Cal. Code Regs. Tit. 18, § 25106.5
(See Cal. Code Regs., tit. 18, § 25106.5-0 for the table of contents for this section, and all other regulations adopted under Rev. and Tax. Code, § 25106.5.)
(a) Combined Reporting. In General . Each
taxpayer whose income and apportionment factor data are permitted or required
to be included in a combined report shall report income in the manner provided
by this regulation, and, to the extent applicable, other regulations adopted
under Section
25106.5 of the Revenue and
Taxation Code.
(b) Definitions.
Unless otherwise indicated, the following definitions shall apply to all
regulations adopted under Section
25106.5 of the Revenue and
Taxation Code.
(1) Combined Report. "Combined
report" refers to the schedules which are attached to the tax return, required
to be filed by Section
18601
of the Revenue and Taxation Code, of one or more taxpayer members, which
reports the taxpayer member's income from sources within this state under the
combined reporting method.
(2)
Combined Reporting Method. "Combined reporting method" refers to the method
under which the total combined report business income of all members of the
combined reporting group is apportioned to California, to determine each
taxpayer member's combined report business income from California
sources.
(3) Combined Reporting
Group. "Combined reporting group" refers to those corporations with business
income that is permitted or required to be included in a particular combined
report under Sections
25101,
25101.15,
25102,
or
25104
of the Revenue and Taxation Code, limited, if applicable, by application of
Section
23801(c)
of the Revenue and Taxation Code, or the effects of a water's edge election
under Section
25110
of the Revenue and Taxation Code, or any other provision of law which precludes
income and apportionment data of an entity from being included in a combined
report. A combined reporting group also refers to those S Corporations whose
income is required to be included in a combined report under Section
23801(d)
of the Revenue and Taxation Code.
(4) Business Income . "Business income " is as
defined under Section
25120(a)
of the Revenue and Taxation Code.
(5) Combined Report Business Income .
"Combined report business income " is the business income of a member of a
combined reporting group permitted or required to be included in the combined
report of the group.
(6) Total
Group Combined Report Business Income . "Total group combined report business
income " is the sum or net of all combined report business income of all members
of the combined reporting group.
(7) Nonbusiness Income . "Nonbusiness income "
is the income of a member of the combined reporting group which is subject to
allocation under Sections
25123
through
25127
of the Revenue and Taxation Code.
(8) Apportionment. "Apportionment" is the
means by which total group combined report business income is sourced to this
state under Sections
25128 through
25137 and Section
25141
of the Revenue and Taxation Code.
(9) Taxpayer Member's California
Apportionment Percentage. "Taxpayer member's California apportionment
percentage" refers to the fraction, determined under Section
25128
of the Revenue and Taxation Code, used to apportion the total group combined
report business income to a taxpayer member in this state.
(10) Member. "Member" is a single corporation
in a combined reporting group. The term includes both taxpayer members and all
other corporations included in the combined reporting group.
(11) Taxpayer Member. "Taxpayer member" is a
corporation which is a member of a combined reporting group which is required
to file a tax return in this state.
(12) Principal Member. "Principal member" is
the member of the combined reporting group whose accounting period is used as a
reference period for all members of the combined reporting group to aggregate
and apportion combined report business income of the group. A principal member
need not be a taxpayer member.
(A)
Corporations Described. Once a principal member has been determined under this
subsection (b)(12), that member shall remain the principal member for all
succeeding periods that it is a member of the combined reporting group, except
as permitted by the Franchise Tax Board. Except as otherwise provided, the
"principal member" is the corporation first described below:
1. The parent corporation which is a member
of the combined reporting group. A "parent corporation" is a corporation which
is a parent corporation to all members of the combined reporting group, within
the meaning of Revenue and Taxation Code section
25105,
subdivision (b)(1).
2. If the group
does not have a parent corporation which is a member of the combined reporting
group, as so defined, the "principal member" is a corporation which is a lower
tier parent to all members of the combined report. A "lower tier parent" is the
first corporation, down the chain of corporations , which is a member of the
combined reporting group and which would have constituted a "parent
corporation" to all members of the combined group if all corporations which own
or constructively own that corporation under Section
25105(b)(1)
of the Revenue and Taxation Code were disregarded.
