California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 1 - General Provisions and Definitions › Article 2 - Definitions › Section 23040 - Income from Sources Within this State

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Except as provided in Chapter 17, "Income
					 from sources within this State" includes income from, rentals of, or gains
					 realized from the sale of real or tangible personal property located in this
					 State, regardless of where the sale or transfer is consummated. The term also
					 includes income from ownership, control or management of such property located
					 in this State, even though the taxpayer is not carrying on a business in this
					 State. Income from business or activities carried on in this State, and from
					 stocks, bonds, notes, bank deposits and other intangible personal property
					 having a business situs in this State, also falls within the purview of this
					 term and is taxable under the law.
(b) If a corporation has become derived from
					 or attributable to sources both within and without this State within the
					 meaning of section
					 25101,
					 Revenue and Taxation Code, a portion of the income derived from the business is
					 attributable to this State and as such constitutes income from sources within
					 this State even though the corporation may have no offices or established place
					 of business in this State. The portion of income attributable to this State
					 shall be determined by apportionment or allocation as provided in Chapter
					 17.
(c) Except as provided in
					 Chapter 17, in the case of corporations organized under the laws of this State
					 which have not acquired a commercial domicile elsewhere, and foreign
					 corporations which have acquired a commercial domicile within this State, all
					 income, with the exceptions noted, from interest on notes, bonds, accounts
					 receivable and other indebtedness, regardless of where the debtors reside or
					 the debts are contracted, interest on bank deposits, including deposits in
					 banks located outside this State, royalties from patents or copyrights,
					 regardless of where the patents or copyrights are used, dividends on stock of
					 both domestic and foreign banks and corporations, and all other income from
					 intangible personal property, including gains derived from the sale or other
					 disposition of such property, is income from sources within this State, unless
					 the property is so used in connection with a business carried on outside this
					 State as to have acquired a business situs outside this State. Interest on
					 bonds or other obligations of the United States and other income which this
					 State is prohibited from taxing under the Constitution of this State or of the
					 United States, is not subject to the tax imposed by Chapter 3.
(d) Whether a foreign corporation has
					 acquired a commercial domicile in this State so that all income from
					 intangibles with the above exceptions is taxable as income from sources within
					 this State, will depend upon the facts of each case. Generally, however, a
					 corporation will be considered as having a commercial domicile here if its
					 principal office or place of business is located in this State, or if its
					 business is managed or controlled from within this State. (See also section
					 25120(b),
					 Revenue and Taxation Code).
(e)
					 Except as provided in Chapter 17, in the case of foreign corporations which
					 have not acquired a commercial domicile in this State, income from intangible
					 personal property is income from sources in this State only if the property has
					 a business situs here. Intangible personal property has a business situs in
					 this State if it is employed as capital in this State or the possession and
					 control of the property has been localized in connection with a business, trade
					 or profession in this State so that its substantial use and value attach to and
					 become an asset of the business, trade or profession in this State. For
					 example, if a corporation pledges stocks, bonds or other intangible personal
					 property in California as security for the payment of indebtedness, taxes,
					 etc., incurred in connection with a business in this State, the property has a
					 business situs here. Again, if a corporation maintains a branch office here and
					 a bank account on which the agent in charge of the branch office may draw for
					 the payment of expenses in connection with the activities in this State, the
					 bank account has a business situs here.
(f) As used in this regulation, "Chapter 3"
					 refers to Chapter 3 of Part 11, Division 2 of the Revenue and Taxation Code
					 (beginning with section
					 23501,
					 Revenue and Taxation Code) and "Chapter 17" refers to Chapter 17 of Part 11,
					 Division 2 of the Revenue and Taxation Code (beginning with section
					 25101,
					 Revenue and Taxation Code).
1. Change
						without regulatory effect redesignating former section
						23040(a) to
						section 23040 and amending section and
						NOTE filed 4-2-2001 pursuant to section
						100, title 1, California Code of
						Regulations (Register 2001, No. 14).
Note: Authority cited: Section
						  19503,
						  Revenue and Taxation Code. Reference: Section
						  23040,
						  Revenue and Taxation Code.