This part is known and may be cited as the “Personal Income Tax Law.”

Except where the context otherwise requires, the definitions given in this chapter govern the construction of this part.

“Franchise Tax Board” means the Franchise Tax Board described in Part 10, Division 3, Title 2 of the Government Code. “Board” means the State Board of Equalization.

“Taxpayer” includes any individual, fiduciary, estate, or trust subject to any tax imposed by this part or any partnership.

“Individual” means a natural person.

“Fiduciary” means a guardian, trustee, executor, administrator, receiver, conservator, or any person, whether individual or corporate, acting in any fiduciary capacity for any person, estate or trust.

“Person” includes individuals, fiduciaries, partnerships, limited liability companies, and corporations.

“Partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this part, a trust or estate or a corporation.

“Partner” includes a member in such a syndicate, group, pool, joint venture, or organization.

A person shall be recognized as a partner for income purposes if he owns a capital interest in a partnership in which capital is a material income-producing factor, whether or not

such interest was derived by purchase or gift from any other person.

Section 7704 of the Internal Revenue Code, relating to certain publicly traded partnerships treated as corporations, shall apply, except as otherwise provided.

amendment made to this section by Chapter 611 of the Statutes of 1997 shall apply to taxable years beginning on or after January 1, 1998.

“Corporation” includes joint stock companies or associations (including nonprofit associations that perform services, borrow money or own property, and business trusts or other business entities taxable as a corporation under regulations of the Franchise Tax Board) and insurance companies. “Corporation” also includes a trust organized and operated exclusively for purposes contained in Section 23701d.

“Taxable year” means the calendar year or the fiscal year upon the basis of which the taxable income is computed under this part. If no fiscal year has been established, “taxable year” means the calendar year.

“Taxable year” means, in the case of a return made for a fractional part of a year under this part or under regulations prescribed by the Franchise Tax Board, the period for which the return is made.

“Fiscal year” means an accounting period of 12 months ending on the last day of any month other than December.

“Paid or incurred” and “paid or accrued” shall be construed according to the method of accounting upon the basis of which the taxable income is computed under this part.

transitory purpose while that individual:

resident even though temporarily absent from the state.

is in effect. In the case of an individual who is married, this paragraph shall be applied to the income of each spouse separately.

“Nonresident” means every individual other than a resident.

For purposes of Part 10.2 (commencing with Section 18401) and this part, the term “part-year resident” means a taxpayer who meets both of the following conditions during the same taxable year.

Every individual who spends in the aggregate more than nine months of the taxable year within this State shall be presumed to be a resident. The presumption may be overcome by satisfactory evidence that the individual is in the State for a temporary or transitory purpose.

“United States,” when used in a geographical sense, includes the states, the District of Columbia, and the possessions of the United States.

“State” includes the District of Columbia, and the possessions of the United States.

“Foreign country” means any jurisdiction other than one embraced within the United States.

“Trade or business” includes the performance of the functions of a public office.

For purposes of this part, the term “substituted basis property” has the same meaning given that term by Section 7701(a)(42) of the Internal Revenue Code.

For purposes of this part, the term “transferred basis property” has the same meaning given that term by Section 7701(a)(43) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

For purposes of this part, the term “exchanged basis property” has the same meaning given that term by Section 7701(a)(44) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

For purposes of this part, the term “nonrecognition transaction” has the same meaning given that term by Section 7701(a)(45) of the Internal Revenue Code, except that reference to Subtitle A shall instead be a reference to this part.

For purposes of this part, in determining the amount of gain or loss (or deemed gain or loss) with respect to any property, Section 7701(g) of the Internal Revenue Code, relating to nonrecourse indebtedness, applies, except as otherwise provided.

For purposes of this part:

Section 7701(a)(46) of the Internal Revenue Code, relating to determination of whether there is a collective bargaining agreement, shall apply, except as otherwise provided.

Section 7701(e) of the Internal Revenue Code, relating to treatment of certain contracts for providing services, etc., shall apply, except as otherwise provided.

