraph) exceeds twice the basis of
the property.
(b) For purposes of this section, "qualified research contribution"
means a charitable contribution by a taxpayer of tangible personal
property described in paragraph (1) of Section 1221 of the Internal
Revenue Code, but only if all of the following conditions are met:
(1) The contribution is to an educational organization which is
described in subsection (b)(1)(A)(ii) of Section 170 of the Internal
Revenue Code and which is an institution of higher education (as
defined in Section 3304(f) of the Internal Revenue Code of 1954) in
California.
(2) The contribution is made not later than two years after the
date the construction of the property is substantially completed.
(3) The original use of the property is by the donee.
(4) The property is scientific equipment or apparatus
substantially all of the use of which by the donee is for research or
experimentation (within the meaning of Section 24365), or for
research training, in physical, applied, or biological sciences, or
for instructional purposes.
(5) The property is not transferred by the donee in exchange for
money, other property, or services.
(6) The taxpayer receives from the donee a written statement
representing that its use and disposition of the property will be in
accordance with this section, and with respect to property
substantially all of the use of which is for instructional purposes,
the taxpayer receives from the donee a written statement representing
that the property will be used as an integral part of the
instructional program. In the case of a computer, the statement
shall also represent that the donee has acquired or will acquire,
necessary basic operational software and the means to provide trained
staff to utilize the property.
(7) The contribution is made on or after July 1, 1983, and on or
before December 31, 1993.
(8) The taxpayer shall report to the Franchise Tax Board, on forms
prescribed by the board, the name and address of the recipient
educational organization, a description of the qualified charitable
contribution, the fair market value of the contribution, and the date
the contribution was made. The taxpayer shall forward a copy of the
forms, along with the written statements prescribed in paragraph
(6), to the following:
(A) The President of the University of California, in the case of
contributions to institutions within the University of California
system.
(B) California Postsecondary Education Commission, in the case of
contributions to private institutions.
(C) The Chancellor of the California State University, in the case
of contributions to institutions within the California State
University system.
(D) The Chancellor of the California Community Colleges, in the
case of contributions to institutions within the California Community
College system.
(c) For purposes of this section, the term "taxpayer" shall not
include a service organization (as defined in Section 414(m)(3) of
the Internal Revenue Code ).
24357.9. (a) In the case of a qualified computer contribution, the
amount otherwise allowed as a deduction under Section 24357 shall be
reduced by that amount of the reduction provided by Section 24357.1
that is no greater than the sum of the following:
(1) One-half of the amount computed pursuant to Section 24357.1
(computed without regard to this paragraph).
(2) The amount (if any) by which the charitable contribution
deduction under this section for any qualified computer contribution
(computed by taking into account the amount determined by paragraph
(1), but without regard to this paragraph) exceeds twice the basis of
the property.
(b) For purposes of this section, the term "qualified computer
contribution" means a charitable contribution by a corporation of any
computer technology or equipment, but only if all of the following
apply:
(1) The contribution is to either of the following:
(A) An educational organization described in Section 170(b)(1)(A)
(ii) of the Internal Revenue Code.
(B) An entity described in Section 23701d and exempt from tax
under Section 23701 (other than an entity described in subparagraph
(A)) that is organized primarily for purposes of supporting
elementary and secondary education in California.
(C) A public library (as described in Section 170(e)(6)(B)(i)(III)
of the Internal Revenue Code).
(2) The contribution is made not later than three years after the
date the taxpayer acquired the property (or in the case of property
constructed by the taxpayer, the date the construction of the
property is substantially completed).
(3) The original use of the property is by the donor or the donee.
(4) Substantially all of the use of the property by the donee is
for use within California for educational purposes in any of the
grades K through 12 that are related to the purpose or function of
the organization or entity.
(5) The property is not transferred by the donee in exchange for
money, other property, or services, except for shipping,
installation, and transfer of costs.
(6) The property will fit productively into the entity's
educational plan.
(7) The entity's use and disposition of the property will be in
accordance with paragraphs (4) and (5).
(8) The property meets the standards, if any, as the Secretary of
the Treasury may have prescribed by regulation under Section 170(e)
(6) of the Internal Revenue Code to assure that the property meets
minimum functionality and suitability standards for educational
purposes.
