Cal. Code Regs. Tit. 18, § 23501 - Corporations Subject to Tax Under Chapter 3

Current through Register 2021 Notice Reg. No. 52, December 24, 2021

(a) In General. Every corporation, domestic or foreign, which is not doing business in this State and not expressly exempt under Article 1 of Chapter 4 or the Constitution of the State of California, but which derives income from sources within this State or from activities carried on in this State, is subject to the tax imposed under Chapter 3.

The income from sources within this State of corporations doing business in this State is included in the measure of the tax imposed under Chapter 2. Consequently, such corporations are not subject to the tax imposed under Chapter 3.

(b) Foreign Corporations. If the only activities of employees of foreign corporations within this State engaging exclusively in interstate commerce are the solicitation of orders for goods to be shipped to customers in this State from points outside this State, the corporations are probably within the purview of Public Law 86-272 ( 15 U.S.C. Sections 381, et. seq),. Accordingly, such corporations would not be subject to the tax imposed under Chapter 3.
(c) The income from sources within this State of holding companies, i.e., corporations organized to hold the stocks or bonds of other corporations and which engage in no other activities, inactive business corporations, and corporations whose activities are not of such a character as to constitute doing business, is likewise taxable under Chapter 3, since such corporations, are not subject to the franchise tax measured by net income imposed by Chapter 2. However, such corporations are subject to the minimum franchise tax imposed by section 23153, Revenue and Taxation Code, if they are incorporated in this State or are qualified to do business in this State, even if they do not actually do business in this State.
(d) As used in this regulation, "Chapter 2" refers to Chapter 2 of Part 11, Division 2 of the Revenue and Taxation Code (beginning with section 23101 of the Revenue and Taxation Code) and "Chapter 3" refers to Chapter 3 of Part 11, Division 2 of the Revenue and Taxation Code (beginning with section 23501, Revenue and Taxation Code).

Notes

Cal. Code Regs. Tit. 18, § 23501

Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Section 23501, Revenue and Taxation Code.

1. New Reg. 23501-23504 filed 12-14-64; effective thirtieth day thereafter (Register 64, No. 25).
2. Renumbering and amendment of Section 23501-23504 to Section 23501 filed 9-3-82; effective thirtieth day thereafter (Register 82, No. 37).
3. Change without regulatory effect amending section and Note filed 4-2-2001 pursuant to section 100, title 1, California Code of Regulations (Register 2001, No. 14).

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