California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 6 - Gross Income › Article 1 - Definitions › Section 24273.5 - Patronage Dividends

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
					 Election to Consider as Income. A taxpayer which receives noncash patronage
					 allocations (as defined in paragraph (f)) may elect to include such allocations
					 in gross income for the income year received. If a taxpayer elects to include
					 such noncash patronage allocations in gross income as received, their face
					 amount shall be reported as gross income. If, upon redemption of noncash
					 patronage allocations, the taxpayer does not and cannot recover the full amount
					 of the allocations previously reported, any loss sustained may be deducted from
					 gross income in the income year during which the allocations are
					 redeemed.
(b) Election to Exclude
					 from Gross Income. In lieu of reporting noncash patronage allocations, (as
					 provided in paragraph (a)), a taxpayer may elect to exclude noncash patronage
					 allocations (as defined in paragraph (f)), from gross income until redeemed or
					 realized upon. In case noncash patronage allocations are excluded from gross
					 income, only the amount realized when redeemed is required to be included in
					 gross income. If such allocations bear interest, the interest is not includible
					 in gross income until the allocations are redeemed or realized upon, unless
					 prior to redemption interest thereon is paid in cash. For the method of
					 electing to exclude noncash patronage allocations, see paragraph (c).
(c) Elections. If a taxpayer includes in its
					 gross income, for its first income year beginning after December 31, 1956, any
					 amount attributable to noncash patronage allocations, it shall be deemed to
					 have elected to include the face amount of such allocations in gross income for
					 such year and all subsequent income years. Furthermore, a taxpayer shall be
					 deemed to have elected to include all noncash allocations in gross income, if
					 less than the face amount of such allocations are reported, or if noncash
					 allocations have been received from more than one cooperative organization and
					 allocations attributable to one or more cooperatives were included in gross
					 income.
A taxpayer shall be deemed to have elected to exclude
						noncash patronage allocations from gross income if it omits the amount of such
						allocations from gross income for the first income year beginning after
						December 31, 1956, during which any noncash patronage allocations are received.
						The amount of patronage allocations which are excluded must be disclosed in the
						return or by a written statement filed with the returns. If such written
						statement has not previously been filed, it must be filed before a taxpayer
						will be permitted to exclude noncash patronage allocations from gross
						income.
The elections provided for by this paragraph may be made,
						regardless of the taxpayer's method of accounting. Once an election has been
						made, it may be changed only with the consent of the Franchise Tax Board.
						Application for permission to change an election shall be filed within 90 days
						after the beginning of the income year to be covered by the
						return.
(d) Statute of
					 Limitations. Whenever a taxpayer has elected to exclude noncash patronage
					 allocations from gross income until such allocations are redeemed or realized
					 upon, the statutory period prescribed in Section
					 25663 for the assessment of any
					 deficiency attributable to amounts excluded will not expire prior to the
					 expiration of four years from the date the Franchise Tax Board is notified by
					 the taxpayer that such deferred allocations have been redeemed or realized
					 upon. Such deficiency may be assessed prior to the expiration of such four-year
					 period notwithstanding the provisions of any other law or rule of law which
					 might bar such assessment.
A taxpayer shall notify the Franchise Tax Board that
						deferred noncash patronage allocations have been realized or redeemed by
						including the amount of such allocations in gross income for the income year
						that such amounts are redeemed or realized upon.
(e) Records. A taxpayer electing to exclude
					 noncash patronage allocations from gross income for the year that such
					 allocations are made must maintain such records as are necessary to clearly
					 reflect income in accordance with this regulation, Section
					 17561, and Reg.
					 17561(a).
(f) Noncash Patronage
					 Allocations Defined. For purposes of this regulation the term "noncash
					 patronage allocations" means amounts allocated on the basis of the business
					 done with or for a patron by any cooperative organization, other than cash or
					 merchandise, evidenced by any document which discloses the dollar amount of
					 such allocations, such as capital stock, revolving fund certificates,
					 certificates of indebtedness, retain certificates, or letters of
					 advice.