(c) A contribution by a corporation of any computer technology or
equipment to a private foundation (as defined in Section 509 of the
Internal Revenue Code) shall be treated as a qualified computer
contribution for purposes of this section if both of the following
apply:
(1) The contribution to the private foundation satisfies the
requirements of paragraphs (2) and (5) of subdivision (b).
(2) Within 30 days after that contribution, the private foundation
does both of the following:
(A) Contributes the property to an entity described in paragraph
(1) of subdivision (b) that satisfies the requirements of paragraphs
(4) to (7), inclusive, of subdivision (b).
(B) Notifies the donor of that contribution.
(d) In the case of property that is reacquired by the person who
constructed the property, both of the following shall apply:
(1) Paragraph (2) of subdivision (b) shall be applied to a
contribution of that property by that person by taking into account
the date that the original construction of the property was
substantially completed.
(2) Paragraph (3) of subdivision (b) shall not apply to that
contribution.
(e) For purposes of this section, property shall be treated as
constructed by the taxpayer only if the cost of the parts used in the
construction of that property (other than parts manufactured by the
taxpayer or a related person) do not exceed 50 percent of the
taxpayer's basis in that property.
(f) For purposes of this section:
(1) "Computer technology or equipment" means computer software (as
defined by Section 197(e)(3)(B) of the Internal Revenue Code),
computer or peripheral equipment (as defined by Section 168(i)(2)(B)
of the Internal Revenue Code), and fiber-optic cable related to
computer use.
(2) "Corporation" shall not include any of the following:
(A) An "S corporation."
(B) A personal holding company (as defined in Section 542 of the
Internal Revenue Code).
(C) A service organization (as defined in Section 414(m)(3) of the
Internal Revenue Code).
(g) (1) This section shall not apply to any contribution made
during any taxable year beginning on or after January 1, 2000, and
before December 31, 2001.
(2) This section shall not apply to any contributions made during
any taxable year beginning after December 31, 2003.
24357.10. (a) For purposes of Section 24357, 80 percent of any
amount described in subdivision (b) shall be treated as a charitable
contribution.
(b) For purposes of subdivision (a), an amount is described in
this subdivision if each of the following applies:
(1) The amount is paid by the taxpayer to or for the benefit of an
educational organization which is:
(A) Described in Section 170 (b)(1)(A)(ii) of the Internal Revenue
Code.
(B) An institution of higher education as defined in Section 3304
(f) of the Internal Revenue Code.
(2) The amount would be allowable as a deduction under this
section but for the fact that the taxpayer receives (directly or
indirectly) as a result of paying the amount the right to purchase
tickets for seating at an athletic event in an athletic stadium of
the institution.
(c) If any portion of a payment is for the purchase of the
tickets, the portion and the remaining portion (if any) of the
payment shall be treated as separate amounts for purposes of this
section.
24358. (a) In the case of a corporation, the total deductions under
Section 24357 for any taxable year shall not exceed 10 percent of
the taxpayer's net income computed without regard to any of the
following:
(1) Subdivision (e) of Section 23802, relating to a deduction for
built-in gains and passive investment income.
(2) Sections 24357 to 24359, inclusive, relating to the deduction
for contributions.
(3) Article 2 (commencing with Section 24401) of Chapter 7 (except
Sections 24407 to 24409, inclusive, relating to organizational
expenses).
(b) Section 170(d)(2) of the Internal Revenue Code, relating to
carryovers of excess contributions, shall apply with respect to
excess contributions made during taxable years beginning on or after
January 1, 1996.
24359. For purposes of Sections 24357 to 24359, inclusive, the term
"charitable contribution" means a contribution or gift to or for the
use of--
(a) A state, a possession of the United States, or any political
subdivision of any of the foregoing, or the United States or the
District of Columbia, but only if the contribution or gift is made
for exclusively public purposes.
