BILL NUMBER: AB 1006 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Cook
FEBRUARY 18, 2011
An act to add Part 10.1 (commencing with Section 15706) to
Division 3 of Title 2 of the Government Code, and to amend Sections
17024.5, 18526, 19032, 19057, 19058, 19060, 19061, 19065, 19066.5,
23051.5, 24273.5, and 24945 of the Revenue and Taxation Code,
relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1006, as introduced, Cook. Taxation: Franchise Tax Board:
statute of limitations: burden of proof.
Existing law imposes income taxes that are administered and
collected by the Franchise Tax Board. Existing law establishes a
general four-year statute of limitations, subject to specified
exceptions, for actions by the Franchise Tax Board regarding tax
liability and also provides that the taxpayer has the burden of proof
in court proceedings for purposes of state income tax laws.
This bill would provide that the Franchise Tax Board shall have
the burden of proof in any court or administrative tax proceedings
with respect to any factual issue relevant to ascertaining the tax
liability of a taxpayer. This bill would also provide that these
provisions shall not subject a taxpayer to unreasonable search or
access to records in violation of the law. This bill would
additionally revise the statute of limitations regarding specified
actions, including audits, conducted by the board and would require
the board to have just cause before beginning any audit.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known, and may be cited, as "The Tax
Fairness Act of 2011."
SEC. 2. Part 10.1 (commencing with Section 15706) is added to
Division 3 of Title 2 of the Government Code, to read:
PART 10.1. BURDEN OF PROOF
15706. (a) The Franchise Tax Board shall have the burden of proof
in any court or administrative tax proceeding with respect to a
factual issue related to ascertaining the tax liability of a
taxpayer.
(b) For purposes of this section:
(1) "Administrative tax proceeding" means, for disputes concerning
taxes collected by the Franchise Tax Board, the oral hearing before
the members of the State Board of Equalization.
(2) "Tax liability" means any tax or fee assessed or determined by
the Franchise Tax Board, including any interest accrued or penalties
levied in association with the tax or fee.
(c) Unless provided otherwise, the burden of proof for purposes of
this part shall be a preponderance of the evidence.
(d) Nothing in this section shall subject a taxpayer to
unreasonable search or access to records in violation of the United
States Constitution, the California Constitution, or any other law.
(e) This section shall apply only to court and administrative
proceedings involving assessments or notices of determination issued
on or after the date on which this act becomes operative.
SEC. 3. Section 17024.5 of the Revenue and Taxation Code is
amended to read:
17024.5. (a) (1) Unless otherwise specifically provided, the
terms "Internal Revenue Code," "Internal Revenue Code of 1954," or
"Internal Revenue Code of 1986," for purposes of this part, mean
Title 26 of the United States Code, including all amendments thereto
as enacted on the specified date for the applicable taxable year as
follows:
Specified Date
of
Internal
Revenue
Code
Taxable Year Sections
(A) For taxable years
beginning on or after
January 1, 1983, and on or
before December
31, 1983....................... January 15, 1983
(B) For taxable years
beginning on or after
January 1, 1984, and on or
before December
31, 1984....................... January 1, 1984
(C) For taxable years
beginning on or after
January 1, 1985, and on or
before December
31, 1985....................... January 1, 1985
(D) For taxable years
beginning on or after
January 1, 1986, and on or
before December
31, 1986....................... January 1, 1986
(E) For taxable years
beginning on or after
January 1, 1987, and on or
before December
31, 1988................. January 1, 1987
(F) For taxable years
beginning on or after
January 1, 1989, and on or
before December
31, 1989....................... January 1, 1989
(G) For taxable years
beginning on or after
January 1, 1990, and on or
before December
31, 1990....................... January 1, 1990
(H) For taxable years
beginning on or after
January 1, 1991, and on or
before December
31, 1991....................... January 1, 1991
(I) For taxable years
beginning on or after
January 1, 1992, and on or
before December
31, 1992....................... January 1, 1992
(J) For taxable years
beginning on or after
January 1, 1993, and on or
before December
31, 1996....................... January 1, 1993
(K) For taxable years
beginning on or after
January 1, 1997, and on or
before December
31, 1997....................... January 1, 1997
(L) For taxable years
beginning on or after
January 1, 1998, and on or
before December
31, 2001....................... January 1, 1998
(M) For taxable years
beginning on or after
January 1, 2002, and on or
before December
31, 2004....................... January 1, 2001
(N) For taxable years
beginning on or after
January 1, 2005, and on or
before December
31, 2009....................... January 1, 2005
(O) For taxable years
beginning on or after
January 1, 2010................ January 1, 2009
(2) (A) Unless otherwise specifically provided, for federal laws
enacted on or after January 1, 1987, and on or before the specified
date for the taxable year, uncodified provisions that relate to
provisions of the Internal Revenue Code that are incorporated for
purposes of this part shall be applicable to the same taxable years
as the incorporated provisions.
