California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 3 - Corporation Income Tax › Article 3 - Tax Credits › Section 23637-10 - Recordkeeping Requirements

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
Recordkeeping Requirements -- (See Regulation 23637-0 for
						Table of Contents.)
(a) In General.
					 For purposes of Regulations 23637-1 through 23637-11, inclusive, a qualified
					 taxpayer shall be required to maintain books and records that are adequate to
					 substantiate its entitlement to any claimed JSF Property Credit. These books
					 and records should be retained for as long as the statute of limitations on
					 assessment for the taxable year for which the JSF Property Credit was allowed
					 remains open, and, in the case of any JSF Property Credit that is being carried
					 forward, for the additional number of years that the actual carryforward of
					 such JSF Property Credit occurs.
(b) Books and Records. The books and records
					 maintained by the qualified taxpayer should be sufficient to clearly establish
					 all necessary facts which affect the allowance and amount of the JSF Property
					 Credit. For this purpose, "adequate" recordkeeping depends upon the sufficiency
					 of the information contained in the documentation. In many cases, the books and
					 records normally maintained for California income or franchise tax purposes
					 will be adequate substantiation for the JSF Property Credit.
EXAMPLE 1: X, a qualified taxpayer, claims a JSF Property
						Credit for the purchase of 100 computers to be used in X's manufacturing
						facility in West Los Angeles. Assume the computers were purchased from a mail
						order retailer located in South Dakota. If X has only retained the original
						invoice and a cash disbursements journal, neither of which reflect that
						California sales or use tax was paid by X, then the invoice would not be
						sufficient to establish that California sales or use tax was paid on the
						computers. However, if X has retained a copy of a timely filed California use
						tax return that clearly demonstrates that California use tax was paid by X with
						respect to the computers, then X would be treated as having paid or incurred
						qualified costs.
EXAMPLE 2: Assume the same facts as in EXAMPLE 1, except
						that X intends to use 20 of the computers for general administrative functions
						such as payroll and marketing. In addition to the records necessary to
						establish that California sales or use tax was paid, X should also retain a
						copy of the purchase contract containing a detailed list of the computers by
						model number so that X can establish which of the computers are being used in
						qualified activities and which are not being used in qualified
						activities.
(c) Affidavit
					 Regarding Sales and Use Tax. For purposes of this regulation only, in the case
					 of any lump sum or turn key contract, the requirement that California sales or
					 use tax be paid may be established by reference to bids, contracts or
					 affidavits from the contractor. For purposes of determining whether California
					 sales or use tax has been paid, directly or indirectly by the contractor, when
					 it is not a separately stated contract amount, a qualified taxpayer shall be
					 entitled to rely on a written representation to that effect from the
					 contractor, and California sales or use tax shall be deemed to have been paid
					 in the absence of affirmative knowledge on the part of the qualified taxpayer
					 that California sales or use tax was not paid.
(d) Written Statement by Lessor to Lessee. In
					 the case of any leasing transaction described in subsection (b) of Regulation
					 23637-6 (relating to operating leases), the lessor shall provide a statement to
					 the lessee specifying the amount of the lessor's original cost of the qualified
					 property upon which the lessee may claim the JSF Property Credit and the amount
					 of that cost upon which California sales or use tax was paid. This statement
					 must be provided to the lessee within 45 days after the close of the lessee's
					 taxable year for which the JSF Property Credit is allowable to the lessee. For
					 purposes of providing this statement only, if a lessor is legally obligated to
					 remit California sales or use tax with respect to its acquisition of qualified
					 property, but has not yet remitted such amounts solely due to timing
					 differences between the lessor's California sales and use tax return filing
					 period and the lessee's taxable year, then the lessor may treat the amounts
					 upon which the California sales or use tax liability arises as "qualified costs
					 to the lessor." This written statement should not be filed with any return of
					 either the lessor or lessee, but shall instead be retained by the lessee and
					 made available to the Franchise Tax Board upon request.
1. New
						section filed 1-23-2003; operative 2-22-2003 (Register 2003, No.
						4).
Note: Authority cited: Section
						  19503,
						  Revenue and Taxation Code. Reference: Section
						  23637,
						  Revenue and Taxation Code.