For purposes of this part, the term “domestic building and loan association” has the same meaning given that term by Section 7701(a)(19) of the Internal Revenue Code.

Section 7701(h) of the Internal Revenue Code, relating to motor vehicle operating leases, applies, except as otherwise provided.

provided.

Section 7701(k) of the Internal Revenue Code, relating to treatment of certain amounts paid to charity, shall apply, except as otherwise provided.

As used in this part, if the spouses therein referred to are divorced or their registered domestic partnership has been terminated, wherever appropriate to the meaning of this part, the term “spouse” shall be read “former spouse.”

Section 7703 of the Internal Revenue Code, relating to determination of marital status, shall apply, except as otherwise provided.

year beginning on or after January 1, 2002.

would be different than the classification of that business entity for federal income tax purposes.

Code, and a Coverdell education savings account, as described in Section 530 of the Internal Revenue Code.

The term “military or naval forces of the United States” and the term “armed forces of the United States” each includes all regular and reserve components of the uniformed services which are subject to the jurisdicition of the Secretary of Defense, the Secretary of the Army, the Secretary of the Navy, or the Secretary of the Air Force, and each term also includes the Coast Guard. The members of such forces include commissioned officers and personnel below the grade of commissioned officers in such forces.

The term “counsel for the Franchise Tax Board,” and “Franchise Tax Counsel” as used in this part, means attorney or attorneys appointed or employed by the Franchise Tax Board and acting subject to the approval and under the supervision of the Attorney General.

The term “Personal Income Tax Law of 1954,” means Part 10 of Division 2 of the Revenue and Taxation Code as enacted by the Statutes 1943, Chapter 659, and as subsequently amended, including all amendments enacted prior to January 1, 1955.

Internal Revenue Code that are incorporated for purposes of this part shall be applicable to the same taxable years as the incorporated provisions.

provisions of prior federal acts, some of which are incorporated by reference into this part. Unless otherwise provided, the provisions described in the preceding sentence, to the extent that they modify provisions that are incorporated into this part, are declaratory of existing law and shall be applied in the same manner and for the same periods as specified in the Revenue Reconciliation Act of 1990.

Internal Revenue Code.

tax credits.

for purposes of this part in the same manner and with respect to the same obligations as the federal provisions, except as otherwise provided in this part.

secretary” shall be deemed to be a proper election for purposes of this part, unless otherwise provided in this part or in regulations issued by the Franchise Tax Board.

taxpayer is deemed to have made the same election for purposes of the tax imposed by this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001), as applicable, and that taxpayer may not make a separate election for California tax purposes unless that separate election is expressly authorized by this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), or by regulations issued by the Franchise Tax Board.

(ii) If a taxpayer has not made a proper election for federal income tax purposes prior to the time that taxpayer becomes subject to tax under this part or Part 11 (commencing with Section 23001), that taxpayer may not make a separate California election for purposes of this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001),

unless that separate election is expressly authorized by this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), or by regulations issued by the Franchise Tax Board.

(iii) This subparagraph applies only to the extent that the provisions of the Internal Revenue Code or the regulation issued by “the secretary” authorizing an election for federal income tax purposes apply for purposes of this part, Part 10.2 (commencing with Section 18401) or Part 11 (commencing with Section 23001).

amount required to be shown as adjusted gross income on the federal tax return for the same taxable year.

7806 of the Internal Revenue Code, relating to construction of title, shall apply.

This part applies to the taxable income of taxpayers received or accrued on or after January 1, 1935.

The provisions of this code insofar as they are substantially the same as existing statutory provisions relating to the same subject matter shall be construed as restatements and continuations thereof, and not as new enactments.

The repeal of any provision of the Personal Income Tax Law shall not affect any act done or any right accruing or accrued, or any suit or proceeding had or commenced in any civil cause, before such repeal; but all rights and liabilities under such law shall continue, and may be enforced in the same manner, as if such repeal had not been made.

forward under prior law.