(B) In the case where Section 901 of the Economic Growth and Tax
Relief Act of 2001 (Public Law 107-16) applies to any provision of
the Internal Revenue Code that is incorporated for purposes of this
part, Section 901 of the Economic Growth and Tax Relief Act of 2001
shall apply for purposes of this part in the same manner and to the
same taxable years as it applies for federal income tax purposes.
(3) Subtitle G (Tax Technical Corrections) and Part I of Subtitle
H (Repeal of Expired or Obsolete Provisions) of the Revenue
Reconciliation Act of 1990 (Public Law 101-508) modified numerous
provisions of the Internal Revenue Code and provisions of prior
federal acts, some of which are incorporated by reference into this
part. Unless otherwise provided, the provisions described in the
preceding sentence, to the extent that they modify provisions that
are incorporated into this part, are declaratory of existing law and
shall be applied in the same manner and for the same periods as
specified in the Revenue Reconciliation Act of 1990.
(b) Unless otherwise specifically provided, when applying any
provision of the Internal Revenue Code for purposes of this part, a
reference to any of the following is not applicable for purposes of
this part:
(1) Except as provided in Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2, an electing small business
corporation, as defined in Section 1361(b) of the Internal Revenue
Code.
(2) Domestic international sales corporations (DISC), as defined
in Section 992(a) of the Internal Revenue Code.
(3) A personal holding company, as defined in Section 542 of the
Internal Revenue Code.
(4) A foreign personal holding company, as defined in Section 552
of the Internal Revenue Code.
(5) A foreign investment company, as defined in Section 1246(b) of
the Internal Revenue Code.
(6) A foreign trust, as defined in Section 679 of the Internal
Revenue Code.
(7) Foreign income taxes and foreign income tax credits.
(8) Section 911 of the Internal Revenue Code, relating to citizens
or residents of the United States living abroad.
(9) A foreign corporation, except that Section 367 of the Internal
Revenue Code shall be applicable.
(10) Federal tax credits and carryovers of federal tax credits.
(11) Nonresident aliens.
(12) Deduction for personal exemptions, as provided in Section 151
of the Internal Revenue Code.
(13) The tax on generation-skipping transfers imposed by Section
2601 of the Internal Revenue Code.
(14) The tax, relating to estates, imposed by Section 2001 or 2101
of the Internal Revenue Code.
(c) (1) The provisions contained in Sections 41 to 44, inclusive,
and Section 172 of the Tax Reform Act of 1984 (Public Law 98-369),
relating to treatment of debt instruments, is not applicable for
taxable years beginning before January 1, 1987.
(2) The provisions contained in Public Law 99-121, relating to the
treatment of debt instruments, is not applicable for taxable years
beginning before January 1, 1987.
(3) For each taxable year beginning on or after January 1, 1987,
the provisions referred to by paragraphs (1) and (2) shall be
applicable for purposes of this part in the same manner and with
respect to the same obligations as the federal provisions, except as
otherwise provided in this part.
(d) When applying the Internal Revenue Code for purposes of this
part, regulations promulgated in final form or issued as temporary
regulations by "the secretary" shall be applicable as regulations
under this part to the extent that they do not conflict with this
part or with regulations issued by the Franchise Tax Board.
(e) Whenever this part allows a taxpayer to make an election, the
following rules shall apply:
(1) A proper election filed with the Internal Revenue Service in
accordance with the Internal Revenue Code or regulations issued by
"the secretary" shall be deemed to be a proper election for purposes
of this part, unless otherwise provided in this part or in
regulations issued by the Franchise Tax Board.
(2) A copy of that election shall be furnished to the Franchise
Tax Board upon request.
(3) (A) Except as provided in subparagraph (B), in order to obtain
treatment other than that elected for federal purposes, a separate
election shall be filed at the time and in the manner required by the
Franchise Tax Board.
