California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 17 - Allocation of Income › Article 2.5 - Uniform Division of Income for Tax Purposes Act › Section 25128 - Apportionment of Business Income

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In General. All business income of each
					 apportioning trade or business of the taxpayer shall be apportioned to this
					 state by use of the formula set forth in section
					 25128, section
					 25128.5, or section
					 25128.7
					 of the Revenue and Taxation Code, whichever is applicable. Section
					 25128,
					 subdivision (a), of the Revenue and Taxation Code, as in effect for taxable
					 years beginning before January 1, 2013, provided that the apportionment formula
					 is a fraction, the numerator of which is the property factor plus the payroll
					 factor plus twice the sales factor, and the denominator of which is four.
					 Section 25128, subdivision (b), of the
					 Revenue and Taxation Code, however, provides exceptions to the rule in
					 subdivision (a) of that section for taxpayers who derive more than 50 percent
					 of their "gross business receipts" (as defined in section
					 25128, subdivision (d)(1), of the
					 Revenue and Taxation Code) from conducting a qualified business activity (as
					 defined in subdivisions (c) and (d)(2)-(5) of section
					 25128 of the Revenue and Taxation
					 Code and these regulations thereunder). Such taxpayers must use an
					 apportionment formula which is a fraction, the numerator of which is the
					 property factor plus the payroll factor plus the sales factor, and the
					 denominator of which is three.
Section
						25128.5
						of the Revenue and Taxation Code applied to taxable years beginning on or after
						January 1, 2011 and before January 1, 2013. Section
						25128.5,
						Revenue and Taxation Code, provided that any apportionable trade or business,
						other than that described in subdivision (b) of Section
						25128, could have an irrevocable
						annual election on an original timely filed return to apportion its income to
						this state by multiplying its business income by the sales factor.
Section
						25128.7
						of the Revenue and Taxation Code applies to taxable years beginning on or after
						January 1, 2013. Section
						25128.7,
						Revenue and Taxation Code, provides that an apportionable trade or business,
						other than that described in subdivision (b) of Section
						25128,
						Revenue and Taxation Code, shall apportion its income to this state by
						multiplying its business income by the sales factor.
(b) Definitions.
(1) The term "qualified business activity" is
					 defined in subdivisions (c) and (d) of Revenue and Taxation Code section
					 25128.
					 In general, it means an agricultural business activity, an extractive business
					 activity, a savings and loan activity, or a banking or financial business
					 activity.
(2) Except as otherwise
					 provided under section
					 25128
					 of the Revenue and Taxation Code, the term "gross receipts" as used in this
					 regulation means "sales" as defined in subdivision (e) of Revenue and Taxation
					 Code section
					 25120
					 and in the regulations under section
					 25134
					 of the Revenue and Taxation Code.
(3) The term "gross business receipts" is
					 defined in subdivision (d)(1) of section
					 25128
					 of the Revenue and Taxation Code. Except as otherwise provided in that
					 subdivision, the term means gross receipts as defined in subsection (b)(2) of
					 this regulation, whether or not the receipts are excluded from the sales factor
					 by operation of section
					 25137
					 of the Revenue and Taxation Code.