3. If the group does not have a "lower tier
parent" corporation which is a member of the combined reporting group, the
"principal member" is the taxpayer member of the combined reporting group
expected to have, on a recurring basis, the largest amount, by value, of real
and tangible personal property in the state. The value of real and tangible
personal property shall be determined pursuant to the property factor
provisions of Sections
25129
through
25131
of the Revenue and Taxation Code and the regulations
thereunder.
(B) Election
to Designate Principal Member. Notwithstanding the provisions of preceding
subsection (A) of this subsection (b)(12), in the first taxable year in which a
combined report is required, the taxpayer members of the combined reporting
group may elect to treat any other member of the combined reporting group as
the "principal member," so long as consistently treated as such for the year of
the election and thereafter. Thereafter, the taxpayer members may change their
principal member only with consent of the Franchise Tax Board.
(C) Inconsistent Principal Member. In the
event that members of a combined reporting group have filed with inconsistent
principal members (including cases where two or more groups of corporations
erroneously filed as distinct combined reporting groups) the determination of
the appropriate principal member shall be in accordance with the provisions of
subsection (A) of this subsection (b)(12), unless, in the discretion of the
Franchise Tax Board, selection of another principal member would result in a
lesser compliance burden for the taxpayer members.
(13) Group Return. "Group return" is that
return filed on behalf of eligible electing taxpayer members of a combined
reporting group included on the electing key corporation's Schedule R-7 of
Schedule R filed in conjunction with its California Form 100.
(14) Key Corporation. "Key corporation" is
the taxpayer member which files a group return described by subsection (b)(13)
of this regulation on behalf of the electing taxpayer members of the combined
reporting group as agent and surety for the electing members.
(15) Fiscalization. "Fiscalization" is the
process under which a member of a combined reporting group aligns the income
and apportionment data from its accounting period to the accounting period of
the principal member.
(16)
California Source Carryover Item. "California source carryover item" refers to
an item of income or loss allocated or apportioned in an earlier year, required
to be taken into account as California source income during the taxable year,
other than a net operating loss.
(17) Income. Unless the context otherwise
requires, the term "income" includes loss.
(18) Total Separate Net Income. Except as
otherwise provided, " total separate net income" is the total net income from
all sources of a member of a combined reporting group from its separate books
of account as determined under the Revenue and Taxation Code, before allocation
and apportionment.
(19)
Corporation. "Corporation," as used in this regulation and other regulations
under Section
25106.5
of the Revenue and Taxation Code, is any of the entities described as a
corporation in Section
23038
of the Revenue and Taxation Code, including banks. In the application of
Section
25102
of the Revenue and Taxation Code, the term "corporation" also includes
"persons" as the term is used in that section.
(20) California Apportionment Percentage.
"California apportionment percentage" means the fraction, determined under
Section 25128 or Section
25128.5
of the Revenue and Taxation Code, used to apportion the total group combined
report business income to this state.
(21) Intrastate Apportionment. "Intrastate
apportionment" means the method by which the total group combined report
business income , which has been apportioned to this state, is assigned to each
of the taxpayer members of the combined reporting group.
(22) Intrastate Apportionment Percentage.
"Intrastate apportionment percentage" means the percentage applied by a
specific taxpayer member to the total group combined report business income ,
after apportionment to this state, in order to determine that member's share of
the group's California source apportioned Income.
(c) Steps in determining California source
income or loss from the business income of a combined reporting group. Members
of a combined reporting group shall compute their income from California
sources in the following steps, in the order indicated.
(1) Determination of Separate Net Income.
