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California Laws | Revenue and Taxation Code
DIVISION 2. OTHER TAXES
PART 11. CORPORATION TAX LAW

(e) (1) In the case of a corporation that is an "S corporation" for purposes of this part for its first taxable year for which it has in effect a valid federal S election, there shall be allowed as a deduction in determining that corporation's "subchapter C earnings and profits" at the close of any taxable year the amount of any consent dividend (as provided in paragraph (2)) paid after the close of that taxable year. (21072)

(2) In the event there is a determination that a corporation described in paragraph (1) has "subchapter C earnings and profits" at the close of any taxable year, that corporation shall be entitled to distribute a consent dividend to its shareholders. The amount of the consent dividend may not exceed the difference between the corporation's "subchapter C earnings and profits" determined under subdivision (d) at the close of the taxable year with respect to which the determination is made and the corporation's "subchapter C earnings and profits" for federal income tax purposes at the same date. A consent dividend must be paid within 90 days of the date of the determination that the corporation has "subchapter C earnings and profits." For this purpose, the date of a determination means the effective date of a closing agreement pursuant to Section 19441, the date an assessment of tax imposed by this section becomes final, or the date of execution by the corporation of an agreement with the Franchise Tax Board relating to liability for the tax imposed by this section. For purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and this part, a corporation must make the election provided in Section 1368(e)(3) of the Internal Revenue Code. (21073)

(3) If a corporation distributes a consent dividend, it shall claim the deduction provided in paragraph (1) by filing a claim therefor with the Franchise Tax Board within 120 days of the date of the determination specified in paragraph (2). (21074)

(4) The collection of tax imposed by this section from a corporation described in paragraph (2) shall be stayed for 120 days after the date of the determination specified in paragraph (2). If a claim is filed pursuant to paragraph (3), collection of that tax shall be further stayed until the date the claim is acted upon by the Franchise Tax Board. (21075)

(5) If a claim is filed pursuant to paragraph (3), the running of the statute of limitations on the making of assessments and actions for collection of the tax imposed by this section shall be suspended for a period of two years after the date of the determination specified in paragraph (2). (21076)

23813. Section 1377(b)(2) of the Internal Revenue Code, relating to determination defined, is modified to include, in addition to the items specified therein, the following: (21077)

(a) A decision by the State Board of Equalization that has become final. (21078)

(b) A closing agreement made under Article 6 (commencing with Section 19441) of Chapter 6 of Part 10.2. (21079)

(c) A final disposition by the Franchise Tax Board of a claim for refund. (21080)

CHAPTER 5. COMPUTATION OF TAX WHEN LAW CHANGED (24251) (21081)(Text)

24251. The tax on any taxpayer for a period beginning in one calendar year (called "first calendar year") and ending in the following calendar year (called "second calendar year") where the law applicable to the computation of taxes for calendar year taxpayers for the second calendar year is different from the law applicable to computation of taxes for calendar year taxpayers for the first calendar year, shall, except as otherwise provided, be the sum of: (21082)

(a) The same proportion of a tax for the entire period, determined under the law and rates applicable to the first calendar year which the portion of the period falling within the first year is of the entire period; and (21083)

(b) The same proportion of a tax for the entire period, determined under the law and rates applicable to the second calendar year which the portion of the period falling within the second calendar year is of the entire period. (21084)

Any tax that has been paid under the law applicable to the first calendar year if in excess of the tax imposed by this section shall be refunded or credited to the taxpayer as provided in Chapter 22. Any tax in addition to that paid under the law applicable to the first calendar year made necessary by this article shall be immediately due and payable upon notice and demand from the Franchise Tax Board. (21085)

CHAPTER 6. GROSS INCOME (21086)(Text)

Article 1. Definitions (24271-24276) (21087)(Text)

24271. (a) Section 61 of the Internal Revenue Code, relating to gross income defined, shall apply, except as otherwise provided. (21088)

(b) A distributive share of partnership gross income shall be determined in accordance with Part 10 (commencing with Section 17001). (21089)

(c) Income from an interest in an estate or trust shall be determined in accordance with Part 10 (commencing with Section 17001). (21090)

24272. For the purposes of the tax imposed under Chapter 2 (commencing with Section 23101), "gross income" includes all interest received from federal, state, municipal or other bonds. (21091)

24272.2. The provisions of Section 72(u) of the Internal Revenue Code, relating to the treatment of annuity contracts not held by natural persons, shall be applicable. (21092)

24272.5. (a) Section 7518 of the Internal Revenue Code, relating to tax incentives relating to merchant marine capital construction funds, shall apply, except as otherwise provided. (21093)

(b) Section 7518(d)(2)(C) of the Internal Revenue Code is modified as follows: (21094)

(1) By substituting "70 percent" in lieu of the reference to "the percentage applicable under Section 243(a)(1)." (21095)

(2) To refer to Section 24402 in lieu of Section 243 of the Internal Revenue Code. (21096)

(c) Section 7518(d)(2)(D) of the Internal Revenue Code is modified to refer to "interest income exempt from taxation" under this part in lieu of "interest income exempt from taxation under Section 103." (21097)

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