20250SB__071193CHP INTRODUCED 2025-02-21 AMENDED_SENATE 2025-03-26 AMENDED_SENATE 2025-04-29 AMENDED_ASSEMBLY 2025-07-07 AMENDED_ASSEMBLY 2025-09-02 PASSED_ASSEMBLY 2025-09-09 PASSED_SENATE 2025-09-11 ENROLLED 2025-09-16 CHAPTERED 2025-10-01 APPROVED 2025-10-01 FILED 2025-10-01 2025 SB CHP CHP 0 Introduced by Senator McNerney LEAD_AUTHOR SENATE McNerney

An act to amend Sections 17024.5, 17052.6, 17052.12, 17053.91, 17062, 17063, 17076, 17085, 17087.5, 17131.4, 17131.8, 17140, 17140.3, 17144.5, 17201.6, 17204, 17220, 17225, 17241, 17250, 17255, 17270, 17271, 17276, 17323, 17501, 17551, 17559, 17560.5, 17564, 18031.5, 18036, 18042, 18409, 18622.5, 18631.7, 18666, 19058, 19141.5, 19144, 19167, 19183, 19852, 19900, 23400, 23453, 23455, 23456, 23609, 23691, 23711, 23806, 23809, 24308.6, 24344, 24349.1, 24356, 24357, 24358, 24365, 24416, 24440, 24459, 24465, 24601, 24661.5, 24661.6, 24673.2, 24721, and 24990.5 of, to amend and repeal Sections and of, to add Sections 17062.1, 17088.1, 17131.11, 17149.1, 17149.2, 17156.2, 17158.4, 17158.5, 17201.1, 17204.2, 17250.1, 17250.2, 17321.1, 17322.5, 17324, 17501.8, 17567, 18045, 18151.9, 19907, 21003.1, 24345.6, 24345.7, 24356.1, 24428, 24430, 24454.1, 24457, 24471.5, 24661.4, 24670, 24876, 24990.1, and 24990.9 to, to add and repeal Sections and 17201.3 of, to repeal Sections 17204.7, 17275.3, 17276.05, 24416.05, and of, and to repeal and add Sections 17062.3 and 23456.5 of, the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately. taxation, and declaring the urgency thereof, to take effect immediately Taxation: federal conformity.

Under the Personal Income Tax Law and the Corporation Tax Law, various provisions of the federal Internal Revenue Code, as enacted as of a specified date, are referenced in various sections of the Revenue and Taxation Code. Those laws provide that for taxable years beginning on or after January 1, 2015, the specified date of those referenced Internal Revenue Code sections is January 1, 2015, unless otherwise specifically provided.

Existing law requires, for any introduced bill that proposes changes in any of those dates, that the Franchise Tax Board prepare a complete analysis of the bill that describes all changes to state law that will automatically occur by reference to federal law as of the changed date. It further requires the Franchise Tax Board to immediately update and supplement that analysis upon any amendment to the bill, and requires that analysis be made available to the public and be submitted to the Legislature for publication in the daily journal of each house of the Legislature.

This bill would change the specified date of those referenced Internal Revenue Code sections to January 1, 2025, for taxable years beginning on or after January 1, 2025, and thereby would make numerous substantive changes to both the Personal Income Tax Law and the Corporation Tax Law with respect to those areas of preexisting conformity that are subject to changes under federal laws enacted after January 1, 2015, and that have not been, or are not being, excepted or modified.

This bill would make certain other changes in federal income tax laws applicable, with specified exceptions and modifications, and make specified supplemental, technical, or clarifying changes for purposes of the Personal Income Tax Law or the Corporation Tax Law, or both, or the administration of those laws, with respect to, among other things, tax credits, deductions, net operating losses, Roth IRAs, and capital assets. This bill would also repeal obsolete provisions. This bill would declare that it is to take effect immediately as an urgency statute.

TWO_THIRDS NO YES NO YES YES NO NO NO NO NO The people of the State of California do enact as follows:

SECTION

Section 17024.5 of the Revenue and Taxation Code is amended to read: 17024.5. (a)

(1) Unless otherwise specifically provided, the terms “Internal Revenue Code,” “Internal Revenue Code of 1954,” or “Internal Revenue Code of 1986,” for purposes of this part, mean Title of the United States Code, including all amendments thereto as enacted on the specified date for the applicable taxable year as follows: Taxable Year Specified Date of Internal Revenue Code Sections (

A) For taxable years beginning on or after January 1, 1983, and on or before December 31, 1983 January 15, 1983 (

B) For taxable years beginning on or after January 1, 1984, and on or before December 31, 1984 January 1, 1984 (

C) For taxable years beginning on or after January 1, 1985, and on or before December 31, 1985 January 1, 1985 (

D) For taxable years beginning on or after January 1, 1986, and on or before December 31, 1986 January 1, 1986 (

E) For taxable years beginning on or after January 1, 1987, and on or before December 31, 1988 January 1, 1987 (

F) For taxable years beginning on or after January 1, 1989, and on or before December 31, 1989 January 1, 1989 (

G) For taxable years beginning on or after January 1, 1990, and on or before December 31, 1990 January 1, 1990 (

H) For taxable years beginning on or after January 1, 1991, and on or before December 31, 1991 January 1, 1991 (

I) For taxable years beginning on or after January 1, 1992, and on or before December 31, 1992 January 1, 1992 (

J) For taxable years beginning on or after January 1, 1993, and on or before December 31, 1996 January 1, 1993 (

K) For taxable years beginning on or after January 1, 1997, and on or before December 31, 1997 January 1, 1997 (

L) For taxable years beginning on or after January 1, 1998, and on or before December 31, 2001 January 1, 1998 (

M) For taxable years beginning on or after January 1, 2002, and on or before December 31, 2004 January 1, 2001 (

N) For taxable years beginning on or after January 1, 2005, and on or before December 31, 2009 January 1, 2005 (

O) For taxable years beginning on or after January 1, 2010, and on or before December 31, 2014 January 1, 2009 (

P) For taxable years beginning on or after January 1, 2015, and on or before December 31, 2024 January 1, 2015 (

Q) For taxable years beginning on or after January 1, 2025 January 1, 2025 (2) (

A) Unless otherwise specifically provided, for federal laws enacted on or after January 1, 1987, and on or before the specified date for the taxable year, uncodified provisions that relate to provisions of the Internal Revenue Code that are incorporated for purposes of this part shall be applicable to the same taxable years as the incorporated provisions. (

B) In the case where

Section of the Economic Growth and Tax Relief Act of 2001 (Public Law 107-16) applies to any provision of the Internal Revenue Code that is incorporated for purposes of this part,

Section of the Economic Growth and Tax Relief Act of shall apply for purposes of this

part in the same manner and to the same taxable years as it applies for federal income tax purposes.

(3) Subtitle G (Tax Technical Corrections) and

Part I of Subtitle H (Repeal of Expired or Obsolete Provisions) of the Revenue Reconciliation Act of 1990 (Public Law 101-508) modified numerous provisions of the Internal Revenue Code and 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. (

b) Unless otherwise specifically provided, when applying any provision of the Internal Revenue Code for purposes of this part, a reference to any of the following is not applicable for purposes of this part:

(1) Except as provided in

Chapter 4.5 (commencing with

Section 23800) of Part of Division 2, an electing small business corporation, as defined in

Section 1361(

b) of the Internal Revenue Code.

(2) Domestic international sales corporations (DISC), as defined in

Section 992(

a) of the Internal Revenue Code.

(3) A personal holding company, as defined in

Section of the Internal Revenue Code.

(4) A foreign personal holding company, as defined in

Section of the Internal Revenue Code.

(5) A foreign investment company, as defined in

Section 1246(

b) of the Internal Revenue Code.

(6) A foreign trust, as defined in

Section of the Internal Revenue Code.

(7) Foreign income taxes and foreign income tax credits.

(8) Section of the Internal Revenue Code, relating to citizens or residents of the United States living abroad.

(9) A foreign corporation, except that

Section of the Internal Revenue Code shall be applicable.

(10) Federal tax credits and carryovers of federal tax credits.

(11) Nonresident aliens.

(12) Deduction for personal exemptions, as provided in

Section of the Internal Revenue Code.

(13) The tax on generation-skipping transfers imposed by

Section of the Internal Revenue Code.

(14) The tax, relating to estates, imposed by

Section or of the Internal Revenue Code. (c)

(1) The provisions contained in Sections to 44, inclusive, and

Section of the Tax Reform Act of 1984 (Public Law 98-369), relating to treatment of debt instruments, is not applicable for taxable years beginning before January 1, 1987.

(2) The provisions contained in Public Law 99-121, relating to the treatment of debt instruments, is not applicable for taxable years beginning before January 1, 1987.

(3) For each taxable year beginning on or after January 1, 1987, the provisions referred to by paragraphs (1) and (2) shall be applicable 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. (

d) When applying the Internal Revenue Code for purposes of this part, regulations promulgated in final form or issued as temporary regulations by “the secretary” shall be applicable as regulations under this part to the extent that they do not conflict with this part or with regulations issued by the Franchise Tax Board. (

e) Whenever this part allows a taxpayer to make an election, the following rules shall apply:

(1) A proper election filed with the Internal Revenue Service in accordance with the Internal Revenue Code or regulations issued by “the 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.

(2) A copy of that election shall be furnished to the Franchise Tax Board upon request. (3) (

A) Except as provided in subparagraph (B), in order to obtain treatment other than that elected for federal purposes, a separate election shall be filed at the time and in the manner required by the Franchise Tax Board. (B) (

i) If a taxpayer makes a proper election for federal income tax purposes prior to the time that taxpayer becomes subject to the tax imposed under this part or

Part 11 (commencing with

Section 23001), that 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). (

f) Whenever this part allows or requires a taxpayer to file an application or seek consent, the rules set forth in subdivision (

e) shall be applicable with respect to that application or consent. (

g) When applying the Internal Revenue Code for purposes of determining the statute of limitations under this part, any reference to a period of three years shall be modified to read four years for purposes of this part. (

h) When applying, for purposes of this part, any

section of the Internal Revenue Code or any applicable regulation thereunder, all of the following shall apply:

(1) References to “adjusted gross income” shall mean the amount computed in accordance with

Section 17072, except as provided in paragraph (2). (2) (

A) Except as provided in subparagraph (B), references to “adjusted gross income” for purposes of computing limitations based upon adjusted gross income, shall mean the amount required to be shown as adjusted gross income on the federal tax return for the same taxable year. (

B) In the case of registered domestic partners and former registered domestic partners, adjusted gross income, for the purposes of computing limitations based upon adjusted gross income, shall mean the adjusted gross income on a federal tax return computed as if the registered domestic partner or former registered domestic partner was treated as a spouse or former spouse, respectively, for federal income tax purposes, and used the same filing status that was used on the state tax return for the same taxable year.

(3) Any reference to “subtitle” or “chapter” shall mean this part.

(4) The provisions of

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

(5) Any provision of the Internal Revenue Code that becomes operative on or after the specified date for that taxable year shall become operative on the same date for purposes of this part.

(6) Any provision of the Internal Revenue Code that becomes inoperative on or after the specified date for that taxable year shall become inoperative on the same date for purposes of this part.

(7) Due account shall be made for differences in federal and state terminology, effective dates, substitution of “Franchise Tax Board” for “secretary” when appropriate, and other obvious differences.

(8) Except as otherwise provided, any reference to

Section of the Internal Revenue Code shall be interpreted to also refer to

Section 23701. (

i) Any reference to a specific provision of the Internal Revenue Code shall include modifications of that provision, if any, in this part.