Except as otherwise provided by this regulation or other regulations adopted
under Section
25106.5
of the Revenue and Taxation Code, each member of a combined reporting group
must identify its total separate net income for the period beginning and ending
with the accounting period of the principal member of the combined reporting
group. Items of income and expense should be presented in columnar form for
each member. Except as otherwise provided by this regulation or other
regulations under Section
25106.5
of the Revenue and Taxation Code, total separate net income shall be determined
by the Revenue and Taxation Code, subject to the following modifications:
(B) Capital, etc., Gains and Losses. Capital,
Section 1231 (Internal Revenue Code), and involuntary conversion gains and
losses shall not be taken into account. Such gains and losses are apportioned
and allocated as determined under California Code of Regulations, title 18,
section 25106.5-2.
(C) Net Operating Loss Deductions. Net
operating loss deductions shall not be taken into account. The net operating
loss deduction of a taxpayer member is allowed as a deduction only against the
California source income (i.e., after apportionment and allocation) of the
taxpayer member of the group (see subsection (e) of this
regulation).
(2)
Accounting Methods and Elections. Except as otherwise provided by this
regulation or other regulations under Section
25106.5 of the Revenue and
Taxation Code, the taxpayer members of the combined reporting group may elect
to determine the net income of a member of the group under accounting methods
and other elections as authorized by Division 2, Part 11 of the Revenue and
Taxation Code, independently of the net income of other members of the combined
reporting group. See Section
of Title
1825106.5-3 of Title 18 of the California
Code of Regulations.
(3) Adjustment
for Nonbusiness Income , etc. The resulting total separate income of each member
of the combined reporting group is then adjusted to remove income items
attributable to the member's nonbusiness income , and any items of business
income which do not constitute combined report business income of the
group.
(4) Assignment of Expenses
to Business and Nonbusiness Income . (Reserved).
(5) Fiscalization to Principal Member's Year.
If the accounting period of the principal member and one or more of the other
members of the combined reporting group do not begin and end on the same dates,
adjustments must be made to fiscalize the other members' combined report
business income and apportionment data in order to assign an appropriate amount
of those values to the accounting period of the principal member. See
California Code of Regulations, title 18, section
25106.5-4.
(6) Alignment of Business Income to Principal
Member's Accounting Period. The combined report business income of all members
aligned to the accounting period of the principal member is then aggregated,
resulting in total group combined report business income .
(7) Apportionment of Combined Income,
(A) For Taxable Years Beginning On or After
January 1, 2011.
1. In General . Total group
combined report business income for the accounting period of the principal
member is multiplied by the California apportionment percentage of the combined
reporting group, determined under either Section
25128 or Section
25128.5
of the Revenue and Taxation Code, to arrive at the group's California source
combined report business income . The California apportionment percentage is
determined as follows:
a. Single-Sales
Factor, Double Weighted Sales Factor, or Single Weighted Sales Factor. Under
Section
25128.5
of the Revenue and Taxation Code, an apportioning trade or business, other than
an apportioning trade or business described in subdivision (b) of Section
25128,
may elect to determine its California apportionment percentage using the
single-sales factor formula. If no single-sales factor formula election is made
and the apportioning trade or business is other than that described in
subdivision (b) of Section
25128, then an apportioning trade
or business must determine its California apportionment percentage by an
apportionment percentage consisting of the sum of the apportioning trade or
business's California property factor, payroll factor, and twice the sales
factor, with that sum divided by four. If an apportioning trade or business
derives more than 50 percent of its gross business receipts from a qualified
business activity, as defined in Section
25128 of the Revenue and Taxation
Code and the regulations thereunder, the California apportionment percentage
for the apportioning trade or business shall consist of the sum of the
apportioning trade or business's California property factor, payroll factor and
sales factor, with that sum divided by three. In the determination of whether a
single or double weighted sales factor applies, the gross business receipts of
a combined reporting group shall be determined on the basis of gross business
receipts of the accounting period of the principal member, using the applicable
fiscalization method provided in subsection (c)(5) of this
regulation.
b. In the application
of subsection (c)(7)(A)1.b. of this regulation, except as modified under
Section
25137
of the Revenue and Taxation Code:
i. The
California property factor of the combined reporting group is a fraction, the
numerator of which is the total California property of the taxpayer members of
the group, and the denominator of which is the total property of the group
everywhere. Property values are determined in accordance with Sections
25130
and
25131
of the Revenue and Taxation Code.