(b) A corporation, trust, or community chest, fund, or
foundation--
(1) Created or organized in the United States or in any possession
thereof, or under the law of the United States, any state, the
District of Columbia, or any possession of the United States;
(2) Organized and operated exclusively for religious, charitable,
scientific, literary, or educational purposes or to foster national
or international amateur sports competition (but only if no part of
its activities involve the provision of athletic facilities or
equipment), or for the prevention of cruelty to children or animals;
(3) No part of the net earnings of which inures to the benefit of
any private shareholder or individual; and
(4) Which is not disqualified for tax exemption under Section
23701d by reason of attempting to influence legislation, and which
does not participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of (or
in opposition to) any candidate for public office.
A contribution or gift by a corporation to a trust, chest, fund,
or foundation shall be deductible by reason of this section only if
it is to be used within the United States or any of its possessions
exclusively for purposes specified in paragraph (2). Rules similar
to the rules of subdivision (b) of Section 23701d shall apply for
purposes of this section.
(c) A post or organization of war veterans, or an auxiliary unit
or society of, or trust or foundation for, any post or organization
of war veterans--
(1) Organized in the United States or any of its possessions, and
(2) No part of the net earnings of which inures to the benefit of
any private shareholder or individual.
(d) A cemetery company owned and operated exclusively for the
benefit of its members, or any corporation chartered solely for
burial purposes as a cemetery corporation and not permitted by its
charter to engage in any business not necessarily incident to that
purpose, if the company or corporation is not operated for profit and
no part of the net earnings of the company or corporation inures to
the benefit of any private shareholder or individual.
24359.1. Notwithstanding any other provision of law, any credit or
deduction allowed by Section 23606 or 24357.8 shall not be disallowed
on the basis that the contribution is made for the primary or
incidental purpose of benefiting the donor in any of the following
ways:
(a) Encouraging institutions to interest and train students to use
a computer, scientific equipment, or apparatus, thereby enlarging
the future potential market by developing prospective purchases.
(b) Developing and maintaining a favorable public image.
24360. In the case of any bond, as defined in Section 24363, the
following rules shall apply to the amortizable bond premium
(determined under Section 24361 on the bond):
(a) In the case of a bond, the amount of the amortizable bond
premium for the taxable year shall be allowed as a deduction.
(b) In the case of any bond the interest on which is excludable
from gross income under Chapter 3 (commencing with Section 23501), no
deduction shall be allowed for the amortizable bond premium for the
taxable year.
24361. (a) For purposes of subsection (b), the amount of bond
premium, in the case of the holder of any bond, shall be determined--
(1) With reference to the amount of the basis (for determining
loss on sale or exchange) of such bond;
(2) With reference to the amount payable on maturity or on earlier
call date; and
(3) With adjustments proper to reflect unamortized bond premium,
with respect to the bond, for the period before the date as of which
Section 24360 becomes applicable with respect to the taxpayer with
respect to such bond.
In no case shall the amount of bond premium on a convertible bond
include any amount attributable to the conversion features of the
bond.
(b) The amortizable bond premium of the taxable year shall be the
amount of the bond premium attributable to such year. In the case of
a bond described in Section 24362(a) issued after January 22, 1951,
and acquired after January 22, 1954, which has a call date not more
than three years after the date of such issue, the amount of bond
premium attributable to the taxable year in which the bond is called
shall include an amount equal to the excess of the amount of the
adjusted basis (for determining loss on sale or exchange) of such
bond as of the beginning of the taxable year over the amount received
on redemption of the bond or (if greater) the amount payable on
maturity.
(c) (1) Except as provided in regulations, the determinations
required under subdivisions (a) and (b) shall be made on the basis of
the taxpayer's yield to maturity determined by--
(A) Using the taxpayer's basis for purposes of determining loss on
sale or exchange of the obligation, and
(B) Compounding at the close of each accrual period (as defined in
Section 1272(a)(5) of the Internal Revenue Code).
(2) For purposes of paragraph (1), if the amount payable on an
earlier call date is used under subparagraph (B) of paragraph (1) in
determining the amortizable bond premium attributable to the period
before the earlier call date, that bond shall be treated as maturing
on that date for the amount so payable and then reissued on that date
for the amount so payable.
24362. (a) Sections 24360 to 24363.5, inclusive, shall apply to the
bonds only if the taxpayer has elected to have these sections apply;
in the case of any taxpayer, bonds the interest on which is not
excludable from gross income.