SEC.

Section 17052.6 of the Revenue and Taxation Code is amended to read: 17052.6. (a)

(1) For each taxable year beginning on or after January 1, 2000, there shall be allowed as a credit against the “net tax,” as defined in

Section 17039, an amount determined in accordance with

Section of the Internal Revenue Code, relating to expense for household and dependent care services necessary for gainful employment, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.

(2) The amount of the credit shall be a percentage, as provided in subdivision (

b) of the allowable federal credit without taking into account whether there is a federal tax liability. (

b) For the purposes of subdivision (a), the percentage of the allowable federal credit shall be determined as follows:

(1) For taxable years beginning before January 1, 2003: If the adjusted gross income is: The percentage of credit is: $40,000 or less 63% Over $40,000 but not over $70,000 53% Over $70,000 but not over $100,000 42% Over $100,000 0%

(2) For taxable years beginning on or after January 1, 2003: If the adjusted gross income is: The percentage of credit is: $40,000 or less 50% Over $40,000 but not over $70,000 43% Over $70,000 but not over $100,000 34% Over $100,000 0% (

c) For purposes of this section, “adjusted gross income” means adjusted gross income as computed for purposes of paragraph (2) of subdivision (

h) of

Section 17024.5. (

d) The credit authorized by this

section shall be limited, as follows:

(1) Employment-related expenses, within the meaning of

Section of the Internal Revenue Code, shall be limited to expenses for household services and care provided in this state.

(2) Earned income, within the meaning of

Section 21(

d) of the Internal Revenue Code, shall be limited to earned income subject to tax under this part. For purposes of this paragraph, compensation received by a member of the armed forces for active services as a member of the armed forces, other than pensions or retired pay, shall be considered earned income subject to tax under this part, whether or not the member is domiciled in this state. (

e) For purposes of this section,

Section 21(b)(1) of the Internal Revenue Code, relating to a qualifying individual, is modified to additionally provide that a child, as defined in

Section 152(f)(1) of the Internal Revenue Code, shall be treated, for purposes of

Section of the Internal Revenue Code, as applicable for purposes of this section, as receiving over one-half of their support during the calendar year from the parent having custody for a greater portion of the calendar year, that parent shall be treated as a “custodial parent,” within the meaning of

Section 152(

e) of the Internal Revenue Code, as applicable for purposes of this section, and the child shall be treated as a qualifying individual under

Section 21(b)(1) of the Internal Revenue Code, as applicable for purposes of this section, if both of the following apply:

(1) The child receives over one-half of their support during the calendar year from their parents who never married each other and who lived apart at all times during the last six months of the calendar year.

(2) The child is in the custody of one or both of their parents for more than one-half of the calendar year. (

f) Section 21(

g) of the Internal Revenue Code, relating to special rules for 2021, as added by

Section 9631(

a) of the American Rescue Plan Act of 2021 (Public Law 117-2), shall not apply.

SEC.

Section 17052.12 of the Revenue and Taxation Code is amended to read: 17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “net tax,” as defined in

Section 17039, for the taxable year an amount determined in accordance with

Section of the Internal Revenue Code, relating to credit for increasing research activities, except as follows: (

a) For each taxable year beginning before January 1, 1997, the reference to “20 percent” in

Section 41(a)(1) of the Internal Revenue Code is modified to read “8 percent.” (b)

(1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, the reference to “20 percent” in

Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.”

(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, the reference to “20 percent” in

Section 41(a)(1) of the Internal Revenue Code is modified to read “12 percent.”

(3) For each taxable year beginning on or after January 1, 2000, the reference to “20 percent” in

Section 41(a)(1) of the Internal Revenue Code is modified to read “15 percent.” (

c) Section 41(a)(2) of the Internal Revenue Code shall not apply. (d) “Qualified research” shall include only research conducted in California. (

e) In the case where the credit allowed under this

section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding years if necessary, until the credit has been exhausted. (f)

(1) With respect to any expense paid or incurred after the operative date of

Section 6378,

Section 41(b)(1) of the Internal Revenue Code, relating to qualified research expenses, is modified to exclude from the definition of “qualified research expense” any amount paid or incurred for tangible personal property that is eligible for the exemption from sales or use tax provided by

Section 6378.

(2) For each taxable year beginning on or after January 1, 1998, the reference to “Section 501(a)” in

Section 41(b)(3)(C)(ii)(

I) of the Internal Revenue Code, relating to qualified research consortium, is modified to read “this part or

Part 11 (commencing with

Section 23001).” (g) (1) (

A) For each taxable year beginning on or after January 1, 2000, and before January 1, 2025, the election of alternative incremental credit under

Section 41(c)(4) of the Internal Revenue Code, as applicable for state purposes, shall apply as that

section was in effect on January 1, 2015, and as modified as follows: (

i) The reference to “3 percent” in

Section 41(c)(4)(A)(

i) of the Internal Revenue Code is modified to read “one and forty-nine hundredths of one percent.” (ii) The reference to “4 percent” in

Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified to read “one and ninety-eight hundredths of one percent.” (iii) The reference to “5 percent” in

Section 41(c)(4)(A)(iii) of the Internal Revenue Code is modified to read “two and forty-eight hundredths of one percent.” (

B) Section 41(c)(4)(

B) shall not apply and in lieu thereof an election under

Section 41(c)(4)(

A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 1998, and before January 1, 2025. That election shall apply to the taxable year for which made and all succeeding taxable years beginning before January 1, 2025, unless revoked with the consent of the Franchise Tax Board. (2) (

A) For taxable years beginning on or after January 1, 2025,

Section 41(c)(4) of the Internal Revenue Code, relating to election of alternative simplified credit, shall apply, and is modified as follows: (

i) The reference to “14 percent” in

Section 41(c)(4)(

A) of the Internal Revenue Code is modified to read “3 percent.” (ii) The reference to “6 percent” in

Section 41(c)(4)(B)(ii) of the Internal Revenue Code is modified to read “1.3 percent.” (

B) Section 41(c)(4)(

C) of the Internal Revenue Code shall not apply and in lieu thereof an election under

Section 41(c)(4)(

A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 2025. That election shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Franchise Tax Board. (

h) Section 41(c)(6) of the Internal Revenue Code, relating to gross receipts, is modified to take into account only those gross receipts from the sale of property held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser within this state, regardless of f.o.b. point or any other condition of the sale. (

i) Section 41(

h) of the Internal Revenue Code, relating to treatment of credit for qualified small businesses, shall not apply. (

j) Section 41(

g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following:

(1) The last sentence shall not apply.

(2) If the amount determined under

Section 41(

a) of the Internal Revenue Code for any taxable year exceeds the limitation of

Section 41(

g) of the Internal Revenue Code, that amount may be carried over to other taxable years under the rules of subdivision (e); except that the limitation of

Section 41(

g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (

k) Section 41(a)(3) of the Internal Revenue Code shall not apply. (

l) Section 41(b)(3)(

D) of the Internal Revenue Code, relating to amounts paid to eligible small businesses, universities, and federal laboratories, shall not apply. (

m) Section 41(f)(6), relating to energy research consortium, shall not apply.

SEC.

Section 17053.91 of the Revenue and Taxation Code is amended to read: 17053.91. For each taxable year beginning on or after January 1, 2021, and before January 1, 2027, there shall be allowed to a taxpayer that receives a tax credit allocation a credit against the “net tax,” as defined in

Section 17039, in an amount determined in accordance with

Section of the Internal Revenue Code, except as otherwise provided in this section. (a)

(1) In lieu of the amount of credit computed pursuant to

Section 47(

a) of the Internal Revenue Code, the amount of credit for the taxable year shall be percent of the qualified rehabilitation expenditures with respect to a certified historic structure.

(2) The applicable percentage shall be percent of the qualified rehabilitation expenditures with respect to a certified historic structure if that certified historic structure meets one of the following criteria: (

A) The structure is located on federal surplus property, if obtained by a local agency under

Section of the Government Code, on surplus state real property, as defined by

Section 11011.1 of the Government Code, or on surplus land, as defined by subdivision (

b) of

Section of the Government Code. (

B) The rehabilitated structure includes affordable housing for lower income households, as defined by

Section 50079.5 of the Health and Safety Code. (

C) The structure is located in a designated census tract, as defined in paragraph (7) of subdivision (

b) of

Section 17053.73. (

D) The rehabilitated structure is a part of a military base reuse authority established pursuant to Title 7.86 (commencing with

Section 67800) of the Government Code. (

E) The structure is a transit-oriented development that is a higher density, mixed-use development within a walking distance of one-half mile of a transit station. (3) (

A) The credit shall be allowed for qualified rehabilitation expenditures for a qualified residence determined by the California Tax Credit Allocation Committee and the Office of Historic Preservation to rehabilitate the historic character and improve the integrity of the residence in the year of completion in the percentages specified in paragraphs (1) and (2), as applicable, except that the credit shall only be allowed in an amount equal to or more than five thousand dollars ($5,000) but not exceeding twenty-five thousand dollars ($25,000). A taxpayer shall only be allowed a credit pursuant to this paragraph once every taxable years. (

B) Section 47(c)(1)(B)(ii) of the Internal Revenue Code, relating to special rule for phased rehabilitation, shall not apply. (

b) For purposes of this section, the following

definitions shall apply: (1) “Certified historic structure” has the same meaning as defined in

Section 47(c)(3) of the Internal Revenue Code, that is a structure in this state and is listed on the California Register of Historical Resources. (2) “Qualified residence” has the same meaning as that term is defined in

Section 163(h)(4) of the Internal Revenue Code, that will be owned and occupied by an individual taxpayer who has a modified adjusted gross income, as defined by

Section 86(b)(2) of the Internal Revenue Code, of two hundred thousand dollars ($200,000) or less, as the taxpayer’s principal residence or what will be the taxpayer’s principal residence within two years after the rehabilitation of the residence. (3) (A) “Qualified rehabilitation expenditure” has the same meaning as that term is defined in

Section 47(c)(2) of the Internal Revenue Code, except that qualified rehabilitation expenditures may include expenditures in connection with the rehabilitation of a building without regard to whether any portion of the building is or is reasonably expected to be tax-exempt use property. (B) “Qualified rehabilitation expenditure” has the same meaning as that term is defined in

Section 47(c)(2) of the Internal Revenue Code and also means rehabilitation expenditures incurred by the taxpayer with respect to a qualified residence for the rehabilitation of the exterior of the building or rehabilitation necessary for the functioning of the home, including, but not limited to, rehabilitation of the electrical, plumbing, or foundation of the qualified residence. (

C) The amendments made by

Section 13402(b)(1)(

B) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 47(c)(2)(B)(iv) of the Internal Revenue Code, relating to certified historic structure, shall not apply. (c)

(1) To be eligible for the credit allowed by this section, a taxpayer shall request a tax credit allocation from the California Tax Credit Allocation Committee, in conjunction with the Office of Historic Preservation.

(2) To obtain a tax credit allocation, the taxpayer shall provide necessary information, as determined by the Office of Historic Preservation and the California Tax Credit Allocation Committee.

(3) A tax credit allocation provided to a taxpayer shall not constitute a determination by the California Tax Credit Allocation Committee with respect to any of the requirements of this

section regarding a taxpayer’s eligibility for the credit authorized by this section.

