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 25128.5 - Single-Sales Factor Formula Election

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Definitions. For purposes of this
					 regulation, the following definitions are applicable:
(1) Affiliated corporations. "Affiliated
					 corporations" are corporations related by common ownership.
(2) Apportioning trade or business.
					 "Apportioning trade or business" means a distinct trade or business whose
					 business income is required to be apportioned because it has income derived
					 from sources within this state and from sources outside this state. An
					 apportioning trade or business can be conducted in many forms, including, but
					 not limited to, the following:
(A) A
					 corporation.
(B) A corporation that
					 is a member of a combined reporting group.
(C) A division of a corporation engaged in a
					 separate trade or business not unitary with the other trades or businesses of
					 the corporation.
(D) A partnership
					 to the extent owned by a corporate partner that is not unitary with the
					 partnership, whether the corporation stands alone or is a member of a combined
					 reporting group.
(E) A partnership
					 to the extent owned by a partner who is an individual who is not a resident of
					 California.
(F) A sole
					 proprietorship that is operated by an individual who is not a resident of
					 California.
(3)
					 Apportionment. "Apportionment" is the means by which the total business income
					 of an apportioning trade or business is assigned to this state under Revenue
					 and Taxation Code sections
					 25128
					 through
					 25137
					 and section
					 25141.
(4) Banking or financial business activity.
					 "Banking or financial business activity" means activities attributable to
					 dealings in money or moneyed capital in substantial competition with the
					 business of national banks.
(5)
					 Business assets. "Business assets" are assets, including intangible assets,
					 other than stock of a member of the combined reporting group, which are used in
					 the conduct of the business of the combined reporting group or would produce
					 business income to the combined reporting group if the assets were sold.
Business assets are valued at net book value as of the
						date that electing taxpayers and non-electing taxpayers or non-taxpayers become
						members of a new combined reporting group. A copy of the taxpayer's valuation
						of the business assets must be made available when required by the Franchise
						Tax Board. The Franchise Tax Board may, in its sole discretion, allow an
						alternative valuation date if it determines that an alternative date would be
						more appropriate.
(6)
					 Business asset test. The "business asset test" is the mechanism of comparing
					 business assets to determine if members of a combined reporting group are
					 required to use the standard formula under Revenue and Taxation Code section
					 25128
					 or the single-sales factor formula under Revenue and Taxation Code section
					 25128.5
					 and this regulation.
(7) Combined
					 reporting group. A "combined reporting group" is as defined by California Code
					 of Regulations section
					 25106.5, subsection
					 (b)(3).
(8) Commencement date. The
					 "commencement date" of a single-sales factor formula election is the first day
					 of the period for which the election is made.
(9) Common Ownership. "Common ownership"
					 exists if:
(A) A parent corporation owns stock
					 possessing more than 50 percent of the voting power of at least one
					 corporation, and, if applicable,
(B) Stock cumulatively representing more than
					 50 percent of the voting power of each of the corporations, except the parent,
					 is owned by the parent, one or more corporations described in subparagraph (A),
					 or one or more other corporations that satisfy the conditions of this
					 subparagraph.
(10)
					 Corporation. References to "corporation" include a Subchapter S corporation,
					 any other incorporated entity, or any entity defined or treated as a
					 corporation pursuant to Revenue and Taxation Code sections
					 23038
					 or
					 23038.5.
(11) Disregarded Entity. A "disregarded
					 entity" is an entity described in California Code of Regulations section
					 23038(b) -
					 2, subsection (a).
(12) Good cause. "Good cause" shall have the
					 same meaning as specified in Treasury Regulation section
					 1.1502-75(c).
(13) Gross business receipts. "Gross business
					 receipts" is as defined by Revenue and Taxation Code section
					 25128,
					 subdivision (d)(1).
(14) Group
					 Return. A "group return" is as defined by California Code of Regulations
					 section 25106.5, subsection
					 (b)(13).
(15) Limited liability
					 company. A "limited liability company" is as defined at Revenue and Taxation
					 Code section
					 17941,
					 subdivision (d).