For the purpose of applying the Personal Income Tax Law of 1954 or the Personal Income Tax Law as herein enacted to any period, any reference in either such law to another provision of the Personal Income Tax Law of 1954 or the Personal Income Tax Law as herein enacted which is not then applicable to such period shall be deemed a reference to the corresponding provision of the other law which is then applicable to such period.

Any provision of this part which refers to the application of any portion of this part to a prior period (or which depends upon the application to a prior period of any portion of this part) shall, when appropriate and consistent with the purpose of such provision, be deemed to refer to (or depend upon the application of) the corresponding provision of Part 10 of Division 2 of the Revenue and Taxation Code or of such other Personal Income Tax Laws as were applicable to the prior period.

Division, part, chapter, article, section and subsection headings contained herein shall not be deemed to govern, limit, modify, or in any manner affect the scope, meaning, or intent of the provisions of this part.

If any chapter, article, section, subsection, clause, sentence or phrase of this part which is reasonably separable from the remaining portions of this part, or the application thereof to any person, taxpayer or circumstance, is for any reason determined unconstitutional, such determination shall not affect the remainder of this part, nor, will the application of any such provision to other persons, taxpayers or circumstances, be affected thereby.

Unless otherwise specifically provided therein, the provisions of any act:

effect.

The term “withholding agent” means any person required to deduct and withhold any tax under Section 18662.

Unless expressly otherwise provided in this part, any notice may be given by first class mail postage prepaid.

Provisions in other codes or general law statutes which are related to this part include all of the following:

series).

except those described in paragraphs (4) and (5).

taxable years beginning on or after January 1, 2022, credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062, except the credit described in paragraph (7) and the credit described in paragraph (9).

provisions.

lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:

(A) The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).

(B) The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).

(C) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).

(D) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).

(E) The credit allowed by Section 17052.12 (relating to research expenses).

(F) The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).

(G) The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).

(H) The credit allowed by Section 17052.25 (relating to the adoption costs credit).

(I) The credit allowed by Section 17053.5 (relating to the renter’s credit).

(J) The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).

(K) The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1,

1998).

(L) The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).

(M) For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).

(N) The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).

(O) The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).

(P) The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January

1, 2004).

(Q) The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).

(R) The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).

(S) The credit allowed by Section 17054 (relating to credits for personal exemption).

(T) The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(U) The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).

(V) The

credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).

(W) The credit allowed by Section 17058 (relating to low-income housing).

(X) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).

(Y) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).

(Z) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).

(AA) The credit allowed by Section 19002 (relating to tax withholding).

(AB) For taxable years

beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).

(AC) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).

(AD) For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).

(AE) For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).

(AF) For taxable years beginning on or after January 1, 2025, the credit allowed by Section

17053.98.1 (relating to the California Motion Picture and Television Production Credit).

(AG) For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.

(AH) For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).

(AI) For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).

the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.

allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partner’s distributive share.

of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).

is less than the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.

taxable year.

operative for taxable years beginning on or after January 1, 2021.

Notwithstanding Section 17039 or any other provision in this part to the contrary, the credit allowed by Section 17053.30 (relating to natural heritage) may reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, but only after allowance of the credit allowed by Section 17063.

carryover amount under this part.

the taxpayer or by a pasthrough entity owned directly or indirectly by the taxpayer. For purposes of this paragraph, the term “passthrough entity” means a partnership or an “S” corporation.

10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2022, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000).

qualified taxpayer with a dependent parent).

rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2024, and before January 1, 2027, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000).

under subdivision (a) of Section 17053.98.1.

before January 1, 2027, this section shall not apply if, by May 14, 2026, the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation, and pursuant to legislation in the annual Budget Act to not apply this section of law.

definitions shall apply:

amount” refers to the credit amount that was assigned to the taxpayer.

(A) A valid election as required under this section was not

made.

(B) The Franchise Tax Board determines that credit amount overstatements in any taxable year resulted in an overstatement in any carryover amount or an overstatement of any refundable credit amount.

(C) The Franchise Tax Board determines that the credit amount was overstated as a result of any subsequent adjustment in the amount of net tax, including, but not limited to, an audit adjustment or claim for refund.