(4) The Office of Historic Preservation shall establish in regulations the time period that a taxpayer who receives a tax credit allocation must commence rehabilitation after the issuance of the tax credit allocation. If rehabilitation is not commenced within the time period established by the office, the tax credit allocation shall be forfeited and the credit amount associated with the tax credit allocation shall be treated as an unused allocation tax credit amount. (

d) A deduction shall not be allowed under this part for any expense for which a credit for that expense is allowed by this section. (

e) If a credit is allowed under this

section with respect to any property, the basis of that property shall be reduced by the amount of the credit allowed. (f)

(1) A credit allowed under this

section shall be claimed in the first taxable year in which the structure is placed in service.

(2) In the case where the credit allowed by this

section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and the seven succeeding years, if necessary, until the credit is exhausted. (

g) For purposes of this section, the Office of Historic Preservation shall do all of the following:

(1) Adopt regulations to implement the requirements of this section. The regulations shall comply with the requirements of the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code).

(2) Establish a written application, on a form jointly prescribed by the office and the California Tax Credit Allocation Committee, for the allocation of the tax credit. The written application shall require the applicant to include a

summary of the expected economic benefits of the project. The economic benefits shall include, but are not limited to, all of the following: (

A) The number of jobs created by the rehabilitation project, both during and after the rehabilitation of the structure. (

B) The expected increase in state and local tax revenues derived from the rehabilitation project, including those from increased wages and property taxes. (

C) Any additional incentives or contributions included in the rehabilitation project from federal, state, or local governments. (

D) For the qualified rehabilitation expenditures with respect to a qualified residence, the rehabilitation has a public benefit, as determined jointly with the Office of Historic Preservation.

(3) Establish a process to determine that applicants meet the requirements of this

section and to ensure that the rehabilitation project meets the Secretary of the Interior’s Standards for Rehabilitation, as found in Part of Title of the Code of Federal Regulations.

(4) Establish a process to approve, or reject, all tax credit allocation applications. (

h) For purposes of this section, the California Tax Credit Allocation Committee shall do all of the following:

(1) Establish a process jointly with the Office of Historic Preservation to implement the provisions of this section. (2) (

A) Subject to the annual cap established as provided in subdivision (i), allocate on a first-come-first-served basis an aggregate amount of credits under this

section and

Section 23691, and allocate any carryover of unallocated credits from prior years. (

B) A taxpayer shall be allocated a tax credit pursuant to the taxpayer’s tax credit allocation upon receipt by the California Tax Credit Allocation Committee of a cost certification for the qualified rehabilitation expenditures. For projects with qualified rehabilitation expenditures in excess of two hundred fifty thousand dollars ($250,000), the cost certification shall be issued by a licensed certified public accountant.

(3) Certify tax credits allocated to taxpayers.

(4) Provide the Franchise Tax Board an annual list of the taxpayers that were allocated a credit pursuant to this

section and

Section 23691, including each taxpayer’s taxpayer identification number, and the amount allocated to each taxpayer.

(5) Establish procedures for the recapture of amounts allocated for a tax credit allowed to a taxpayer for the rehabilitation of a qualified residence if the taxpayer does not use the qualified residence as their principal residence within two years after the rehabilitation of the residence. (i)

(1) The aggregate amount of credits that may be allocated in any calendar year pursuant to this

section and

Section shall be an amount equal to the sum of all of the following: (

A) Fifty million dollars ($50,000,000) in tax credits for the calendar year and each calendar year thereafter, through and including the calendar year. (

B) The unused allocation tax credit amount, if any, for the preceding calendar year.

(2) Notwithstanding the foregoing, the California Tax Credit Allocation Committee shall set aside ten million dollars ($10,000,000) of tax credits that may be allocated each calendar year for taxpayers in the aggregate, pursuant to this paragraph and paragraph (2) of subdivision (

i) of

Section 23691, as follows: (

A) Two million dollars ($2,000,000) of tax credits, in the aggregate, for taxpayers with qualified rehabilitation expenditures for a certified historic structure that is a qualified residence. After providing for the reallocation pursuant to subparagraph (C), to the extent that this amount is not fully allocated in any calendar year, the unused portion shall become available in subsequent calendar years for allocation to other taxpayers with qualified rehabilitation expenditures for a certified historic structure that is a qualified residence. (

B) Eight million dollars ($8,000,000) of tax credits, in the aggregate, for taxpayers with qualified rehabilitation expenditures of less than one million dollars ($1,000,000) for any other certified historic building that is not a qualified residence. After providing for the reallocation pursuant to subparagraph (C), to the extent that this amount is not fully allocated in any calendar year, the unused portion shall become available in subsequent calendar years for allocation to other taxpayers, except those taxpayers subject to subparagraph (A). (

C) Beginning July 1, 2025, any unused allocation set aside in subparagraphs (

A) and (

B) for the calendar year shall be made available within days to taxpayers with qualified rehabilitation expenditures of one million dollars ($1,000,000) or more that submitted applications in that same calendar year and did not receive any allocation, are eligible to receive an allocation, and would have been the next affordable housing project application to receive an award. (

j) In the case of any application for tax credits by an entity treated as a partnership for income tax purposes:

(1) Credits awarded to a partnership shall be allocated to the partners of that partnership in accordance with the partnership agreement, regardless of how the federal historic rehabilitation tax credit with respect to the project is allocated to the partners, or whether the allocation of the credit under the terms of the partnership agreement has substantial economic effect, within the meaning of

Section 704(

b) of the Internal Revenue Code.

(2) To the extent the allocation of the credit to a partner under this

section lacks substantial economic effect, any loss or deduction otherwise allowable under this part that is attributable to the sale or other disposition of that partner’s partnership interest made prior to the expiration of the tax credit recapture period for the project described in paragraph (1) shall not be allowed in the taxable year in which the sale or other disposition occurs, but shall instead be deferred until, and treated as if, it occurred in the first taxable year immediately following the taxable year in which the tax credit recapture period expires for the project described in paragraph (1).

The credits awarded to a partnership shall be allocated to the partners of that partnership in accordance with the partnership agreement. (

k) For purposes of this section, the provisions of subsection (

a) of

Section of the Internal Revenue Code shall apply. (

l) Notwithstanding any other provision of this part, a credit allowed pursuant to this

section may reduce the tax imposed under

Section or plus the tax imposed under

Section 17504, relating to the separate tax on lump-sum distributions, below the tentative minimum tax. (

m) This

section shall remain in effect regardless of the expiration or repeal of

Section of the Internal Revenue Code, relating to rehabilitation credit. (

n) The California Tax Credit Allocation Committee and the Office of Historic Preservation may charge a reasonable fee in an amount that does not exceed the reasonable costs incurred by the California Tax Credit Allocation Committee and the Office of Historic Preservation in fulfilling the responsibilities described in paragraphs (4) and (5) of subdivision (

g) and subdivision (

h) and paragraphs (4) and (5) of subdivision (

g) and subdivision (

h) of

Section 23691. (o)

(1) This

section shall remain in effect only until December 1, 2027, and as of that date is repealed.

(2) Unless otherwise specified in any bill providing for appropriations related to the Budget Act, for taxable years beginning on or after January 1, 2021, and before January 1, 2027, the amount of credit allowed pursuant to this

section shall be zero dollars ($0).

SEC. 5.

Section of the Revenue and Taxation Code is amended to read: 17062. (

a) In addition to the other taxes imposed by this part, there is hereby imposed for each taxable year, a tax equal to the excess, if any, of:

(1) The tentative minimum tax for the taxable year, over

(2) The regular tax for the taxable year. (

b) For purposes of this chapter, each of the following applies:

(1) The tentative minimum tax shall be computed in accordance with Sections to 59, inclusive, of the Internal Revenue Code, except as otherwise provided in this part.

(2) The regular tax shall be the amount of tax imposed by

Section or 17048, before reduction for any credits against the tax, less any amount imposed under paragraph (1) of subdivision (

d) and paragraph (1) of subdivision (

e) of

Section 17560. (3) (

A) The provisions of

Section 55(b)(1) of the Internal Revenue Code shall be modified to provide that the tentative minimum tax for the taxable year shall be equal to the following percent of so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount, before reduction for any credits against the tax: (

i) For any taxable year beginning on or after January 1, 1991, and before January 1, 1996, 8.5 percent. (ii) For any taxable year beginning on or after January 1, 1996, and before January 1, 2009, 7 percent. (iii) For taxable years beginning on and after January 1, 2009, and before January 1, 2011, 7.25 percent. (iv) For any taxable year beginning on or after January 1, 2011, 7 percent. (

B) In the case of a nonresident or part-year resident, the tentative minimum tax shall be computed by multiplying the alternative minimum taxable income of the nonresident or part-year resident, as defined in subparagraph (C), by a rate (expressed as a percentage) equal to the tax computed under subdivision (

b) on the alternative minimum taxable income of the nonresident or part-year resident as if the nonresident or part-year resident were a resident of this state for the taxable year and as if the nonresident or part-year resident were a resident of this state for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, divided by the amount of that income. (

C) For purposes of this section, the term “alternative minimum taxable income of a nonresident or part-year resident” includes each of the following: (

i) For any period during which the taxpayer was a resident of this state (as defined by

Section 17014), all items of alternative minimum taxable income (as modified for purposes of this chapter), regardless of source. (ii) For any period during which the taxpayer was not a resident of this state, alternative minimum taxable income (as modified for purposes of this chapter) which were derived from sources within this state, determined in accordance with

Article of

Chapter 3 (commencing with

Section 17301) and

Chapter 11 (commencing with

Section 17951). (iii) For purposes of computing “alternative minimum taxable income of a nonresident or part-year resident,” any carryover items, deferred income, suspended losses, or suspended deductions shall only be allowable to the extent that the carryover item, suspended loss, or suspended deduction was derived from sources within this state.

(4) The provisions of

Section 55(b)(2) of the Internal Revenue Code, relating to alternative minimum taxable income, shall be modified to provide that alternative minimum taxable income shall not include the income, adjustments, and items of tax preference attributable to any trade or business of a qualified taxpayer. (

A) For purposes of this paragraph, “qualified taxpayer” means a taxpayer who meets both of the following: (

i) Is the owner of, or has an ownership interest in, a trade or business. (ii) Has aggregate gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the taxable year from all trades or businesses of which the taxpayer is the owner or has an ownership interest, in the amount of that taxpayer’s proportionate interest in each trade or business. (

B) For purposes of this paragraph, “aggregate gross receipts, less returns and allowances” means the sum of the gross receipts of the trades or businesses that the taxpayer owns and the proportionate interest of the gross receipts of the trades or businesses that the taxpayer owns and of pass-through entities in which the taxpayer holds an interest. (

C) For purposes of this paragraph, “gross receipts, less returns and allowances” means the sum of the gross receipts from the production of business income, as defined in subdivision (

a) of

Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (

d) of

Section 25120. (

D) For purposes of this paragraph, “proportionate interest” means: (

i) In the case of a pass-through entity that reports a profit for the taxable year, the taxpayer’s profit interest in the entity at the end of the taxpayer’s taxable year. (ii) In the case of a pass-through entity that reports a loss for the taxable year, the taxpayer’s loss interest in the entity at the end of the taxpayer’s taxable year. (iii) In the case of a pass-through entity that is sold or liquidates during the taxable year, the taxpayer’s capital account interest in the entity at the time of the sale or liquidation. (E) (

i) For purposes of this paragraph, “proportionate interest” includes an interest in a pass-through entity. (ii) For purposes of this paragraph, “pass-through entity” means any of the following: (

I) A partnership, as defined by

Section 17008. (II) An “S” corporation, as provided in

Chapter 4.5 (commencing with

Section 23800) of

Part 11. (III) A regulated investment company, as provided in

Section 24871. (IV) A real estate investment trust, as provided in

Section 24872. (

V) A real estate mortgage investment conduit, as provided in

Section 24874.

