SB 1449, as amended, Nguyen. Personal income tax: credit for taxes paid.
The Personal Income Tax Law allows a credit against the net tax imposed by that law to residents for specified taxes paid to another state on income derived from sources within that state. That law requires income derived from sources within that state to be determined by applying nonresident sourcing rules for determining income from sources within this state.
This bill would, instead, require the apportionment and allocation rules of the other state to be used to determine the source of income derived from thatbegin delete state if doing so will either maintain or increase the amount of the credit that a taxpayer is allowed.end deletebegin insert state.end insert
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
It is the intent of the Legislature to do the
2following:
P2 1(a) Require that the Other State Tax Credit be administered in
2a manner to help prevent California residents from being subject
3to taxation on more than 100 percent of their income.
4(b) Modify existing law to prevent the risk of there being an
5impermissible burden on interstate commerce resulting from the
6potential burden of multiple taxation.
Section 18001 of the Revenue and Taxation Code is
8amended to read:
(a) Subject to the following conditions, residents shall
10be allowed a credit against the “net tax” (as defined by Section
1117039) for net income taxes imposed by and paid to another state
12(not including any preference, alternative, or minimum tax
13comparable to the tax imposed by Section 17062) on income
14taxable under this part:
15(1) The credit shall be allowed only for taxes paid to the other
16state (not including any preference, alternative, or minimum tax
17comparable to the tax imposed by Section 17062) on income
18derived from sources within that state which is taxable under its
19laws irrespective of the residence or domicile of the recipient.
20This paragraph shall not apply to residents to whom subdivision
21(b) of Section 17014 applies.
22(2) The credit shall not be allowed if the other state allows
23residents of this state a credit against the taxes imposed by that
24state (not including any preference, alternative, or minimum tax
25comparable to the tax imposed by Section 17062) for “net tax” (as
26defined by Section 17039) paid or payable under this part.
27(3) The credit shall not exceed the proportion of the “net tax”
28(as defined by Section 17039) payable under this part as the income
29subject to tax in the other state (not including any preference,
30alternative, or minimum tax comparable to the tax imposed by
31Section 17062) and also taxable under this part bears to the
32taxpayer’s entire
income upon which the “net tax” (as defined by
33Section 17039) is imposed by this part.
34(4) No credit shall be allowed under this section for any tax
35imposed by Section 17062.
36(b) For purposes of this section, the amount of “net income
37taxes” paid to another state shall include the taxpayer’s pro rata
38share of any taxes on, or according to, or measured by, income or
39profits paid or accrued, which were paid by an “S” corporation,
40as provided by Section 18006.
P3 1(c) begin delete(1)end deletebegin delete end deleteFor purposes of this section, “income derived from
2sources within that state” shall be
determined by applying the
3nonresident sourcing rules for determining income from sources
4within this state, as specified in Chapter 11 (commencing with
5Section 17951), and the regulations thereunder, except that the
6apportionment and allocation rules of the other state shall apply
7in lieu of Article 2 (commencing with Section 25120) of Chapter
817 of Part 11.
9(2) The changes made in paragraph (1) by the act adding this
10paragraph shall apply if it will either maintain or increase the
11amount of the credit that a taxpayer is allowed.
This act provides for a tax levy within the meaning of
13Article IV of the Constitution and shall go into immediate effect.
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