ii. The California payroll factor of the
combined reporting group is a fraction, the numerator of which is the total
California payroll of the taxpayer members of the group, determined under
Section
25133
of the Revenue and Taxation Code, and the denominator of which is the total
payroll of the group everywhere.
iii. The California sales factor of the
combined reporting group is a fraction, the numerator of which is the total
California sales of the group, determined under Sections
25134
through
25136
of the Revenue and Taxation Code, and the denominator of which is the total
sales of the group everywhere. In the application of this subsection (c)(7)(A),
a sale of tangible personal property shall be assigned to the state from which
the property is shipped only if no member of the combined reporting group is
taxable in the state of the purchaser. In addition, a sale of tangible personal
property shipped to this state by a member of the combined reporting group
(whether or not a taxpayer member) shall be assigned to this state if any
member of the combined reporting group is taxable in this
state.
2.
Intrastate Apportionment of Taxpayer Member Income, In General . The resulting
California source total group combined report business income , determined under
the preceding subsection (c)(7)(A)1, is intrastate apportioned between the
taxpayer members of the group, to arrive at each taxpayer member's California
source combined report business income . That value is determined by multiplying
the group's California source combined report business income by that member's
intrastate apportionment percentage to arrive at the taxpayer member's
California source combined report business income . For purposes of this clause,
"taxpayer member" means a taxpayer member, as defined in subsection (b)(11) of
this regulation, whose tax is measured by net income. The steps of intrastate
apportionment are as follows:
a. Each taxpayer
member of the combined reporting group (and only the taxpayer members)
determines its California property factor, payroll factor and sales factor.
i. The taxpayer member's California property
factor is a fraction, the numerator of which is the California property of that
member, and the denominator of which is the total property of the group
everywhere. Property values are determined in accordance with Sections
25130
and
25131
of the Revenue and Taxation Code.
ii. The taxpayer member's California payroll
factor is a fraction, the numerator of which is that member's California
payroll, determined under Section
25133
of the Revenue and Taxation Code, and the denominator of which is the total
payroll of the group everywhere.
iii. The taxpayer member's California sales
factor is a fraction, the numerator of which is the California sales of that
taxpayer member, determined under Sections
25134
through
25136
of the Revenue and Taxation Code, and the denominator of which is the total
sales of the group everywhere.
iv.
If, in the application of subsection (c)(7)(A)1 of this regulation, the
property, payroll, and sales factors of the combined reporting group have been
modified under Section
25137
of the Revenue and Taxation Code, comparable modifications shall be made in the
determination of the taxpayer member's California factors in subsection
(c)(7)(A)2 of this regulation.
b. The taxpayer member then determines its
California apportionment percentage. The taxpayer member's California
apportionment percentage is either (i) that member's sales factor; or (ii) the
sum of that member's California payroll, property, and a doubled-weighted sales
factor (or a single weighted sales factor, if applicable), with that sum
divided by either four or three. In determining its California apportionment
percentage, the taxpayer member must use the same apportionment formula
(single-sales factor, double, or single weighted sales factor) the combined
reporting group uses in determining the group's California apportionment
percentage under subsection (c)(7)(A)1 of this regulation.
c. Next, the taxpayer member determines its
intrastate apportionment percentage. That percentage is the ratio of the
taxpayer member's California apportionment percentage to the sum of all of the
California taxpayer members' California apportionment percentages.
d. Finally, the taxpayer member multiplies
the group's California source combined report business income by its intrastate
apportionment percentage to arrive at the taxpayer member's California source
combined report business income .
3. Example. The rules set forth in this
subsection (c)(7)(A) are illustrated below:
Assume
The basic computations necessary to determine the amounts
of
| TOTAL GROUP COMBINED REPORT |
$ 1,000,000 | ||||
| PROPERTY, PAYROLL, AND SALES: | |||||
| TOTAL | _______________WITHIN CALIFORNIA_______________ | ||||
| EVERYWHERE | CORP A | CORP B | CORP C | TOTAL CA | |
| PROPERTY | $ 600,000 | $ 24,000 | $ 0 | $ 36,000 | $ 60,000 |
| PAYROLL | 400,000 | 14,000 | 0 | 26,000 | 40,000 |
| SALES | 5,000,000 | 150,000 | 450,000 | 400,000 | 1,000,000 |
a.