(5) For taxable years beginning on or after January 1, 1998,

Section 55(d)(1) of the Internal Revenue Code, relating to exemption amount for taxpayers other than corporations is modified, for purposes of this part, to provide the following exemption amounts in lieu of those contained therein: (

A) Fifty-seven thousand two hundred sixty dollars ($57,260) in the case of either of the following: (

i) A joint return. (ii) A surviving spouse. (

B) Forty-two thousand nine hundred forty-five dollars ($42,945) in the case of an individual who is both of the following: (

i) Not a married individual. (ii) Not a surviving spouse. (

C) Twenty-eight thousand six hundred thirty dollars ($28,630) in the case of either of the following: (

i) A married individual who files a separate return. (ii) An estate or trust.

(6) For taxable years beginning on or after January 1, 1998,

Section 55(d)(3) of the Internal Revenue Code, relating to phaseout of exemption amount, is modified, for purposes of this part, to provide the following phaseout of exemption amounts in lieu of those contained therein: (

A) Two hundred fourteen thousand seven hundred twenty-five dollars ($214,725) in the case of a taxpayer described in subparagraph (

A) of paragraph (5). (

B) One hundred sixty-one thousand forty-four dollars ($161,044) in the case of a taxpayer described in subparagraph (

B) of paragraph (5). (

C) One hundred seven thousand three hundred sixty-two dollars ($107,362) in the case of a taxpayer described in subparagraph (

C) of paragraph (5).

(7) For each taxable year beginning on or after January 1, 1999, the Franchise Tax Board shall recompute the exemption amounts prescribed in paragraph (5) and the phaseout of exemption amounts prescribed in paragraph (6). Those computations shall be made as follows: (

A) The California Department of Industrial Relations shall transmit annually to the Franchise Tax Board the percentage change in the California Consumer Price Index for all items from June of the prior calendar year to June of the current calendar year, no later than August of the current calendar year. (

B) The Franchise Tax Board shall do both of the following: (

i) Compute an inflation adjustment factor by adding percent to the percentage change figure that is furnished pursuant to subparagraph (

A) and dividing the result by 100. (ii) Multiply the preceding taxable year exemption amounts and the phaseout of exemption amounts by the inflation adjustment factor determined in clause (

i) and round off the resulting products to the nearest one dollar ($1). (c)

(1) Section 56(b)(1)(

E) of the Internal Revenue Code, relating to standard deduction and deduction for personal exemptions not allowed, is modified, for purposes of this part, to deny the standard deduction allowed by

Section 17073.5.

(2) Section 56(b)(3) of the Internal Revenue Code, relating to treatment of incentive stock options, shall be modified to additionally provide the following: (

A) Section of the Internal Revenue Code does not apply to the transfer of stock acquired pursuant to the exercise of a California qualified stock option under

Section 17502. (

B) Section 422(c)(2) of the Internal Revenue Code applies in any case in which the disposition and inclusion of a California qualified stock option for purposes of this

chapter are within the same taxable year, and that

section does not apply in any other case. (

C) The adjusted basis of any stock acquired by the exercise of a California qualified stock option shall be determined on the basis of the treatment prescribed by this paragraph. (

d) The provisions of

Section 57(a)(5) of the Internal Revenue Code, relating to tax-exempt interest, shall not apply. (

e) The provisions of

Section 59(

a) of the Internal Revenue Code, relating to the alternative minimum tax foreign tax credit, shall not apply.

SEC.

Section 17062.1 is added to the Revenue and Taxation Code , to read: 17062.1. For the purposes of this chapter,

Part VI of Subchapter A of

Chapter of Subtitle A of the Internal Revenue Code, relating to alternative minimum tax, as it read on January 1, 2015, shall apply, except as otherwise provided.

SEC.

Section 17062.3 of the Revenue and Taxation Code , as added by

Section of

Chapter of the Statutes of 2002, is repealed.

SEC.

Section 17062.3 of the Revenue and Taxation Code , as added by

Section of

Chapter of the Statutes of 2002, is repealed.

SEC.

Section 17062.3 is added to the Revenue and Taxation Code , to read: 17062.3.

Section 56A of the Internal Revenue Code, relating to adjusted financial statement income, shall not apply.

SEC. 10.

Section of the Revenue and Taxation Code is amended to read: 17063. (

a) There shall be allowed as a credit against the net tax (as defined by

Section 17039) for any taxable year an amount equal to the minimum tax credit for that taxable year. (

b) For purposes of subdivision (a), the minimum tax credit shall be determined in accordance with

Section of the Internal Revenue Code, except as otherwise provided in this part. (

c) For purposes of this chapter, the amount determined under

Section 53(c)(1) of the Internal Revenue Code shall be the regular tax as defined by paragraph (2) of subdivision (

b) of

Section 17062, reduced by the sum of the credits allowable under this part, other than:

(1) The credits described in paragraph (7) of subdivision (

a) of

Section 17039.

(2) A credit that reduces the tax below the tentative minimum tax, as defined by

Section 17062. (

d) Section 53(

e) of the Internal Revenue Code, relating to the application to applicable corporations, does not apply.

SEC. 11.

Section of the Revenue and Taxation Code is amended to read: 17076. (

a) Section of the Internal Revenue Code, relating to the 2-percent floor on miscellaneous itemized deductions, shall apply, except as otherwise provided. (

b) A deduction allowable under this part that exceeds three thousand dollars ($3,000) and is described in

Section 17049, relating to computation of tax where the taxpayer restores a substantial amount held under claim of right, may not be treated as a miscellaneous itemized deduction under

Section of the Internal Revenue Code, as applicable for purposes of this part. (

c) Section 67(

g) of the Internal Revenue Code, relating to suspension for taxable years to 2025, shall not apply.

SEC. 12.

Section of the Revenue and Taxation Code is amended to read: 17085.

Section of the Internal Revenue Code, relating to annuities, certain proceeds of endowment and life insurance contracts, is modified as follows: (

a) The amendments and transitional rules made by Public Law 99-514 shall be applicable to this part for the same transactions and the same years as they are applicable for federal purposes, except that the repeal of

Section 72(

d) of the Internal Revenue Code, relating to repeal of special rule for employees’ annuities, shall apply only to the following:

(1) Any individual whose annuity starting date is after December 31, 1986.

(2) At the election of the taxpayer, any individual whose annuity starting date is after July 1, 1986, and before January 1, 1987. (

b) The amount of a distribution from an individual retirement account or annuity or employee trust or employee annuity that is includable in gross income for federal purposes shall be reduced for purposes of this part by the lesser of either of the following:

(1) An amount equal to the amount includable in federal gross income for the taxable year.

(2) An amount equal to the basis in the account or annuity allowed by

Section 17507 (relating to individual retirement accounts and simplified employee pensions), the increased basis allowed by Sections and 17506 (relating to plans of self-employed individuals), the increased basis allowed by

Section 17501, or the increased basis allowed by

Section that is remaining after adjustment for reductions in gross income under this provision in prior taxable years. (c)

(1) Except as provided in paragraph (2), the amount of the additional tax imposed under this part shall be computed in accordance with Sections 72(m), (q), (t), and (

v) of the Internal Revenue Code, as applicable for federal income tax purposes for the same taxable year, using a rate of 2 1 percent, in lieu of the rate provided in those sections.

(2) In the case where

Section 72(t)(6) of the Internal Revenue Code, relating to special rules for simple retirement accounts, as applicable for federal income tax purposes for the same taxable year, applies, the rate in paragraph (1) shall be percent in lieu of the 2 1 percent rate specified therein. (

d) Section 72(f)(2) of the Internal Revenue Code shall be applicable without applying the exceptions which immediately follow that paragraph. (

e) The amendments made by

Section of the federal Pension Protection Act of 2006 (Public Law 109-280) to

Section 72(

e) of the Internal Revenue Code, shall not apply. (

f) For purposes of this part,

Section 2202(

b) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), relating to loans from qualified plans shall apply. (

g) For purposes of this part,

Section 302(

c) of Title III of the Consolidated Appropriations Act, 2021 (Public Law 116-260), relating to loans from qualified plans, shall apply.

SEC.

Section 17087.5 of the Revenue and Taxation Code is amended to read: 17087.5. (

a) Subchapter S of

Chapter of Subtitle A of the Internal Revenue Code, relating to tax treatment of “S corporations” and their shareholders, shall apply, except as otherwise provided under this part or

Part 11 (commencing with

Section 23001). (

b) Section 1371(

f) of the Internal Revenue Code, relating to cash distributions following post-termination transition period, shall not apply.

SEC.

Section 17088.1 is added to the Revenue and Taxation Code , to read: 17088.1. (

a) The amendments made to

Section 860E(a)(3)(

B) of the Internal Revenue Code by

Section 2303(a)(2)(

C) of Public Law 116-136, relating to conforming amendments, shall not apply. (

b) The amendments made to

Section 860E(a)(4) of the Internal Revenue Code by

Section 10101(a)(4)(B)(ii) of Public Law 117-169, relating to conforming adjustments, shall not apply.

SEC. 15.

Section is added to the Revenue and Taxation Code , to read: 17091. (

a) Section of the Internal Revenue Code, relating to alimony and separate maintenance payments, as it read on January 1, 2015, shall apply, except as otherwise provided. (

b) Subdivision (

a) shall not apply for any divorce or separation instrument executed after December 31, 2025, or for any divorce or separation instrument executed on or before December 31, 2025, and modified after that date, if the modification expressly provides that the amendments made by this subdivision apply to such modification. (

c) This

section shall remain in effect only until December 1, 2027, and as of that date is repealed.

SEC.

Section 17131.4 of the Revenue and Taxation Code is amended to read: 17131.4. (

a) Section 106(

d) of the Internal Revenue Code, relating to contributions to health savings accounts, shall not apply. (

b) Section 106(

g) of the Internal Revenue Code, relating to qualified small employer health reimbursement arrangement, shall not apply.

SEC.

Section 17131.8 of the Revenue and Taxation Code is amended to read: 17131.8. (

a) For taxable years beginning on or after January 1, 2019, gross income does not include any covered loan amount forgiven pursuant to

Section of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), pursuant to the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139), pursuant to the Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142), pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260), or pursuant to the PPP Extension Act of 2021 (Public Law 117-6). (

b) For taxable years beginning on or after January 1, 2019, gross income does not include any advance grant amount issued pursuant to

Section 1110(

e) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or pursuant to

Section of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (c)

(1) Notwithstanding

Section 17280, for taxable years beginning on or after January 1, 2019, subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided. (2) Paragraph (1) of subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.”

(3) The provisions of paragraph (1) of subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260), relating to paragraphs (2) and (3) of subsection (

i) of

Section 7A of the Small Business Act, shall not apply to an ineligible entity. (4) Paragraph (2) of subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply. (d)

(1) Notwithstanding

Section 17280, for taxable years beginning on or after January 1, 2019, subsection (

b) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.

(2) Subsection (

b) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986, in the case of any taxable year ending after the date of the enactment of this Act” with “For purposes of this part.” (3) Paragraphs (2) and (3) of subsection (

b) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity. (e)

(1) Notwithstanding

Section 17280, for taxable years beginning on or after January 1, 2019, subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.

(2) Subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.” (3) Paragraphs (2) and (3) of subsection (

a) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity. (f)

(1) Notwithstanding

Section 17280, for taxable years beginning on or after January 1, 2019, subsection (

b) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.

