Amended by Stats. 1984, Ch. 193, Sec. 127.
“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).
Article 1 - Deductions
California Revenue and Taxation Code — §§ 24341-24383
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Sections (77)
Amended by Stats. 2019, Ch. 39, Sec. 22. (AB 91) Effective July 1, 2019.
(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.
(c)(1) The amendments made by Section 13601(a), (b), (c), and (d) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 162(m) of the Internal Revenue Code, relating to certain excessive employee remuneration, shall apply, except as otherwise provided.
(2)The amendments made by Section 13601(e)(2) of the Tax Cuts and Jobs Act (Public Law 115-97), relating to exception for binding contracts, shall apply, and is modified by substituting “March 31, 2019” for “November 2, 2017.”
Added by Stats. 2019, Ch. 39, Sec. 23. (AB 91) Effective July 1, 2019.
(a)The amendments made by Section 13531(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to add Section 162(r) to the Internal Revenue Code, relating to the disallowance of FDIC premiums paid by certain large financial institutions, shall apply, except as otherwise provided.
(b)For purposes of this section, Article 9 (commencing with Section 23361) of Chapter 2 of Part 11 shall not
apply.
Amended by Stats. 2011, Ch. 261, Sec. 23. (SB 559) Effective January 1, 2012.
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 ancestry or any characteristic listed or defined in Section 11135 of the Government Code, except for genetic information.
(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.
Amended by Stats. 2000, Ch. 862, Sec. 122. Effective January 1, 2001.
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.
Amended by Stats. 2000, Ch. 862, Sec. 123. Effective January 1, 2001.
(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.
Amended by Stats. 2002, Ch. 35, Sec. 48. Effective May 8, 2002.
Section 162(k)(2)(A)(ii) of the Internal Revenue Code shall not apply.
Added by Stats. 2014, Ch. 792, Sec. 2. (AB 877) Effective September 29, 2014.
For taxable years beginning on or after January 1, 2014, a deduction shall not be allowed for the amount of any fine or penalty paid or incurred by an owner of all or part of a professional sports franchise, where that fine or penalty is assessed or imposed by the professional sports league that includes that franchise.
Amended by Stats. 2025, Ch. 231, Sec. 89. (SB 711) Effective October 1, 2025.
(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) of the Internal Revenue Code, relating to the limitation on business interest, shall not apply.
Amended by Stats. 2000, Ch. 862, Sec. 126. Effective January 1, 2001.
(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.
Amended by Stats. 2000, Ch. 862, Sec. 127. Effective January 1, 2001.
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.
Amended by Stats. 2000, Ch. 862, Sec. 128. Effective January 1, 2001.
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.
Added by Stats. 2015, Ch. 359, Sec. 31. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.
A deduction shall not be allowed for the fee imposed by subsection (a) of Section 9008 of the Patient Protection and Affordable Care Act (Public Law 111-148).
Added by Stats. 2025, Ch. 231, Sec. 90. (SB 711) Effective October 1, 2025.
A deduction shall not be allowed for the excise tax imposed by Section 4501 of the Internal Revenue Code, relating to repurchase of corporate stock.
Added by Stats. 2025, Ch. 231, Sec. 91. (SB 711) Effective October 1, 2025.
A deduction shall not be allowed for the excise tax imposed by Section 5000D of the Internal Revenue Code, relating to designated drugs during noncompliance periods.
Amended by Stats. 2000, Ch. 862, Sec. 129. Effective January 1, 2001.
(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.
Amended by Stats. 2000, Ch. 862, Sec. 130. Effective January 1, 2001.
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.
Amended by Stats. 2015, Ch. 303, Sec. 492. (AB 731) Effective January 1, 2016.
(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 sustained in the County of San Mateo as a result of the explosion and fire that occurred in September 2010.
(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)This section and Section 165(i) of the Internal Revenue Code apply 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)A corporation subject to 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 shall 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 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.
Added by Stats. 2012, Ch. 203, Sec. 2. (AB 2332) Effective August 27, 2012.
(a)Section 165(i) of the Internal Revenue Code shall be applicable to any losses sustained in the County of Santa Cruz as a result of the severe storms that occurred in March 2011.
(b)For losses described in 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.
(c)Unless specifically provided otherwise, any law that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss shall not apply to a net operating loss attributable to the loss described in subdivision (a).
Added by Stats. 2012, Ch. 284, Sec. 2. (SB 1544) Effective September 7, 2012.
(a)Section 165(i) of the Internal Revenue Code shall be applicable to any losses sustained in the Counties of Los Angeles and San Bernardino as a result of the severe winds that occurred in November 2011.
(b)For losses described in 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.
(c)Unless specifically provided otherwise, any law that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss shall not apply to a net operating loss attributable to the loss described in subdivision (a).
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