(b) The election authorized under this section shall be made in
accordance with such regulations as the Franchise Tax Board shall
prescribe. If such election is made with respect to any bond
(described in subsection (a)) of the taxpayer, it shall also apply to
all such bonds held by the taxpayer at the beginning of the first
taxable year to which the election applies and to all such bonds
thereafter acquired by him and shall be binding for all subsequent
taxable years with respect to all such bonds of the taxpayer, unless,
on application by the taxpayer, the Franchise Tax Board permits him,
subject to such conditions as the Franchise Tax Board deems
necessary, to revoke such election.
24363. For purposes of Sections 24360 to 24363.5, inclusive, the
term "bond" means any bond, debenture, note, or certificate or other
evidence of indebtedness, but does not include any such obligation
which constitutes stock in trade of the taxpayer or any such
obligation of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the taxable
year, or any such obligation held by the taxpayer primarily for sale
to customers in the ordinary course of its trade or business.
24363.5. (a) Except as provided in regulations, in the case of any
taxable bond each of the following shall apply:
(1) The amount of any bond premium shall be allocated among the
interest payments on the bond under rules similar to the rules of
subdivision (c) of Section 24361.
(2) In lieu of any deduction under Section 24360, the amount of
any premium so allocated to any interest payment shall be applied
against (and operate to reduce) the amount of the interest payment.
(b) For purposes of this section, the term "taxable bond" means
any bond the interest of which is not excludable from gross income.
24364. Notwithstanding Article 3 (commencing with Section 24421),
all expenditures (other than expenditures for the purchase of land or
depreciable property or for the acquisition of circulation through
the purchase of any part of the business of another publisher of a
newspaper, magazine, or other periodical) to establish, maintain, or
increase the circulation of a newspaper, magazine, or other
periodical shall be allowed as a deduction. However, the deduction
shall not be allowed with respect to the portion of such expenditures
as, under regulations prescribed by the Franchise Tax Board, is
chargeable to capital account if the taxpayer elects, in accordance
with those regulations, to treat that portion as so chargeable. The
election, if made, shall be for the total amount of that portion of
the expenditures which is so chargeable to capital account, and shall
be binding for all subsequent taxable years unless, upon application
by the taxpayer, the Franchise Tax Board permits a revocation of the
election subject to such conditions as it deems necessary.
24365. (a) Section 174 of the Internal Revenue Code, relating to
research and experimental expenditures, shall apply, except as
otherwise provided.
(b) Section 174(b) of the Internal Revenue Code is modified to
refer to subdivision (a) of Section 24916 in lieu of Section 1016(a)
(1) of the Internal Revenue Code.
(c) Section 174(c) of the Internal Revenue Code is modified to
refer to Sections 24349 to 24356, inclusive, in lieu of Section 167
of the Internal Revenue Code.
24368.1. (a) Section 167(e) of the Internal Revenue Code, relating
to certain term interests not depreciable, shall apply.
(b) The provisions of Section 7622(b) of Public Law 101-239,
relating to the effective date of changes in treatment of transfers
of franchises, trademarks, and trade names, shall apply.
(c) The provisions of Section 7645(b) of Public Law 101-239,
relating to the effective date of disallowance of depreciation for
certain term interests, shall apply.
24369. Section 175 of the Internal Revenue Code, relating to soil
and water conservation expenditures, shall apply, except as otherwise
provided.
24369.4. (a) Section 198 of the Internal Revenue Code, relating to
expensing of environmental remediation costs, shall apply, except as
otherwise provided.
(b) Section 198(b)(2) is modified to refer to Sections 24349 to
24355, inclusive, in lieu of Section 167 of the Internal Revenue
Code.
(c) Section 198(f) is modified to refer to Section 24442 in lieu
of Section 280B of the Internal Revenue Code.