(2) Subsection (

b) of

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.” (

g) Notwithstanding

Section 17280, for taxable years beginning on or after January 1, 2019,

Section 304(

a) of Title III of Division N of the Consolidated Appropriations Act, 2021 (Public law 116-260) shall apply, except as provided. (

h) For purposes of this section, all of the following

definitions shall apply: (1) “Covered loan” has the same meaning as in

Section of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260). (2) “Advance grant amount” means an emergency Economic Injury Disaster Loan grant pursuant to

Section 1110(

e) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or a targeted Economic Injury Disaster Loan advance pursuant to

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (3) “Ineligible entity” means a taxpayer that either: (

A) Is a publicly traded company. (

B) Does not meet the reduction from the gross receipts requirements of

Section 636(a)(37)(A)(iv)(bb) of Title of the United States Code, as added by

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (4) “Publicly traded company” means a publicly traded entity as described in

Section of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). (

i) The Administrative Procedure Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code) shall not apply to any standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section. (

j) The amendments made by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2019. (

k) The amendments made to this

section by

Chapter of the Statutes of shall be operative for taxable years beginning on or after January 1, 2019.

SEC.

Section 17131.11 is added to the Revenue and Taxation Code , to read: 17131.11.

Section of the Federal Disaster Tax Relief Act of 2023 (Public Law 118-148), relating to East Palestine disaster relief payments, shall not apply.

SEC. 19.

Section of the Revenue and Taxation Code is amended to read: 17140. (

a) For purposes of this section, the following terms have the following meanings as provided in the Golden State Scholarshare Trust Act (Article 19 (commencing with

Section 69980) of

Chapter of Part of the Education Code): (1) “Beneficiary” has the meaning set forth in subdivision (

c) of

Section of the Education Code. (2) “Benefit” has the meaning set forth in subdivision (

d) of

Section of the Education Code. (3) “Participant” has the meaning set forth in subdivision (

h) of

Section of the Education Code. (4) “Participation agreement” has the meaning set forth in subdivision (

i) of

Section of the Education Code. (5) “Scholarshare trust” has the meaning set forth in subdivision (

f) of

Section of the Education Code. (

b) For taxable years beginning on or after January 1, 1998, and before January 1, 2002, except as otherwise provided in subdivision (c), gross income of a beneficiary or a participant does not include any of the following:

(1) Any distribution or earnings under a Scholarshare trust participation agreement, as provided in

Article 19 (commencing with

Section 69980) of

Chapter of Part of the Education Code.

(2) Any contribution to the Scholarshare trust on behalf of a beneficiary shall not be includable as gross income of that beneficiary. (

c) For taxable years beginning on or after January 1, 1998, and before January 1, 2002:

(1) Any distribution under a Scholarshare trust participation agreement shall be includable in the gross income of the distributee in the manner as provided under

Section of the Internal Revenue Code, as modified by

Section 17085, to the extent not excluded from gross income under this part. For purposes of applying

Section of the Internal Revenue Code, the following apply: (

A) All Scholarshare trust accounts of which an individual is a beneficiary shall be treated as one account, except as otherwise provided. (

B) All distributions during a taxable year shall be treated as one distribution. (

C) The value of the participation agreement, income on the participation agreement, and investment in the participation agreement shall be computed as of the close of the calendar year in which the taxable year begins.

(2) A contribution by a for-profit or nonprofit entity, or by a state or local government agency, for the benefit of an owner or employee of that entity or a beneficiary whom the owner or employee has the power to designate, including the owner or employee’s minor children, shall be included in the gross income of that owner or employee in the year the contribution is made.

(3) For purposes of this subdivision, “distribution” includes any benefit furnished to a beneficiary under a participation agreement, as provided in

Article 19 (commencing with

Section 69980) of

Chapter of Part of the Education Code. (4) (A) Paragraph (1) shall not apply to that portion of any distribution that, within days of distribution, is transferred to the credit of another beneficiary under the Scholarshare trust who is a “member of the family,” as that term is used in

Section 529(e)(2) of the Internal Revenue Code, as amended by

Section of the Taxpayer Relief Act of 1997 (Public Law 105-34), of the former beneficiary of that Scholarshare trust. (

B) Any change in the beneficiary of an interest in the Scholarshare trust shall not be treated as a distribution for purposes of paragraph (1) if the new beneficiary is a “member of the family,” as that term is used in

Section 529(e)(2) of the Internal Revenue Code, as amended by

Section of the Taxpayer Relief Act of 1997 (Public Law 105-34), of the former beneficiary of that Scholarshare trust. (

d) For taxable years beginning on or after January 1, 2002, Sections 529(

c) and 529(

e) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors and to other

definitions and special rules, respectively, shall apply, except as otherwise provided in

Part 11 (commencing with

Section 23001) and this part. (e)

(1) The amendments made by

Section 302(a)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section 529(

e) of the Internal Revenue Code, relating to other

definitions and special rules, shall apply except as otherwise provided.

(2) The amendments made by

Section 302(b)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section 529(c)(3) of the Internal Revenue Code, relating to distributions, shall apply, except as otherwise provided.

(3) The amendments made by

Section 302(c)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section 529(c)(3)(

D) of the Internal Revenue Code, relating to special rule for contributions of refunded amounts, shall apply, except as otherwise provided. (f)

(1) The amendments made by

Section 11025(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 529(c)(3)(

C) of the Internal Revenue Code, relating to change in beneficiaries or programs, shall apply, except as otherwise provided. (2) (

A) The amendments made by

Section 11032(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 529(

c) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors, shall not apply, except as otherwise provided. (

B) The amendments made by

Section 11032(a)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 529(e)(3)(

A) of the Internal Revenue Code, relating to qualified higher education expenses, shall not apply, except as otherwise provided. (

C) In the case of any distribution made under

Section 529(e)(3)(

A) of the Internal Revenue Code, as amended by

Section 11032(a)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), that would be treated for federal income tax purposes as a “qualified higher education expense” under

Section 529(c)(7) of the Internal Revenue Code, as added by

Section 11032(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), the amount of that distribution shall, notwithstanding anything in

Section of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under

Section of the Internal Revenue Code. (

D) Any distribution includable in the gross income of a distributee under subparagraph (

C) shall not affect the exempt status of the qualified tuition program under

Section of the Internal Revenue Code for purposes of this part. (g)

(1) For taxable years beginning on or after January 1, 2021, the amendments made by

Section 302(

a) of Division O of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94) to

Section 529(c)(8) of the Internal Revenue Code, relating to distributions for certain expenses associated with registered apprenticeship programs, shall apply.

(2) For taxable years beginning on or after January 1, 2021, the amendments made by

Section 302(b)(1) of Division O of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94) to

Section 529(c)(9) of the Internal Revenue Code, relating to distributions for qualified education loan repayments, shall apply. (h)

(1) Section 529(c)(3)(

E) of the Internal Revenue Code, relating to special rollovers to Roth IRAs from long-term qualified tuition programs, shall not apply.

(2) In the case of any distribution made under

Section 529(c)(3)(

E) of the Internal Revenue Code, relating to the special rollover to Roth IRAs from long-term qualified tuition programs, treated for federal income tax purposes as a “qualified rollover contribution” under

Section 408A(e)(1)(

C) of the Internal Revenue Code, the amount of that distribution shall, notwithstanding

Section or

Section 408A of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under

Section of the Internal Revenue Code.

(3) Any distribution includable in the gross income of a distributee under paragraph (2) shall not affect the exempt status of the qualified tuition program under

Section of the Internal Revenue Code for purposes of this part.

SEC.

Section 17140.3 of the Revenue and Taxation Code is amended to read: 17140.3.

Section of the Internal Revenue Code, relating to qualified state tuition programs, shall apply, except as otherwise provided. (

a) Section 529(

a) of the Internal Revenue Code is modified as follows:

(1) By substituting the phrase “under this part and

Part 11 (commencing with

Section 23001)” in lieu of the phrase “under this subtitle.”

(2) By substituting “Article 2 (commencing with

Section 23731)” in lieu of “Section 511.” (

b) A copy of the report required to be filed with the Secretary of the Treasury under

Section 529(

d) of the Internal Revenue Code shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section. (c)

(1) The amendments made by

Section 302(a)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section 529(

e) of the Internal Revenue Code, relating to other

definitions and special rules, shall apply except as otherwise provided.

(2) The amendments made by

Section 302(b)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section 529(c)(3) of the Internal Revenue Code, relating to distributions, shall apply, except as otherwise provided.

(3) The amendments made by

Section 302(c)(1) of Division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section 529(c)(3)(

D) of the Internal Revenue Code, relating to special rule for contributions of refunded amounts, shall apply, except as otherwise provided. (d)

(1) The amendments made by

Section 11025(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 529(c)(3)(

C) of the Internal Revenue Code, relating to change in beneficiaries or programs, shall apply, except as otherwise provided. (2) (

A) The amendments made by

Section 11032(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 529(

c) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors, shall not apply, except as otherwise provided. (

B) The amendments made by

Section 11032(a)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 529(e)(3)(

A) of the Internal Revenue Code, relating to qualified higher education expenses, shall not apply, except as otherwise provided. (

C) In the case of any distribution made under

Section 529(e)(3)(

A) of the Internal Revenue Code, as amended by

Section 11032(a)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), that would be treated for federal income tax purposes as a “qualified higher education expense” under

Section 529(c)(7) of the Internal Revenue Code, as added by

Section 11032(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), the amount of that distribution shall, notwithstanding anything in

Section of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under

Section of the Internal Revenue Code. (

D) Any distribution includable in the gross income of a distributee under subparagraph (

C) shall not affect the exempt status of the qualified tuition program under

Section of the Internal Revenue Code for purposes of this part. (e)

(1) For taxable years beginning on or after January 1, 2021, the amendments made by

Section 302(

a) of Division O of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94) to

Section 529(c)(8) of the Internal Revenue Code, relating to distributions for certain expenses associated with registered apprenticeship programs, shall apply.

(2) For taxable years beginning on or after January 1, 2021, the amendments made by

Section 302(b)(1) of Division O of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94) to

Section 529(c)(9) of the Internal Revenue Code, relating to distributions for qualified education loan repayments, shall apply. (f)

(1) Section 529(c)(3)(

E) of the Internal Revenue Code, relating to special rollovers to Roth IRAs from long-term qualified tuition programs, shall not apply.

(2) In the case of any distribution made under

Section 529(c)(3)(

E) of the Internal Revenue Code, relating to the special rollover to Roth IRAs from long-term qualified tuition programs, treated for federal income tax purposes as a “qualified rollover contribution” under

Section 408A(e)(1)(

C) of the Internal Revenue Code, the amount of that distribution shall, notwithstanding

Section or

Section 408A of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under

Section of the Internal Revenue Code.

(3) Any distribution includable in the gross income of a distributee under paragraph (2) shall not affect the exempt status of the qualified tuition program under

Section of the Internal Revenue Code for purposes of this part.

SEC.

Section 17144.5 of the Revenue and Taxation Code is amended to read: 17144.5. (a)

(1) Section 108(a)(1)(

E) of the Internal Revenue Code is modified to provide that the amount excluded from gross income shall not exceed five hundred thousand dollars ($500,000) (two hundred fifty thousand dollars ($250,000) in the case of a married individual filing a separate return).