(B) (i) If a taxpayer makes a proper election for federal income
tax purposes prior to the time that taxpayer becomes subject to the
tax imposed under this part or Part 11 (commencing with Section
23001), that taxpayer is deemed to have made the same election for
purposes of the tax imposed by this part, Part 10.2 (commencing with
Section 18401), and Part 11 (commencing with Section 23001), as
applicable, and that taxpayer may not make a separate election for
California tax purposes unless that separate election is expressly
authorized by this part, Part 10.2 (commencing with Section 18401),
or Part 11 (commencing with Section 23001), or by regulations issued
by the Franchise Tax Board.
(ii) If a taxpayer has not made a proper election for federal
income tax purposes prior to the time that taxpayer becomes subject
to tax under this part or Part 11 (commencing with Section 23001),
that taxpayer may not make a separate California election for
purposes of this part, Part 10.2 (commencing with Section 18401), or
Part 11 (commencing with Section 23001), unless that separate
election is expressly authorized by this part, Part 10.2 (commencing
with Section 18401), or Part 11 (commencing with Section 23001), or
by regulations issued by the Franchise Tax Board.
(iii) This subparagraph applies only to the extent that the
provisions of the Internal Revenue Code or the regulation issued by
"the secretary" authorizing an election for federal income tax
purposes apply for purposes of this part, Part 10.2 (commencing with
Section 18401) or Part 11 (commencing with Section 23001).
(f) Whenever this part allows or requires a taxpayer to file an
application or seek consent, the rules set forth in subdivision (e)
shall be applicable with respect to that application or consent.
(g) When applying the Internal Revenue Code for purposes of
determining the statute of limitations under this part, any reference
to a period of three years shall be modified to read four years for
purposes of this part.
(h)
(g) When applying, for purposes of this part, any
section of the Internal Revenue Code or any applicable regulation
thereunder, all of the following shall apply:
(1) References to "adjusted gross income" shall mean the amount
computed in accordance with Section 17072, except as provided in
paragraph (2).
(2) (A) Except as provided in subparagraph (B), references to
"adjusted gross income" for purposes of computing limitations based
upon adjusted gross income, shall mean the amount required to be
shown as adjusted gross income on the federal tax return for the same
taxable year.
(B) In the case of registered domestic partners and former
registered domestic partners, adjusted gross income, for the purposes
of computing limitations based upon adjusted gross income, shall
mean the adjusted gross income on a federal tax return computed as if
the registered domestic partner or former registered domestic
partner was treated as a spouse or former spouse, respectively, for
federal income tax purposes, and used the same filing status that was
used on the state tax return for the same taxable year.
(3) Any reference to "subtitle" or "chapter" shall mean this part.
(4) The provisions of Section 7806 of the Internal Revenue Code,
relating to construction of title, shall apply.
(5) Any provision of the Internal Revenue Code that becomes
operative on or after the specified date for that taxable year shall
become operative on the same date for purposes of this part.
(6) Any provision of the Internal Revenue Code that becomes
inoperative on or after the specified date for that taxable year
shall become inoperative on the same date for purposes of this part.
(7) Due account shall be made for differences in federal and state
terminology, effective dates, substitution of "Franchise Tax Board"
for "secretary" when appropriate, and other obvious differences.
(8) Except as otherwise provided, any reference to Section 501 of
the Internal Revenue Code shall be interpreted to also refer to
Section 23701.
(i)
(h) Any reference to a specific provision of the
Internal Revenue Code shall include modifications of that provision,
if any, in this part.
SEC. 4. Section 18526 of the Revenue and Taxation Code is amended
to read:
18526. A joint return may not be made under Section 18522 in any
of the following situations:
(a) After the expiration of four three
years from the last date prescribed by law for filing the
return for the taxable year (determined without regard to any
extension of time granted to either spouse).
(b) After there has been mailed to either spouse, with respect to
the taxable year, a notice of deficiency under Section 19033, if the
spouse, as to that notice, files a protest under Section 19041 or
appeal under Section 19045.
(c) After either spouse has commenced a suit in any court for the
recovery of any part of the tax for that taxable year.
(d) After either spouse has entered into a closing agreement under
Section 19441 with respect to the taxable year.
SEC. 5. Section 19032 of the Revenue and Taxation Code is amended
to read:
19032. (a) As soon as practicable after the
return is filed, the Franchise Tax Board shall examine it and shall
determine the correct amount of the tax.