(d) For expenditures paid or incurred before January 1, 2004, each
of the following shall apply:
(1) If a taxpayer has, at any time, made an election for federal
purposes under Section 198(a) of the Internal Revenue Code to have
Section 198 of the Internal Revenue Code apply to a qualified
environmental remediation expenditure, Section 198 of the Internal
Revenue Code shall apply to that qualified environmental remediation
expenditure for state purposes, a separate election for state
purposes shall not be allowed under paragraph (3) of subdivision (e)
of Section 23051.5, and the federal election shall be binding for
purposes of this part.
(2) If a taxpayer fails to make an election for federal purposes
under Section 198(a) of the Internal Revenue Code to have Section 198
of the Internal Revenue Code apply to a qualified environmental
remediation expenditure, an election under Section 198(a) of the
Internal Revenue Code shall not be allowed for state purposes,
Section 198 of the Internal Revenue Code shall not apply to that
qualified environmental remediation expenditure for state purposes,
and a separate election for state purposes shall not be allowed under
paragraph (3) of subdivision (e) of Section 23051.5.
(e) No inference as to the proper treatment for purposes of this
part of qualified environmental remediation expenditures for periods
before the enactment of this section shall be made.
(f) Section 198(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(g) Section 198 of the Internal Revenue Code, relating to
expensing of environmental remediation costs, shall not apply to
expenditures paid or incurred after December 31, 2003.
24370. There shall also be allowed as a deduction, under Chapter 2
of this part, in the case of a mutual savings bank, the entire amount
of interest paid to depositors possessing no proprietary interest in
the institution or in its surplus, and interest on their deposits to
members possessing a proprietary interest in the institution or in
its surplus at a rate determined by the Commissioner of Financial
Institutions to be the going rate of interest upon savings deposits
in this state during the calendar year preceding the taxable year,
such rate to be certified by the Commissioner of Financial
Institutions to the Franchise Tax Board on or before the first day of
March of each year.
24372.3. (a) Section 169 of the Internal Revenue Code, relating to
amortization of pollution control facilities, shall apply, except as
otherwise provided.
(b) The deduction allowed by this section shall be available only
with respect to facilities located in this state.
(c) The "state certifying authority," as defined in Section 169(d)
(2) of the Internal Revenue Code, means the State Air Resources
Board, in the case of air pollution, and the State Water Resources
Control Board, in the case of water pollution.
24372.5. (a) Section 194 of the Internal Revenue Code, relating to
amortization of reforestation expenditures, shall apply, except as
otherwise provided.
(b) The deduction allowed by this section shall be available only
with respect to qualified timber property located in this state.
24373. Section 178 of the Internal Revenue Code, relating to the
amortization of cost of acquiring a lease, shall apply.
24377. (a) A taxpayer engaged in the business of farming may elect
to treat as expenses which are not chargeable to capital account
expenditures (otherwise chargeable to capital account) which are paid
or incurred by it during the taxable year for the purchase or
acquisition of fertilizer, lime, ground limestone, marl, or other
materials to enrich, neutralize, or condition land used in farming,
or for the application of such materials to such land. The
expenditures so treated shall be allowed as a deduction.
(b) For purposes of subdivision (a), the term "land used in
farming" means land used (before or simultaneously with the
expenditures described in subdivision (a)) by the taxpayer or its
tenant for the production of crops, fruits, or other agricultural
products or for the sustenance of livestock.
(c) The election under subdivision (a) for any taxable year shall
be made within the time prescribed by law (including extensions
thereof) for filing the return for that taxable year. The election
shall be made in the form and manner as the Franchise Tax Board may
prescribe. The election may not be revoked except with the consent
of the Franchise Tax Board.
24379. Section 83 of the Internal Revenue Code, relating to
property transferred in connection with performance of services,
shall apply, except as otherwise provided.
24382. (a) Section 216 of the Internal Revenue Code, relating to
deduction of taxes, interest, and business depreciation by
cooperative housing corporation tenant-stockholder, shall apply,
except as otherwise provided.
(b) Section 6282(b) of Public Law 100-647, relating to the
effective date for distributions by cooperative housing corporations,
shall apply.