(2) Section 108(a)(1)(

E) of the Internal Revenue Code is modified by substituting “before January 1, 2015,” in lieu of clauses (

i) and (ii). (

b) Section 108(h)(2) of the Internal Revenue Code is modified by substituting the phrase “(within the meaning of

section 163(h)(3)(B), applied by substituting ‘$800,000 ($400,000’ for ‘$1,000,000 ($500,000’ in clause (ii) thereof)” for the phrase “(within the meaning of

section 163(h)(3)(B), applied by substituting ‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’ in clause (ii) thereof)” contained therein. (

c) This

section shall apply to discharges of indebtedness occurring on or after January 1, 2007, and, notwithstanding any other law to the contrary, no penalties or interest shall be due with respect to the discharge of qualified principal residence indebtedness during the or taxable year regardless of whether or not the taxpayer reports the discharge on their return for the or taxable year. (

d) The amendments made by

Section of the American Taxpayer Relief Act of 2012 (Public Law 112-240) to

Section of the Internal Revenue Code shall apply. (

e) The changes made to this

section by

Section of

Chapter of the Statutes of shall apply to discharges of indebtedness that occur on or after January 1, 2013, and before January 1, 2014, and, notwithstanding any other law, no penalties or interest shall be due with respect to the discharge of qualified principal residence indebtedness during the taxable year, regardless of whether the taxpayer reports the discharge on their income tax return for the taxable year.

SEC.

Section 17149.1 is added to the Revenue and Taxation Code , to read: 17149.1.

Section 132(f)(8) of the Internal Revenue Code, relating to suspension of qualified bicycle commuting reimbursement exclusion, shall not apply.

SEC.

Section 17149.2 is added to the Revenue and Taxation Code , to read: 17149.2.

Section 132(g)(2) of the Internal Revenue Code, relating to qualified moving expense reimbursement suspension for taxable years to 2025, shall not apply.

SEC.

Section 17156.2 is added to the Revenue and Taxation Code , to read: 17156.2. (

a) Section 139C of the Internal Revenue Code, relating to certain disability-related first responder retirement payments, shall apply. (

b) This

section shall apply to amounts received with respect to taxable years beginning on or after January 1, 2027.

SEC.

Section 17158.4 is added to the Revenue and Taxation Code , to read: 17158.4.

Section of the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114-113), relating to exclusion from gross income of certain coal power grants to non-corporate taxpayers, shall not apply.

SEC.

Section 17158.5 is added to the Revenue and Taxation Code , to read: 17158.5.

Section of the Federal Disaster Tax Relief Act of 2023 (Public Law 118-148), relating to exclusion from gross income for compensation for losses or damages resulting from certain wildfires, shall not apply.

SEC.

Section 17201.1 is added to the Revenue and Taxation Code , to read: 17201.1. (

a) Section of the Internal Revenue Code as it read on January 1, 2015, relating to amortization of research and experimental expenditures, shall apply. (

b) Section 217(

k) of the Internal Revenue Code, relating to the suspension of the moving expense deduction for taxable years to 2025, shall not apply. (

c) The amendments made by

Section of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section of the Internal Revenue Code, relating to limitation on deduction by employers of expenses for fringe benefits, shall not apply. (

d) The amendments made by

Section 13202(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 280F of the Internal Revenue Code, relating to limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes, shall not apply.

SEC.

Section 17201.3 is added to the Revenue and Taxation Code , to read: 17201.3. (

a) Section of the Internal Revenue Code, relating to alimony, etc., payments, as it read on January 1, 2015, shall apply, except as otherwise provided. (

b) Subdivision (

a) shall not apply for any divorce or separation instrument executed after December 31, 2025, or for any divorce or separation instrument executed on or before December 31, 2025, and modified after that date, if the modification expressly provides that the amendments made by this subdivision apply to such modification. (

c) This

section shall remain in effect only until December 1, 2027, and as of that date is repealed.

SEC.

Section 17201.6 of the Revenue and Taxation Code is amended to read: 17201.6.

Section 199A of the Internal Revenue Code, relating to qualified business income, shall not apply.

SEC. 30.

Section of the Revenue and Taxation Code is amended to read: 17204. (

a) Section 165(h)(3) of the Internal Revenue Code, relating to special rules for losses in federally declared disasters, shall not apply. (

b) Section 165(h)(5) of the Internal Revenue Code, relating to limitation for taxable years to 2025, shall not apply. (

c) The amendments by

Section 11028(

c) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section of the Internal Revenue Code, relating to special rules for personal casualty losses related to major disaster, shall not apply. (

d) The amendments made by

Section of Division EE of Title III of the Consolidated Appropriations Act, 2021 (Public Law 116-260) to

Section 165(

h) of the Internal Revenue Code, relating to qualified disaster-related personal casualty losses, shall not apply. (

e) Section of the Federal Disaster Tax Relief Act of 2023 (Public Law 118-148), relating to extension of rules for treatment of certain disaster-related personal casualty losses, shall not apply.

SEC.

Section 17204.2 is added to the Revenue and Taxation Code , to read: 17204.2. The amendments made by

Section of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 165(

d) of the Internal Revenue Code, relating to wagering losses, shall not apply.

SEC.

Section 17204.7 of the Revenue and Taxation Code is repealed.

SEC. 33.

Section of the Revenue and Taxation Code is amended to read: 17220. (

a) Section 164(a)(3) of the Internal Revenue Code, relating to the deductibility of state, local, and foreign income, war profits, and excess profits taxes, shall not apply. (

b) Section 164(b)(5) of the Internal Revenue Code, relating to general sales taxes, shall not apply. (

c) Section 164(b)(6) of the Internal Revenue Code, relating to the limitation on individual deductions for taxable years to 2025, shall not apply. (

d) In addition to the provisions of

Section 164(

c) of the Internal Revenue Code, relating to deduction denied in case of certain taxes, no deduction shall be allowed for any tax imposed under

Chapter 10.5 (commencing with

Section 17935),

Chapter 10.6 (commencing with

Section 17941), or

Chapter 10.7 (commencing with

Section 17948) of this part or under

Part 11 (commencing with

Section 23001).

SEC. 34.

Section of the Revenue and Taxation Code is amended to read: 17225. (

a) Section 163(h)(3)(

E) of the Internal Revenue Code, relating to mortgage insurance premiums treated as interest, shall not apply. (

b) Section 163(h)(3)(

F) of the Internal Revenue Code, relating to special rules for taxable years to 2025, shall not apply.

SEC. 35.

Section of the Revenue and Taxation Code is amended to read:

Section 213(

a) of the Internal Revenue Code, relating to allowance of deduction, is modified by substituting “7.5 percent” for “10 percent” for taxable years beginning before January 1, 2021.

SEC. 36.

Section of the Revenue and Taxation Code is amended to read: 17250. (

a) Section of the Internal Revenue Code is modified as follows:

(1) Any reference to “tax imposed by this chapter” in

Section of the Internal Revenue Code means “net tax,” as defined in

Section 17039. (2) (

A) Section 168(e)(3) is modified to provide that any grapevine, replaced in a vineyard in California in any taxable year beginning on or after January 1, 1992, as a direct result of a phylloxera infestation in that vineyard, or replaced in a vineyard in California in any taxable year beginning on or after January 1, 1997, as a direct result of Pierce’s disease in that vineyard, shall be “five-year property,” rather than “10-year property.” (

B) Section 168(g)(3) of the Internal Revenue Code is modified to provide that any grapevine, replaced in a vineyard in California in any taxable year beginning on or after January 1, 1992, as a direct result of a phylloxera infestation in that vineyard, or replaced in a vineyard in California in any taxable year beginning on or after January 1, 1997, as a direct result of Pierce’s disease in that vineyard, shall have a class life of years. (

C) Every taxpayer claiming a depreciation deduction with respect to grapevines as described in this paragraph shall obtain a written certification from an independent state-certified integrated pest management adviser, or a state agricultural commissioner or adviser, that specifies that the replanting was necessary to restore a vineyard infested with phylloxera or Pierce’s disease. The taxpayer shall retain the certification for future audit purposes.

(3) Section 168(

j) of the Internal Revenue Code, relating to property on Indian reservations, shall not apply.

(4) Section 168(

k) of the Internal Revenue Code, relating to special allowance for certain property, shall not apply.

(5) Section 168(e)(3)(E)(vii) of the Internal Revenue Code shall not apply.

(6) Sections 168(b)(3)(

G) and 168(e)(6) of the Internal Revenue Code, relating to qualified improvement property, shall not apply. (7) (

A) Sections 168(g)(1)(

F) and 168(g)(1)(

G) of the Internal Revenue Code shall not apply. (

B) The amendments made by

Section 13204(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Sections 168(g)(2)(

C) and 168(g)(3)(

B) of the Internal Revenue Code shall not apply. (

C) Section 168(g)(8) of the Internal Revenue Code, relating to electing real property trade or business, shall not apply.

(8) Section 168(

l) of the Internal Revenue Code, relating to qualified second generation biofuel plant property, shall not apply.

(9) Section 168(

m) of the Internal Revenue Code, relating to special allowance for certain reuse and recycling property, shall not apply.

(10) Section 168(i)(15)(

D) of the Internal Revenue Code, relating to termination, is modified by substituting the phrase “December 31, 2007” for the phrase “December 31, 2025.”

(11) Sections 168(e)(3)(B)(vii) and 168(e)(3)(B)(viii) of the Internal Revenue Code shall not apply. (

b) Section of the Internal Revenue Code, relating to amortization of pollution control facilities, is modified as follows:

(1) The deduction allowed by

Section of the Internal Revenue Code shall be allowed only with respect to facilities located in this state.

(2) The “state certifying authority,” as defined in

Section 169(d)(2) of the Internal Revenue Code, means the State Air Resources Board, in the case of air pollution, and the State Water Resources Control Board, in the case of water pollution.

SEC.

Section 17250.1 is added to the Revenue and Taxation Code , to read: 17250.1. (

a) Section 170(b)(1)(A)(ix) of the Internal Revenue Code, relating to percentage limitations, shall not apply. (

b) Section 170(b)(1)(

G) of the Internal Revenue Code, relating to increased limitation for cash contributions, shall not apply. (

c) Section 170(b)(1)(E)(vi) of the Internal Revenue Code as it read on January 1, 2015, relating to termination, shall apply.

SEC.

Section 17250.2 is added to the Revenue and Taxation Code , to read: 17250.2.

Section 170(

p) of the Internal Revenue Code, relating to special rule for taxpayers who do not elect to itemize deductions, shall not apply.

SEC. 39.

Section of the Revenue and Taxation Code is amended to read: 17255. (

a) Section 179(b)(1) of the Internal Revenue Code, relating to dollar limitation, shall not apply and in lieu thereof, the aggregate cost which may be taken into account under

Section 179(

a) of the Internal Revenue Code for any taxable year shall not exceed twenty-five thousand dollars ($25,000). (

b) Section 179(b)(2) of the Internal Revenue Code, relating to reduction in limitation, does not apply and in lieu thereof, the limitation under subdivision (

a) for any taxable year shall be reduced, but not to below zero, by the amount by which the cost of

Section property, as defined in

Section 179(d)(1) of the Internal Revenue Code, except as otherwise provided, placed in service during the taxable year exceeds two hundred thousand dollars ($200,000). (

c) Section of the Internal Revenue Code is modified to provide that the “aggregate amount disallowed” referred to in

Section 179(b)(3)(

B) of the Internal Revenue Code shall be computed under this part as it read on the date the property generating the amount disallowed was placed in service. (

d) Section 179(c)(2) of the Internal Revenue Code, relating to elections, shall not apply. (

e) Section 179(d)(1)(A)(ii) of the Internal Revenue Code does not apply. (

f) Section 179(

e) of the Internal Revenue Code, relating to special rules for qualified disaster assistance property, shall not apply. (

g) The amendments made by

Section of the Consolidated Appropriations Act, 2016 (Public Law 114-113) to

Section of the Internal Revenue Code, relating to elections to expense certain depreciable business assets, shall not apply. (

h) The amendments made by

Section of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section of the Internal Revenue Code, relating to elections to expense certain depreciable business assets, shall not apply.

