California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 2.5 - Personal Income Tax (Taxable Years Beginning After 12-31-54) › Subchapter 12 - Credit for Taxes Paid › Section 18000-1 - * Credit for Taxes Paid to Another State

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
(1) Subject to the limitations described in
				  California Code of Regulations, title 18, section
				  18001-2 respecting residents, and
				  in Revenue and Taxation Code section
				  18002
				  respecting nonresidents, resident taxpayers are allowed a credit against "net
				  tax", as defined in Revenue and Taxation Code section
				  17039,
				  for net income taxes paid another state, and nonresidents are allowed a credit
				  against "net tax", as defined in Revenue and Taxation Code section
				  17039,
				  for net income taxes paid to the state in which they reside. The term "state"
				  as used in the regulations contained in this Group for taxable years beginning
				  before December 31, 1956, includes states, foreign countries, territories and
				  possessions of the United States, and territories, possessions and political
				  subdivisions of foreign countries, but did not include the United States. For
				  taxable years beginning after December 31, 1956, the term "state" includes
				  states of the United States, the District of Columbia and the possessions of
				  the United States, but does not include the United States or foreign countries.
				  The credit is limited to "net tax" and may neither be taken on account of any
				  preference, alternative, or minimum tax comparable to the tax imposed by
				  Revenue and Taxation Code section
				  17062
				  paid to another state or interest or penalties paid to another state nor may
				  the credit be applied against interest or penalties due under the law. Since
				  credit may be allowed only for net income taxes or, in the case of shareholders
				  of a S corporation, the shareholders' prorata share of any taxes on, according
				  to or measured by income or profits which were paid by the S corporation and
				  satisfy the requirements of Revenue and Taxation Code section
				  18006,
				  subdivision (b), no credit may be allowed for taxes imposed on gross receipts,
				  gross income, dividends, etc., which must be paid regardless of whether or not
				  the subject of the tax constitutes net income, even though in particular
				  instances the subject taxed is net income in whole or in part. A taxpayer may
				  also be required to report only the net amount of dividends if a tax is imposed
				  by a foreign country upon the profits of the corporation and the corporation
				  deducts the tax from each dividend payment before remitting the
				  remainder.
(2) For purposes of this
				  section, a tax will be considered a net income tax only where the tax is
				  imposed on only net income. A tax imposed on items that include amounts other
				  than net income is not a net income tax, even though in particular instances
				  the items taxed include net income in whole or in part. If a tax base includes
				  items other than net income, in whole or in part, as applied to all taxpayers,
				  the tax is not a tax on net income, regardless of whether an individual
				  taxpayer would only be taxed on net income.