Single-Sales Factor Apportionment
| APPORTIONMENT OF COMBINED INCOME | ||||
| Combined Reporting Group's California Apportionment Percentage: | ||||
| CORP A | CORP B | CORP C | TOTAL CA | |
| SALES FACTOR | 3.00% | 9.00% | 8.00% | 20.00% |
| Combined Reporting Group's California
Source |
||||
| $1,000,000 x 20.00% = $200,000 | ||||
| INTRASTATE APPORTIONMENT | ||||
| Taxpayer Member's California Apportionment Percentage | ||||
| CORP A | CORP B | CORP C | TOTAL CA | |
| 3.00% | N/A | 8.00% | 11.00% | |
| Taxpayer Member's Intrastate Apportionment Percentage | ||||
| 27.27% | N/A | 72.73% | 100.00% | |
| Taxpayer Member's California Source
Combined Report |
||||
| $54,540 | N/A | $145,460 | $200,000 | |
b. Double Weighted Sales Factor Apportionment
| APPORTIONMENT OF COMBINED INCOME | ||||
| Combined Reporting Group's California Apportionment Percentage: | ||||
| CORP A | CORP B | CORP C | TOTAL CA | |
| PROPERTY FACTOR | 4.00% | 0.00% | 6.00% | 10.00% |
| PAYROLL FACTOR | 3.50% | 0.00% | 6.50% | 10.00% |
| SALES FACTOR | 3.00% | 9.00% | 8.00% | 20.00% |
| SALES FACTOR | 3.00% | 9.00% | 8.00% | 20.00% |
| TOTAL | 13.50% | 18.00% | 28.50% | 60.00% |
| California Apportionment Percentage | 15.00% | |||
| Combined Reporting Group's California
Source |
||||
| $1,000,000 x 15.00% = $150,000 | ||||
| INTRASTATE APPORTIONMENT | ||||
| Taxpayer Member's California Apportionment Percentage | ||||
| CORP A | CORP B | CORP C | TOTAL CA | |
| TOTAL | 13.50% | N/A | 28.50% | 42.00% |
| Total divided by 4 | 3.375% | N/A | 7.125% | 10.50% |
| Taxpayer Member's Intrastate Apportionment Percentage | ||||
| 32.14% | 0.00% | 67.86% | 100.00% | |
| Taxpayer Member's California Source
Combined Report |
||||
| $48,210 | $0 | $101,790 | $150,000 | |
c. Single Weighted Sales Factor Apportionment
| APPORTIONMENT OF COMBINED INCOME | ||||
| Combined Reporting Group's California Apportionment Percentage: | ||||
| CORP A | CORP B | CORP C | TOTAL CA | |
| PROPERTY FACTOR | 4.00% | 0.00% | 6.00% | 10.00% |
| PAYROLL FACTOR | 3.50% | 0.00% | 6.50% | 10.00% |
| SALES FACTOR | 3.00% | 9.00% | 8.00% | 20.00% |
| TOTAL | 10.50% | 9.00% | 20.50% | 40.00% |
| California Apportionment Percentage 13.33% | ||||
| Combined Reporting Group's California
Source |
||||
| $1,000,000 x 13.33% = $133,333 | ||||
| INTRASTATE APPORTIONMENT | ||||
| Taxpayer Member's California Apportionment Percentage | ||||
| CORP A | CORP B | CORP C | TOTAL CA | |
| TOTAL | 10.50% | N/A | 20.50% | 31.00% |
| Total divided by 3 | 3.50% | N/A | 6.83% | 10.33% |
| Taxpayer Member's Intrastate Apportionment Percentage | ||||
| 33.87% | 0.00% | 66.13% | 100.00% | |
| Taxpayer Member's California Source
Combined Report |
||||
| $45,161 | $0 | $88,172 | $133,333 | |
(B) For Taxable Years Beginning On or After
April 22, 1999 and Before January 1, 2011. In General . Total group combined
report business income for the accounting period of the principal member is
multiplied by the California apportionment percentage of each of the taxpayer
members of the group, determined under Section
25128
of the Revenue and Taxation Code, to arrive at each taxpayer member's
California source combined report business income . That percentage is
determined as follows:
1. Double or Single
Weighted Sales Factor. For most taxpayer members, the total group combined
report business income is multiplied by the taxpayer member's California
apportionment percentage consisting of the sum of the taxpayer member's
California property factor, the payroll factor, and twice the sales factor,
with that sum divided by four. However, if a combined reporting group has more
than 50% of its gross business receipts from a qualified business activity, as
defined in Section
25128
of the Revenue and Taxation Code and the regulations thereunder, the taxpayer
member's California apportionment percentage consists of the sum of the