(b) The Franchise Tax Board shall have just cause in order to
begin any audit and shall not begin any audit more than three years
from the date the return is filed.
SEC. 6. Section 19057 of the Revenue and Taxation Code is amended
to read:
19057. (a) Except in the case of a false or fraudulent return and
except as otherwise expressly provided in this part, every notice of
a proposed deficiency assessment shall be mailed to the taxpayer
within four three years after the
return was filed. No deficiency shall be assessed or collected with
respect to the year for which the return was filed unless the notice
is mailed within the four-year three-year
period or the period otherwise provided. For purposes of this
chapter, the term "return" means the return required to be filed by
the taxpayer and does not include a return of any person from whom
the taxpayer has received an item of income, gain, loss, deduction,
or credit.
(b) The running of the period of limitations provided in
subdivision (a) on mailing a notice of proposed deficiency assessment
shall, in a case under Title 11 of the United States Code, be
suspended for any period during which the Franchise Tax Board is
prohibited by reason of that case from mailing the notice of proposed
deficiency assessment and for 60 days thereafter.
(c) Where, within the 60-day period ending on the day on which the
time prescribed in this section for the assessment of any tax
imposed under Part 10 (commencing with Section 17001) or Part 11
(commencing with Section 23001) for any taxable year would otherwise
expire, the Franchise Tax Board receives a written document, other
than an amended return or a report required by Section 18622, signed
by the taxpayer showing that the taxpayer owes an additional amount
of that tax for that taxable year, the period for the assessment of
an additional amount in excess of the amount shown on either an
original or amended return shall not expire before the day 60 days
after the day on which the Franchise Tax Board receives that
document.
(d) If a taxpayer determines in good faith that it is an exempt
organization and files a return as an exempt organization under
Section 23772, and if the taxpayer is thereafter held to be a taxable
organization for the taxable year for which the return is filed,
that return shall be deemed the return of the organization for the
purposes of this section.
SEC. 7. Section 19058 of the Revenue and Taxation Code is amended
to read:
19058. (a) If the taxpayer omits from gross income an amount
properly includable therein which is in excess of 25 percent of the
amount of gross income stated in the return, a notice of a proposed
deficiency assessment may be mailed to the taxpayer within
six three years after the return was filed.
Additionally, in the case of a corporation, a proceeding in court for
the collection of the tax may be commenced without assessment at any
time within six three years after the
return was filed.
(b) For purposes of this section both of the following shall
apply:
(1) In the case of a trade or business, the term "gross income"
means the total of the amounts received or accrued from the sale of
goods or services (if the amounts are required to be shown on the
return) prior to diminution by the cost of the sales or service.
(2) In determining the amount omitted from gross income, there
shall not be taken into account any amount which is omitted from
gross income stated in the return if the amount is disclosed in the
return, or in a statement attached to the return, in a manner
adequate to apprise the Franchise Tax Board of the nature and amount
of the item.
SEC. 8. Section 19060 of the Revenue and Taxation Code is amended
to read:
19060. (a) If a taxpayer fails to report a change or correction
by the Commissioner of Internal Revenue or other officer of the
United States or other competent authority or fails to file an
amended return as required by Section 18622, a notice of proposed
deficiency assessment resulting from the adjustment may be mailed to
the taxpayer at any time.
(b) If, after the six-month period required in Section 18622, a
taxpayer or the Internal Revenue Service reports a change or
correction by the Commissioner of Internal Revenue or other officer
of the United States or other competent authority or files an amended
return as required by Section 18622, a notice of proposed deficiency
assessment resulting from the adjustment may be mailed to the
taxpayer within four three years from
the date the taxpayer or the Internal Revenue Service notifies the
Franchise Tax Board of that change or correction or files that
return.
SEC. 9. Section 19061 of the Revenue and Taxation Code is amended
to read:
19061. In case of a deficiency described in Sections 24945 and
24946, and in Sections 1033(a)(2)(C) and 1033(a)(2)(D) of the
Internal Revenue Code, the deficiency may be assessed at any time
prior to the expiration of the time therein provided
three years after the return was filed .
SEC. 10. Section 19065 of the Revenue and Taxation Code is amended
to read:
19065. If any taxpayer agrees with the United States Commissioner
of Internal Revenue for an extension or renewals thereof of the
period for proposing and assessing deficiencies in federal income
taxes for any year, the period for mailing a notice of a proposed
deficiency shall be four three years
after the return was filed or six months after the date of the
expiration of the agreed period for assessing deficiencies in the
federal income tax, whichever period expires the later.
