(

a) For taxable years beginning on or after January 1, 2023, the income of an incomplete gift nongrantor trust shall be included in a qualified taxpayer’s gross income to the extent the income of the trust would be taken into account in computing the qualified taxpayer’s taxable income if the trust in its entirety were treated as a grantor trust under

Section 17731. (

b) Notwithstanding subdivision (a),

Section applies to distributions from an incomplete gift nongrantor trust. (

c) Notwithstanding subdivision (a), the income of an incomplete gift nongrantor trust shall not be included in a qualified taxpayer’s gross income for a taxable year if all of the following apply:

(1) The fiduciary of the incomplete gift nongrantor trust timely files an original California Fiduciary Income Tax Return and makes an irrevocable election on that return to be taxed as a resident nongrantor trust, pursuant to

Chapter 9 (commencing with

Section 17731). The election shall be made in the form and manner prescribed by the Franchise Tax Board.

(2) The incomplete gift nongrantor trust is a nongrantor trust pursuant to

Chapter 9 (commencing with

Section 17731).

(3) Ninety percent or more of the distributable net income of the incomplete gift nongrantor trust, pursuant to

Chapter 9 (commencing with

Section 17731), is distributed, or treated as being distributed pursuant to

Section or 17731, including subdivision (a), for purposes of

Chapter 9 (commencing with

Section 17731), to a charitable organization, as defined in

Section 501(c)(3) of the Internal Revenue Code. (

d) For purposes of this section, the following

definitions apply: (1) (A) “Incomplete gift nongrantor trust” means a trust that meets both of the following conditions: (

i) The trust does not qualify as a grantor trust under Subpart E of

Part I of Subchapter J of

Chapter of Subtitle A of the Internal Revenue Code, relating to grantors and others treated as substantial owners. (ii) The qualified taxpayer’s transfer of assets to the trust is treated as an incomplete gift under

Section of the Internal Revenue Code, relating to transfers in general. (B) “Incomplete gift nongrantor trust” shall not include a trust, or portion of a trust, that qualifies as a charitable remainder trust under

Section of the Internal Revenue Code. (2) “Qualified taxpayer” means a grantor of an incomplete gift nongrantor trust. (3) “Resident nongrantor trust” means a trust that is not a grantor trust and where the tax applies to the entire taxable income of the trust based on the residency of the fiduciary or beneficiary in accordance with

Section 17742. (e)

(1) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section.

(2) The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section.

Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code shall not apply to any rule, guideline, procedure, or other guidance prescribed by the Franchise Tax Board pursuant to this section.