taxpayer member's California property factor, payroll factor and sales factor,
with that sum divided by three. In the determination of whether a single or
double-weighted sales factor applies, the gross business receipts of the
combined reporting group shall be determined on the basis of gross business
receipts of the accounting period of the principal member, using the applicable
fiscalization method provided in subsection (c)(5) of this
regulation.
2. Taxpayer Member's
Property, Payroll, and Sales Factors. In the application of subsection
(c)(7)(B) of this regulation, except as modified under Section
25137
of the Revenue and Taxation Code:
a. The
taxpayer member's California property factor is a fraction, the numerator of
which is that member's California property, and the denominator of which is the
total property of the group everywhere. Property values are determined in
accordance with Sections
25130
and
25131
of the Revenue and Taxation Code,
b. The taxpayer member's California payroll
factor is a fraction, the numerator of which is that member's California
payroll, determined under Section
25133
of the Revenue and Taxation Code, and the denominator of which is the total
payroll of the group everywhere.
c.
The taxpayer member's California sales factor is a fraction, the numerator of
which is that member's California sales, determined under Sections
25134-
25136
of the Revenue and Taxation Code, and the denominator of which is the total
sales of the group everywhere. In the application of Section
25135
of the Revenue and Taxation Code, the term "taxpayer" refers to the specific
member of the group which transferred title to tangible personal property to
the purchaser. Thus, if a member of the combined reporting group sells goods
shipped to a purchaser in California, and that member is not taxable in that
state, the sale is not assigned to California, even if another member of the
combined reporting group is taxable in that state. Likewise, if a taxpayer
member sells goods to a purchaser in another state which are shipped from
California, and that member is not taxable in the other state, the sale is a
California sale, even if another member of the combined reporting group is
taxable in the other state. Except as otherwise provided, in the application of
Section 25136 and sales factor provisions
in Section
25137 (and the regulations
respectively thereunder), for purposes of determining values in the numerator
of the sales factor, the term "taxpayer" refers to the specific member of the
group which was entitled to receive the proceeds of the
sale.
3. Taxpayer
Member's California Apportionment Percentage. The taxpayer member's California
apportionment percentage is the sum of that member's California payroll,
property, and a double-weighted sales factor (or a single-weighted sales
factor, if applicable), with that sum divided by either four or three, as
determined under Section
25128
of the Revenue and Taxation Code and the regulations thereunder.
4. California Source Apportioned Combined
Report Business Income . Finally, each taxpayer member multiplies the group's
total combined report business income by its respective taxpayer member's
California apportionment percentage to arrive at the taxpayer member's
California source apportioned income.
(8) Fiscalization to Taxpayer Member's
Taxable Year. If applicable, California source combined report business income
of a taxpayer member, determined under subsection (c)(7) of this regulation, is
then proportionately assigned to the applicable portion of that member's
taxable year, based on the number of months falling within the common
accounting period of the principal member. The resulting income from such
portions is then aggregated (or netted) together for the member's taxable year
to determine that member's business income from California sources attributable
to the combined reporting group. (See Cal. Code Regs., tit. 18, §
25106.5-4.)
