2023 California Code › Revenue and Taxation Code - RTC › DIVISION 2 - OTHER TAXES › PART 11 - CORPORATION TAX LAW › CHAPTER 7 - Net Income › ARTICLE 2 - Special Deductions › Section 24415.

24415. (a) To the extent specified in subdivision (b), there shall be allowed as a deduction to a taxpayer those payments of the taxpayer which are made pursuant to an interindemnity arrangement specified in Section 1280.7 of the Insurance Code and which are paid to a trust of members of a cooperative corporation organized and operated under Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code and the members of which consist solely of physicians and surgeons licensed in this state.
(b) The deduction authorized by subdivision (a) shall be taken with respect to the taxable year in which the payment is made and shall be taken only to the extent that the payment does not exceed the amount which would otherwise be payable to an independent insurance company for similar coverage for medical malpractice insurance in that taxable year. Any portion of the payment in excess of that amount shall be treated as a payment under the interindemnity arrangement for five succeeding taxable years and may be carried forward as a deduction to those five succeeding taxable years until used. The deduction shall be applied first to the earliest years possible.
(c) In the event any payment is refunded by the trust to the taxpayer for any reason, the payment shall be included in the taxpayer’s income for the taxable year in which it is received to the extent that the payment or any portion thereof was taken as a deduction in any earlier taxable year.
(d) Any refund of a payment which is made by a trust to a taxpayer shall be reported by the trust to the Franchise Tax Board in the year in which the refund is made. The trust shall furnish the taxpayer with a copy of that report. In the case of any payment to be made to a taxpayer who is not a resident of the State of California in the year in which the refund is made, the Franchise Tax Board may, by regulation, require the trust to withhold an amount from the refund, determined by the Franchise Tax Board to reasonably represent the amount of tax due when that refund is included with other income of the taxpayer, and to transmit the amount withheld to the Franchise Tax Board at a time as it may designate.
(e) For purposes of this section:
(1) “Payment” means a contribution to or an assessment by an interindemnity arrangement described in Section 1280.7 of the Insurance Code.
(2) “Taxpayer” means a corporation whose shares are held by a physician and surgeon, or physicians and surgeons, licensed in this state which is a participating member in an interindemnity arrangement described in Section 1280.7 of the Insurance Code.
(3) “Trust” means a trust described in subdivision (a).
(f) Upon request, the trust shall submit to the Franchise Tax Board the names and membership dates of all participating corporations.
(g) The Franchise Tax Board shall prescribe those regulations as may be necessary to carry out the purposes of this section.
(Amended by Stats. 2000, Ch. 862, Sec. 158. Effective January 1, 2001.)