24383. (a) Every taxpayer, at the election of the taxpayer, shall
be entitled to a deduction of the cost of repairing or remodeling any
building, facility or transportation vehicle owned or leased by the
taxpayer at the time of such repairing or remodeling, in order to
permit handicapped or elderly individuals to enter or leave such
building, facility or transportation vehicle, to increase the access
handicapped or elderly individuals would have to such building,
facility or transportation vehicle, or to allow handicapped or
elderly individuals more effective use of the building, facility or
transportation vehicle, provided that the repair or remodeling meets
one or more standards established pursuant to Section 4450 or 4451 of
the Government Code. In the absence of such state standards, those
standards established by the Secretary of the Treasury of the United
States with the concurrence of the Architectural and Transportation
Barriers Compliance Board shall be used. The installation of
emergency egress/safe area refuge systems shall be eligible for such
deductions.
(b) The deduction authorized by this section shall be taken with
respect to the taxable year in which such repairing or remodeling is
completed.
(c) The deduction provided by this section with respect to any
taxable year shall be in lieu of any deduction with respect to such
repairing or remodeling relating to exhaustion, wear and tear or
obsolescence. If, however, the costs of that repair or remodeling
exceed the limit set forth in subdivision (g), the remaining balance
may be charged to capital account.
(d) If any building, facility or transportation vehicle is owned
by more than one person, a taxpayer may deduct a portion of the costs
of such repairing or remodeling apportionate to the interest in such
building, facility or transportation vehicle which is owned by the
taxpayer.
(e) For purposes of this section, "building, facility or
transportation vehicle" means a building, facility or transportation
vehicle, or part thereof, which is intended to be used, and is
actually used, by the taxpayer or the general public, in the taxpayer'
s business or trade.
(f) For purposes of this section, "handicapped individual" means
any individual who has a physical or mental disability (including,
but not limited to, blindness or deafness) which for such individual
constitutes or results in a functional limitation to employment, or
who has any physical or mental impairment (including, but not limited
to, a sight or hearing impairment) which substantially limits one or
more major life activities of such individual, and "elderly
individual" means an individual who is 65 years of age or older.
(g) The deduction authorized by this section shall not exceed
fifteen thousand dollars ($15,000) with respect to any taxpayer for
any taxable year.
(h) The Franchise Tax Board shall prescribe such regulations as
may be necessary to carry out the provisions of this section.
(i) This section shall apply to taxable years beginning after
December 31, 1976.
(j) (1) The State Fire Marshal in cooperation with the Department
of Rehabilitation and the Department of Aging shall adopt building
standards and regulations for emergency egress/safe area refuge
systems. The building standards and regulations shall include, but
not be limited to, minimum requirements for safety, reliability,
durability and usability. Emergency egress/safe area refuge systems
that comply with the building standards and regulations adopted
pursuant to this section shall be eligible for the deduction provided
by this section.
(2) It is the intent of the Legislature that this section and the
building standards adopted pursuant to this section do not supersede
more restrictive building standards and regulations adopted by the
state and local governments.
(k) "Emergency egress/safe area refuge system" shall include, but
not be limited to, all of the following:
(1) A building floor divided into not less than two compartments
by not less than one-hour fire-resistive construction. Each door
opening in the construction shall be protected by a twenty minute
fire-resistive assembly as defined in regulations of the State Fire
Marshal. Duct openings shall be protected by single-blade or
curtain-type fire dampers to restrict the passage of smoke or flame.
The smaller of the compartmental areas shall be not less than
one-fourth the floor area of the story. Each such compartment shall
contain a stairway or elevator or other means of ready egress from
the building.
(2) A fire alarm system defined in regulations by the State Fire
Marshal.
(3) Use of existing exiting systems and warning devices when
practical, including, but not limited to, stairways, elevators, and
fire alarms.
(4) Accommodations for wheelchairs and all attached wheelchair
equipment, as well as wheelchair occupants.
(5) Its own power source.
24384.5. (a) There shall be allowed as a deduction the amount of
net interest received by the taxpayer in payment of indebtedness of a
person or entity engaged in a trade or business located in an
enterprise zone.
(b) No deduction shall be allowed under this section unless at the
time the indebtedness is incurred each of the following requirements
are met:
(1) The trade or business is located solely within an enterprise
zone.
(2) The indebtedness is incurred solely in connection with
activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the
debtor.
(c) "Enterprise zone" means an area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
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