(d) Steps in determining a taxpayer member's
income from sources within this state, for purposes of imposition of tax. The
California source income of a taxpayer member of a combined reporting group
subject to the imposition of the income or franchise tax is determined as
follows:
(1) Total California Business
Income . To each taxpayer member's California source combined report business
income , determined under subsection (c) of this regulation, is added (or
netted) any other California source business income .
(A) Determined by apportionment of combined
report business income of another combined reporting group of which the
taxpayer is a member,
(B) From
apportionment of income from a distinct business income activity conducted
within and without the state wholly by the taxpayer member, or
(C) From a trade or business conducted wholly
by the taxpayer member entirely within the state, if any.
(2) Other California Source Items. The amount
determined under the preceding subsection (d)(1) is increased by or decreased
by any--
(A) California source carryover
items as defined in subsection (a)(16) of this regulation.
(B) California source income from the sale or
exchange of capital or Section 1231 assets, and from involuntary conversions
(see Section
of Title
1825106.5-2 of Title 18 of the California
Code of Regulations) and,
(C)
California source nonbusiness income .
(3) California Source Net Operating Loss
Deduction. The value determined under subsection (d)(2) of this regulation is
reduced by the member's California source net operating loss carryforward
deduction (see subsection (e) of this regulation).
(4) Adjustment of Charitable Contributions.
(Reserved).
(5) Taxpayer Member's
California Source Income. The final resulting value is the taxpayer member's
California source income.
(e) California Source Net Operating Loss. If
the final resulting value of subsection (d)(5) of this regulation is a loss for
a taxpayer member, that taxpayer member has a California source net operating
loss (CSNOL). The CSNOL is subject to the net operating loss limitations and
carryforward provisions of Sections
24416,
24416.1,
24416.2,
24416.3
and
25108
of the Revenue and Taxation Code. If applicable, the CSNOL must be recomputed
to apply the Water's-Edge limitation of Section
24416(c)
of the Revenue and Taxation Code. CSNOL, as adjusted, is applied as a deduction
in a subsequent year only when the taxpayer has California source positive net
income, whether or not the taxpayer is a member of a combined reporting group
in the subsequent year (see subsection (d)(3) of this regulation). A CSNOL
incurred by one member of a combined reporting group cannot be used to reduce
the income of any other member in a subsequent taxable year. Whether the CSNOL
resulted from an apportioned business loss or an allocated nonbusiness loss, or
a combination of both, the CSNOL is a deduction against positive California
source income in a subsequent year, regardless of the composition of that
income as apportioned, allocated or wholly within California.
(f) Tax on Taxpayer Member's California
Source Income. The taxpayer member's positive California source income, as
determined under subsection (d), is multiplied by the applicable tax rate for
the taxable year. The minimum franchise tax imposed by Section
23153
of the Revenue and Taxation Code is then applied, if applicable. The resulting
amount is the taxpayer member's regular tax, within the meaning of Section
23455(c)
of the Revenue and Taxation Code.
Notes
2. Amendment filed 11-1-2000; operative 12-1-2000 (Register 2000, No. 44).
3. Change without regulatory effect amending first paragraph and subsections (b)(12)(A)1., (b)(12)(C), (c)(1)(A)-(B), (c)(5), (c)(8) and (d)(2)(A) filed 3-11-2002 pursuant to section 100, title 1, California Code of Regulations (Register 2002, No. 11).
4. Amendment filed 11-21-2013; operative 1-1-2014 (Register 2013, No. 47).
Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Section 25106.5, Revenue and Taxation Code.
2. Amendment filed 11-1-2000; operative 12-1-2000 (Register 2000, No. 44).
3. Change without regulatory effect amending first paragraph and subsections (b)(12)(A)1., (b)(12)(C), (c)(1)(A)-(B), (c)(5), (c)(8) and (d)(2)(A) filed 3-11-2002 pursuant to section 100, title 1, California Code of Regulations (Register 2002, No. 11).
4. Amendment filed 11-21-2013; operative 1-1-2014 (Register 2013, No. 47).
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