California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 7 - Net Income › Article 2 - Special Deductions › Section 24407-24409 - Election to Amortize Organizational Expenditures

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In General.
(1) Section
					 24407 provides that a bank or
					 corporation may elect for any income year beginning after December 31, 1960, to
					 treat its organizational expenditures, as defined in Section
					 24408 and in subsection (b) of
					 this regulation, as deferred expenses. A bank or corporation which exercises
					 such election must, at the time it makes the election, select a period of not
					 less than 60 months, beginning with the month in which it began business, over
					 which it will amortize its organizational expenditures. The period selected by
					 the bank or corporation may be equal to or greater, but not less, than 60
					 months, but in any event it must begin with the month in which the corporation
					 began business. The organizational expenditures of the bank or corporation
					 which are treated as deferred expenses under the provisions of Section
					 24407 and this regulation shall
					 then be allowed as a deduction in computing net income ratably over the period
					 selected by the taxpayer. The period selected by the taxpayer in making its
					 election may not be subsequently changed but shall be adhered to in computing
					 net income for the income year for which the election is made and all
					 subsequent income years.
(2) If a
					 bank or corporation exercises the election provided in Section
					 24407, such election shall apply
					 to all of its expenditures which are organizational expenditures within the
					 meaning of Section
					 24408 and subsection (b) of this
					 regulation. The election shall apply, however, only with respect to
					 expenditures incurred before the end of the income year in which the bank or
					 corporation begins business (without regard to whether the bank or corporation
					 files its returns on the accrual or cash method of accounting or whether the
					 expenditures are paid in the income year in which they are incurred), and if
					 such expenditures are paid or incurred on or after June 23, 1961.
(3) The deduction allowed under Section
					 24407 must be spread over a period
					 beginning with the month in which the bank or corporation begins business. The
					 determination of the date the bank or corporation begins business presents a
					 question of fact which must be determined in each case in light of all the
					 circumstances of the particular case. The words "begins business," however, do
					 not have the same meaning as "in existence." Ordinarily, a bank or corporation
					 begins business when it starts the business operations for which it was
					 organized; a bank or corporation comes into existence on the date of its
					 incorporation. Mere organizational activities, such as the obtaining of the
					 corporate charter, are not alone sufficient to show the beginning of business.
					 If the activities of the bank or corporation have advanced to the extent
					 necessary to establish the nature of its business operations, however, it will
					 be deemed to have begun business. For example, the acquisition of operating
					 assets which are necessary to the type of business contemplated may constitute
					 the beginning of business.