(16) Member.
					 "Member" is as defined by California Code of Regulations section
					 25106.5, subsection
					 (b)(10).
(17) Net book value. "Net
					 book value" is equal to an asset's original cost minus depreciation, depletion
					 and amortization. Book value means the amount which an asset is carried on a
					 balance sheet. Depreciation means the systematic write off of the cost of a
					 tangible asset over the asset's useful life. Depletion means the systematic
					 write off of the cost of harvesting or mining a natural resource. Amortization
					 means the systematic write off of the cost of an intangible asset over the
					 asset's useful life. Book value, depreciation, depletion and amortization will
					 be reflected using United States Generally Accepted Accounting Principles (US
					 GAAP). If any member of a combined reporting group does not maintain its books
					 using US GAAP, the Franchise Tax Board may allow an alternative method of
					 valuation of that member's business assets.
(18) New combined reporting group. A "new
					 combined reporting group" is a combined reporting group that is created by a
					 new affiliation of two or more corporations, or by the addition of one or more
					 new members to an existing combined reporting group.
(19) Nonresident. A "nonresident" is as
					 defined in California Code of Regulations section
					 17014.
(20) Original return. The "original return"
					 is the last return filed on or before the due date (taking extensions into
					 account) regardless of the form on which it is filed or however it may be
					 denominated. A return filed after the due date (taking extensions into account)
					 regardless of the form on which it is filed or however it may be denominated
					 may be an original return, if no other return has been filed, but it would not
					 be a timely filed, original return.
(21) Partnership. A "partnership" is as
					 defined in Revenue and Taxation Code section
					 17008
					 and includes entities treated as partnerships as set forth in California Code
					 of Regulations section
					 23038(b) -
					 3.
(22) Qualified business activities.
					 "Qualified business activities" are as defined in Revenue and Taxation Code
					 section
					 25128,
					 subdivision (c).
(23) Qualified
					 Subchapter S subsidiary: A "qualified Subchapter S subsidiary" is as defined in
					 Internal Revenue Code section
					 1361, subsection (b)(3), as
					 incorporated by Revenue and Taxation Code section
					 23800
					 and as modified by Revenue and Taxation Code section
					 23800.5.
(24) Resident. A "resident" is as defined in
					 Revenue and Taxation Code section
					 17014,
					 subdivision (a), and California Code of Regulations section
					 17014, subsection (a).
(25) S corporation. An "S corporation" is as
					 defined in Internal Revenue Code sections
					 1361 and
					 1362, as modified by Revenue and
					 Taxation Code sections
					 23800.5
					 and
					 23801.
(26) Sole Proprietorship. A "sole
					 proprietorship" is an unincorporated trade or business that is operated by one
					 individual.
(27) Standard formula.
					 The "standard formula" is the three-factor method of apportionment as defined
					 by Revenue and Taxation Code section
					 25128
					 and California Code of Regulations section
					 25128.
(28) Taxpayer. "Taxpayer" means an
					 individual, corporation, or partnership with a requirement to file a California
					 franchise or income tax return.
(29) Taxpayer member. "Taxpayer member" is as
					 defined by California Code of Regulations section
					 25106.5, subsection
					 (b)(11).
(30) Timely filed. A
					 "timely filed" return is one filed on or before the due date (taking extensions
					 into account).
(31) Unitary. One
					 corporation or partnership is "unitary" with another corporation or partnership
					 if they are engaged in a unitary business.
(32) Unitary business. A "unitary business"
					 consists of those activities required to be included in a combined report
					 pursuant to Revenue and Taxation Code section
					 25101
					 and the published cases decided thereunder by the United States Supreme Court,
					 the courts of this State, and the California State Board of Equalization.
					 Activities constitute a "unitary business" if unity of ownership, unity of
					 operation, and unity of use are present, or if the activities carried on within
					 the state contribute to or are dependent upon the activities carried on without
					 the state. California Code of Regulations section
					 25120, subsection (b), sets forth
					 certain indicia and standards for determining whether activities constitute a
					 single trade or business and are therefore unitary.