SEC. 40.

Section of the Revenue and Taxation Code is amended to read: 17270. (

a) For purposes of

Section 162(a)(2) of the Internal Revenue Code, relating to travel expenses, all of the following shall apply:

(1) The place of residence of a member of the Legislature within the district represented shall be considered the tax home.

(2) The provisions of

Section 162(

h) of the Internal Revenue Code, relating to state legislators’ travel expenses away from home, shall not be applied. (

b) The provisions of

Section 280C(

a) of the Internal Revenue Code (relating to rule for employment credits) shall not apply. (

c) The amendments made by

Section 13206(d)(2)(

A) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 280C(

c) of the Internal Revenue Code, relating to credit for increasing research activities, shall not apply, except as otherwise provided. (

d) Section 280C(c)(2)(

B) of the Internal Revenue Code, as enacted pursuant to

Section 13206(d)(2)(

A) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified to refer to

Section in lieu of

Section 11(

b) of the Internal Revenue Code.

SEC. 41.

Section of the Revenue and Taxation Code is amended to read: 17271. (

a) The amendments made to

Section 162(

m) of the Internal Revenue Code by

Section 13601(e)(2) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to exception for binding contracts, shall apply, and is modified by substituting “March 31, 2019” for “November 2, 2017.” (

b) Section 162(m)(3)(

C) of the Internal Revenue Code, relating to covered employee, shall not apply.

SEC.

Section 17275.3 of the Revenue and Taxation Code is repealed.

SEC. 43.

Section of the Revenue and Taxation Code is amended to read: 17276. Except as provided in Sections 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7, the deduction provided by

Section of the Internal Revenue Code, relating to net operating loss deduction, shall be modified as follows: (a)

(1) Net operating losses attributable to taxable years beginning before January 1, 1987, shall not be allowed.

(2) A net operating loss shall not be carried forward to any taxable year beginning before January 1, 1987.

(3) The amendments made by

Section 13302(a)(1) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) and

Section 2303(a)(1) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136) to

Section 172(

a) of the Internal Revenue Code, relating to the deduction allowed, shall not apply. (b)

(1) Except as provided in paragraphs (3) and (4), the provisions of

Section 172(b)(2) of the Internal Revenue Code, relating to amount of carrybacks and carryovers, shall be modified so that the applicable percentage of the entire amount of the net operating loss for any taxable year shall be eligible for carryover to any subsequent taxable year. For purposes of this subdivision, the applicable percentage shall be: (

A) Fifty percent for any taxable year beginning before January 1, 2000. (

B) Fifty-five percent for any taxable year beginning on or after January 1, 2000, and before January 1, 2002. (

C) Sixty percent for any taxable year beginning on or after January 1, 2002, and before January 1, 2004. (

D) One hundred percent for any taxable year beginning on or after January 1, 2004.

(2) Section 172(b)(2)(

C) of the Internal Revenue Code shall not apply.

(3) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates a new business during that taxable year, each of the following shall apply to each loss incurred during the first three taxable years of operating the new business: (

A) If the net operating loss is equal to or less than the net loss from the new business, 100 percent of the net operating loss shall be carried forward as provided in subdivision (d). (

B) If the net operating loss is greater than the net loss from the new business, the net operating loss shall be carried over as follows: (

i) With respect to an amount equal to the net loss from the new business, 100 percent of that amount shall be carried forward as provided in subdivision (d). (ii) With respect to the portion of the net operating loss that exceeds the net loss from the new business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d). (

C) For purposes of

Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (

B) shall be absorbed before the amount described in clause (

i) of subparagraph (B).

(4) In the case of a taxpayer who has a net operating loss in any taxable year beginning on or after January 1, 1994, and who operates an eligible small business during that taxable year, each of the following shall apply: (

A) If the net operating loss is equal to or less than the net loss from the eligible small business, 100 percent of the net operating loss shall be carried forward to the taxable years specified in subdivision (d). (

B) If the net operating loss is greater than the net loss from the eligible small business, the net operating loss shall be carried over as follows: (

i) With respect to an amount equal to the net loss from the eligible small business, 100 percent of that amount shall be carried forward as provided in subdivision (d). (ii) With respect to that portion of the net operating loss that exceeds the net loss from the eligible small business, the applicable percentage of that amount shall be carried forward as provided in subdivision (d). (

C) For purposes of

Section 172(b)(2) of the Internal Revenue Code, the amount described in clause (ii) of subparagraph (

B) shall be absorbed before the amount described in clause (

i) of subparagraph (B).

(5) In the case of a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates a business that qualifies as both a new business and an eligible small business under this section, that business shall be treated as a new business for the first three taxable years of the new business.

(6) In the case of a taxpayer who has a net operating loss in a taxable year beginning on or after January 1, 1994, and who operates more than one business, and more than one of those businesses qualifies as either a new business or an eligible small business under this section, paragraph (2) shall be applied first, except that if there is any remaining portion of the net operating loss after application of clause (

i) of subparagraph (

B) of that paragraph, paragraph (3) shall be applied to the remaining portion of the net operating loss as though that remaining portion of the net operating loss constituted the entire net operating loss.

(7) For purposes of this section, the term “net loss” means the amount of net loss after application of Sections and of the Internal Revenue Code. (

c) Section 172(b)(1) of the Internal Revenue Code, relating to years to which the loss may be carried, is modified as follows:

(1) Net operating loss carrybacks shall not be allowed for any net operating losses attributable to taxable years beginning after December 31, 2018, and before January 1, 2013.

(2) A net operating loss attributable to taxable years beginning on or after January 1, 2013, and before January 1, 2019, shall be a net operating loss carryback to each of the two taxable years preceding the taxable year of the loss in lieu of the number of years provided therein. (

A) For a net operating loss attributable to a taxable year beginning on or after January 1, 2013, and before January 1, 2014, the amount of carryback to any taxable year shall not exceed percent of the net operating loss. (

B) For a net operating loss attributable to a taxable year beginning on or after January 1, 2014, and before January 1, 2015, the amount of carryback to any taxable year shall not exceed percent of the net operating loss. (

C) For a net operating loss attributable to a taxable year beginning on or after January 1, 2015, and before January 1, 2019, the amount of carryback to any taxable year shall not exceed percent of the net operating loss.

(3) A net operating loss carryback shall not be carried back to any taxable year beginning before January 1, 2011. (d) (1) (

A) For a net operating loss for any taxable year beginning on or after January 1, 1987, and before January 1, 2000,

Section 172(b)(1)(A)(ii) of the Internal Revenue Code shall apply as it read on January 1, 2015, and is modified to substitute “five taxable years” in lieu of “20 taxable years” except as otherwise provided in paragraphs (2) and (3). (

B) For a net operating loss for any taxable year beginning on or after January 1, 2000, and before January 1, 2008,

Section 172(b)(1)(A)(ii)(

I) of the Internal Revenue Code is modified to substitute “10 taxable years” in lieu of “20 taxable years.” (

C) Section 172(b)(1)(

A) of the Internal Revenue Code, relating to years to which loss may be carried, shall not apply. (

D) Section 172(b)(1)(

D) of the Internal Revenue Code, relating to special rule for losses arising in 2018, 2019, and 2020, shall not apply.

(2) For any taxable year beginning before January 1, 2000, in the case of a “new business,” the “five taxable years” in paragraph (1) shall be modified to read as follows: (A) “Eight taxable years” for a net operating loss attributable to the first taxable year of that new business. (B) “Seven taxable years” for a net operating loss attributable to the second taxable year of that new business. (C) “Six taxable years” for a net operating loss attributable to the third taxable year of that new business.

(3) For any carryover of a net operating loss for which a deduction is denied by

Section 17276.3, the carryover period specified in this subdivision shall be extended as follows: (

A) By one year for a net operating loss attributable to taxable years beginning in 1991. (

B) By two years for a net operating loss attributable to taxable years beginning before January 1, 1991.

(4) The net operating loss attributable to taxable years beginning on or after January 1, 1987, and before January 1, 1994, shall be a net operating loss carryover to each of the taxable years following the year of the loss if it is incurred by a taxpayer that is under the jurisdiction of the court in a Title or similar case at any time during the income year. The loss carryover provided in the preceding sentence does not apply to any loss incurred after the date the taxpayer is no longer under the jurisdiction of the court in a Title or similar case. (

e) For purposes of this section: (1) “Eligible small business” means any trade or business that has gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the taxable year.

(2) Except as provided in subdivision (f), “new business” means any trade or business activity that is first commenced in this state on or after January 1, 1994. (3) “Title or similar case” shall have the same meaning as in

Section 368(a)(3) of the Internal Revenue Code.

(4) In the case of any trade or business activity conducted by a partnership or “S” corporation paragraphs (1) and (2) shall be applied to the partnership or “S” corporation. (

f) For purposes of this section, in determining whether a trade or business activity qualifies as a new business under paragraph (2) of subdivision (e), the following rules apply:

(1) In any case where a taxpayer purchases or otherwise acquires all or any portion of the assets of an existing trade or business (irrespective of the form of entity) that is doing business in this state (within the meaning of

Section 23101), the trade or business thereafter conducted by the taxpayer (or any related person) shall not be treated as a new business if the aggregate fair market value of the acquired assets (including real, personal, tangible, and intangible property) used by the taxpayer (or any related person) in the conduct of its trade or business exceeds percent of the aggregate fair market value of the total assets of the trade or business being conducted by the taxpayer (or any related person). For purposes of this paragraph only, the following rules apply: (

A) The determination of the relative fair market values of the acquired assets and the total assets shall be made as of the last day of the first taxable year in which the taxpayer (or any related person) first uses any of the acquired trade or business assets in its business activity. (

B) Acquired assets that constituted property described in

Section 1221(a)(1) of the Internal Revenue Code in the hands of the transferor shall not be treated as assets acquired from an existing trade or business, unless those assets also constitute property described in

Section 1221(a)(1) of the Internal Revenue Code in the hands of the acquiring taxpayer (or related person).

(2) In a case in which a taxpayer (or any related person) is engaged in one or more trade or business activities in this state, or has been engaged in one or more trade or business activities in this state within the preceding months (“prior trade or business activity”), and thereafter commences an additional trade or business activity in this state, the additional trade or business activity shall only be treated as a new business if the additional trade or business activity is classified under a different division of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, than are any of the taxpayer’s (or any related person’

s) current or prior trade or business activities.

(3) In a case in which a taxpayer, including all related persons, is engaged in trade or business activities wholly outside of this state and the taxpayer first commences doing business in this state (within the meaning of

Section 23101) after December 31, 1993 (other than by purchase or other acquisition described in paragraph (1)), the trade or business activity shall be treated as a new business under paragraph (2) of subdivision (e).

(4) In a case in which the legal form under which a trade or business activity is being conducted is changed, the change in form shall be disregarded and the determination of whether the trade or business activity is a new business shall be made by treating the taxpayer as having purchased or otherwise acquired all or any portion of the assets of an existing trade or business under the rules of paragraph (1). (5) “Related person” shall mean any person that is related to the taxpayer under either

Section or of the Internal Revenue Code. (6) “Acquire” shall include any gift, inheritance, transfer incident to divorce, or any other transfer, whether or not for consideration. (7) (

A) For taxable years beginning on or after January 1, 1997, the term “new business” shall include any taxpayer that is engaged in biopharmaceutical activities or other biotechnology activities that are described in Codes to 2836, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, and as further amended, and that has not received regulatory approval for any product from the Food and Drug Administration. (

B) For purposes of this paragraph: (i) “Biopharmaceutical activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics.

Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products. (ii) “Other biotechnology activities” means activities consisting of the application of recombinant DNA technology to produce commercial products, as well as activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (

g) Notwithstanding any provisions of this

section to the contrary, a deduction shall be allowed to a “qualified taxpayer” as provided in Sections 17276.1, 17276.2, 17276.4, 17276.5, 17276.6, and 17276.7. (

h) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this section, including any regulations necessary to prevent the avoidance of the purposes of this

section through splitups, shell corporations, partnerships, tiered ownership structures, or otherwise. (

i) The Franchise Tax Board may reclassify any net operating loss carryover determined under either paragraph (2) or (3) of subdivision (

b) as a net operating loss carryover under paragraph (1) of subdivision (

b) upon a showing that the reclassification is necessary to prevent evasion of the purposes of this section. (

j) Except as otherwise provided, the amendments made by

Chapter of the Statutes of apply to net operating losses for taxable years beginning on or after January 1, 2000.

SEC.

Section 17276.05 of the Revenue and Taxation Code is repealed.

SEC. 45.

Section of the Revenue and Taxation Code is amended to read: 17302. (

a) In the case of a nonresident or part-year resident, the deduction provided by

Section of the Internal Revenue Code, relating to alimony, etc., payments, as it read on January 1, 2015, shall be allowed in computing “taxable income of a nonresident or part-year resident” in the same ratio (not to exceed 1.00) that California adjusted gross income (as defined in

Section 17301.3), computed without regard to the alimony deduction, bears to total adjusted gross income (as defined in

Section 17301.4), computed without regard to the alimony deduction. (

b) Subdivision (

a) shall not apply for any divorce or separation instrument executed after December 31, 2025, or for any divorce or separation instrument executed on or before December 31, 2025, and modified after that date, if the modification expressly provides that the amendments made by this subdivision apply to such modification. (

c) This

section shall remain in effect only until December 1, 2027, and as of that date is repealed.

SEC.

Section 17321.1 is added to the Revenue and Taxation Code , to read: 17321.1. The amendments to

Section 367(

a) of the Internal Revenue Code as enacted by

Section of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to repeal of the exception for transfers of certain property used in the active conduct of a trade or business, shall not apply.

SEC.

Section 17322.5 is added to the Revenue and Taxation Code , to read: 17322.5.

Section 381(c)(20) of the Internal Revenue Code, relating to carryforward of disallowed business interest, shall not apply.

SEC. 48.

Section of the Revenue and Taxation Code is amended to read: 17323. (

a) Section 382(

n) of the Internal Revenue Code, relating to special rule for certain ownership changes, shall not apply. (

b) Section 382(d)(3) of the Internal Revenue Code, relating to application to carryforward of disallowed interest, shall not apply. (

c) The amendments made by

Section 13301(b)(3) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to

Section 382(k)(1) of the Internal Revenue Code, relating to loss corporation, shall not apply.

SEC. 49.

Section is added to the Revenue and Taxation Code , to read:

Section 312(k)(3)(B)(ii) of the Internal Revenue Code, relating to special rule for real estate investment trusts, shall not apply.

SEC. 50.

Section of the Revenue and Taxation Code is amended to read: 17501. (

a) Subchapter D of

Chapter of Subtitle A of the Internal Revenue Code, relating to deferred compensation, shall apply, except as otherwise provided. (

b) Notwithstanding the specified date contained in paragraph (1) of subdivision (

a) of

Section 17024.5,

Part I of Subchapter D of

Chapter of Subtitle A of the Internal Revenue Code, relating to pension, profitsharing, stock bonus plans, etc., and

Part III of Subchapter D of

Chapter of Subtitle A of the Internal Revenue Code, relating to rules relating to minimum funding standards and benefit limitations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes. (

c) For taxable years beginning before January 1, 2025, the maximum amount of elective deferrals (as defined in

Section 402(g)(3)) for the taxable year that may be excluded from gross income under

Section 402(

g) of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of elective deferrals that may be excluded from gross income under

Section 402(

g) of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under

Section 414(

v) of the Internal Revenue Code, as in effect on January 1, 2010. (d)

(1) For taxable years beginning on or after January 1, 2002, the basis of any person in the plan, account, or annuity shall be increased by the amount of elective deferrals not excluded as a result of the application of the elective deferral limitations imposed by subdivision (c).

(2) Any basis described in paragraph (1) shall be recovered in the manner specified in

Section 17085. (

e) Notwithstanding the limitations provided in subdivision (c), any income attributable to elective deferrals in taxable years beginning on or after January 1, 2002, in conformance with

Part I of Subchapter D of

Chapter of Subtitle A of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan or account was established until distributed pursuant to the plan or by operation of law. (f)

(1) Section 408A(e)(1)(

C) of the Internal Revenue Code, relating to qualified rollover contribution, shall not apply.

(2) In the case of any distribution made under

Section 529(c)(3)(

E) of the Internal Revenue Code, relating to the special rollover to Roth IRAs from long-term qualified tuition programs, treated for federal income tax purposes as a “qualified rollover contribution” under

Section 408A(e)(1)(

C) of the Internal Revenue Code, the amount of that distribution shall, notwithstanding

Section or

Section 408A of the Internal Revenue Code to the contrary, be includable in the gross income of the distributee in the manner as provided under

Section of the Internal Revenue Code.

(3) Notwithstanding any other provision, no increase in the basis of the Roth IRA, as defined in

Section 408A of the Internal Revenue Code, shall result from any amount distributed as described in this subdivision.

SEC.

Section 17501.8 is added to the Revenue and Taxation Code , to read: 17501.8. (

a) The following amendments made by the Consolidated Appropriations Act, 2023 (Public Law 117-328) shall apply for purposes of this part,

Part 10.2 (commencing with

Section 18401), and

Part 11 (commencing with

Section 23001) except as otherwise provided:

(1) The amendments made by

Section of Division T of that act to

Section 219(b)(5)(

C) of the Internal Revenue Code, relating to indexing IRA catch-up limit.

(2) The amendments made by

Section of Division T of that act to

Section 414(

v) of the Internal Revenue Code, relating to higher catch-up limit to apply at to years of age, inclusive.

(3) The amendments made by

Section of Division T of that act to

Section 414(v)(2) of the Internal Revenue Code, relating to contribution limit for simple plans. (b)

(1) For the purposes of complying with

Section 41, as it pertains to the deductions expanded by this section, the Legislature finds and declares as follows: (

A) The specific goal, purpose, and objective of this bill is to conform state law to changes in federal law in order to reduce complications relating to mismatches in basis of retirement accounts for federal income tax purposes compared to state income tax purposes. (

B) The performance indicators used by the Legislature to determine if the deductions are achieving the stated goal shall be the number of taxpayers making contributions that would, but for the expansion of deductions pursuant to this section, be included in income for state purposes, and the total dollar value of those contributions.

(2) The Legislative Analyst’s Office shall, no later than October 1, 2029, submit a report to the Legislature, in accordance with

Section of the Government Code, that estimates the number of taxpayers making contributions to retirement accounts that, but for the expansion of deductions provided by this section, would be included in income, and estimates of the total dollar value of those contributions, to the extent data is available.

SEC. 52.

Section of the Revenue and Taxation Code is amended to read: 17551. (

a) Subchapter E of

Chapter of Subtitle A of the Internal Revenue Code, relating to accounting periods and methods of accounting, shall apply, except as otherwise provided. (

b) Section 444(c)(1) of the Internal Revenue Code, relating to effect of election, shall not apply. (

c) Section 451(

b) of the Internal Revenue Code, relating to inclusion not later than for financial accounting purposes, shall not apply to specified credit card fees, as defined in Treasury Regulations

Section 1.451-3(j)(2). (d)

(1) Notwithstanding the specified date contained in paragraph (1) of subdivision (

a) of

Section 17024.5,

Section of the Internal Revenue Code, relating to deferred compensation plans of state and local governments and tax-exempt organizations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes.

(2) The maximum deferred compensation for the taxable year that may be excluded from gross income under

Section of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of deferred compensation that may be excluded from gross income under

Section of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under

Section 414(

v) of the Internal Revenue Code, as in effect on January 1, 2010. (e)

(1) For taxable years beginning on or after January 1, 2002, the basis of any person in the plan shall be increased by the amount of compensation not allowed to be excluded under subdivision (a).

(2) Any basis described in paragraph (1) shall be recovered in the manner specified in

Section 17085. (

f) Notwithstanding the limitations provided in subdivision (a), any income attributable to compensation deferred in a plan in taxable years beginning on or after January 1, 2002, in conformance with

Section of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan was established until distributed pursuant to the provisions of the plan or by operation of law. (

g) Section 451(

k) of the Internal Revenue Code, relating to special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy, shall not apply. (

h) Section 457A of the Internal Revenue Code, relating to nonqualified deferred compensation from certain tax indifferent parties, shall not apply.

SEC. 53.

Section of the Revenue and Taxation Code is amended to read: 17559. (

a) Section 451(

g) of the Internal Revenue Code, relating to special rule for proceeds from livestock sold on account of drought, is modified by substituting the phrase “drought, flood, or other weather-related conditions, and that those conditions” in lieu of the phrase “drought conditions, and that these drought conditions” contained therein. (

b) This

section shall apply to sales and exchanges after December 31, 1996. (

c) This

section shall not apply to taxable years beginning on or after January 1, 1998.

SEC.

Section 17560.5 of the Revenue and Taxation Code is amended to read: 17560.5. (

a) Section 461(

j) of the Internal Revenue Code, relating to limitation on excess farm losses of certain taxpayers, shall not apply. (b)

(1) Section 11012(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), relating to limitation on excess business losses on noncorporate taxpayers, shall apply except as otherwise provided.

(2) Section 461(l)(1) of the Internal Revenue Code, relating to limitation, as amended by

Section 11012(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by substituting “beginning after December 31, 2018” for the phrase “beginning after December 31, 2017, and before January 1, 2026.”

(3) Section 461(l)(2) of the Internal Revenue Code, relating to disallowed loss carryover, as amended by

Section 11012(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by substituting “Any loss which is disallowed under paragraph (1) shall be treated as a carryover excess business loss for the following taxable year.” for “Any loss which is disallowed under paragraph (1) shall be treated as a net operating loss carryover to the following taxable year under

section 172.”

(4) Section 461(l)(3)(

A) of the Internal Revenue Code, as amended by

Section 11012 (

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by inserting “(

i) the sum of (

I) Any prior year carryover excess business losses, plus” below “In general, the term ‘excess business loss’ means the excess (if any) of.”

(5) Section 461(l)(3)(A)(

i) of the Internal Revenue Code, as amended by

Section 11012 (

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by inserting “(II)” for “(i).”

(6) Section 461(l)(6) of the Internal Revenue Code, relating to coordination with

section 469, as amended by

Section 11012(

a) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97), is modified by substituting “Section 17561” for “section 469.” (

c) The amendments to

Section 461(

l) of the Internal Revenue Code made by

Section 2304(

a) and (

b) of Public Law 116-136, relating to the modification of limitation on losses for taxpayers other than corporations, shall not apply. (

d) The amendments to

Section 461(l)(1) of the Internal Revenue Code made by

Section 9041(

a) of Public Law 117-2, relating to the extension of limitation on excess business losses of noncorporate taxpayers, shall not