SEC. 11. Section 19066.5 of the Revenue and Taxation Code is
amended to read:
19066.5. In the case of any information that is required to be
reported to the Franchise Tax Board under Section 19141.2 or 19141.5,
the time for assessment of any tax imposed by Part 10 (commencing
with Section 17001), Part 11 (commencing with Section 23001), or this
part with respect to any event or period to which that information
relates shall not expire before the date that is four
three years after the date on which the
Franchise Tax Board is furnished the information required to be
reported under Section 19141.2 or 19141.5, or within the periods
provided in Section 19057, 19058, 19059, 19060, 19065, 24945, 24946,
Section 1033(a)(2)(C) of the Internal Revenue Code, or Section 1033
(a)(2)(D) of the Internal Revenue Code, whichever period expires
later.
SEC. 12. Section 23051.5 of the Revenue and Taxation Code is
amended to read:
23051.5. (a) (1) Unless otherwise specifically provided, the
terms "Internal Revenue Code," "Internal Revenue Code of 1954," or
"Internal Revenue Code of 1986," for purposes of this part, mean
Title 26 of the United States Code, including all amendments thereto,
as enacted on the specified date for the applicable taxable year as
defined in paragraph (1) of subdivision (a) of Section 17024.5.
(2) (A) Unless otherwise specifically provided, for federal laws
enacted on or after January 1, 1987, and on or before the specified
date for the taxable year, uncodified provisions that relate to
provisions of the Internal Revenue Code that are incorporated for
purposes of this part, shall be applicable to the same taxable years
as the incorporated provisions.
(B) In the case where Section 901 of the Economic Growth and Tax
Relief Act of 2001 (Public Law 107-16) applies to any provision of
the Internal Revenue Code that is incorporated for purposes of this
part, Section 901 of the Economic Growth and Tax Relief Act of 2001
(Public Law 107-16) shall apply for purposes of this part in the same
manner and to the same taxable years as it applies for federal
income tax purposes.
(3) Subtitle G (Tax Technical Corrections) and Part I of Subtitle
H (Repeal of Expired or Obsolete Provisions) of the Revenue
Reconciliation Act of 1990 (Public Law 101-508) modified numerous
provisions of the Internal Revenue Code and provisions of prior
federal acts, some of which are incorporated by reference into this
part. Unless otherwise provided, the provisions described in the
preceding sentence, to the extent that they modify provisions that
are incorporated into this part, are declaratory of existing law and
shall be applied in the same manner and for the same periods as
specified in the Revenue Reconciliation Act of 1990.
(b) Unless otherwise specifically provided, when applying the
Internal Revenue Code for purposes of this part, a reference to any
of the following is not applicable for purposes of this part:
(1) Domestic International Sales Corporations (DISC), as defined
in Section 992(a) of the Internal Revenue Code.
(2) Foreign Sales Corporations (FSC), as defined in Section 922(a)
of the Internal Revenue Code.
(3) A personal holding company, as defined in Section 542 of the
Internal Revenue Code.
(4) A foreign personal holding company, as defined in Section 552
of the Internal Revenue Code.
(5) A foreign investment company, as defined in Section 1246(b) of
the Internal Revenue Code.
(6) A foreign trust as defined in Section 679 of the Internal
Revenue Code.
(7) Foreign income taxes and foreign income tax credits.
(8) Federal tax credits and carryovers of federal tax credits.
(c) (1) The provisions contained in Sections 41 to 44, inclusive,
and Section 172 of the Tax Reform Act of 1984 (Public Law 98-369),
relating to treatment of debt instruments, is not applicable for
taxable years beginning before January 1, 1987.
(2) The provisions contained in Public Law 99-121, relating to the
treatment of debt instruments, is not applicable for taxable years
beginning before January 1, 1987.
(3) For taxable years beginning on and after January 1, 1987, the
provisions referred to by paragraphs (1) and (2) shall be applicable
for purposes of this part in the same manner and with respect to the
same obligations as the federal provisions, except as otherwise
provided in this part.
(d) When applying the Internal Revenue Code for purposes of this
part, regulations promulgated in final form or issued as temporary
regulations by "the secretary" shall be applicable as regulations
issued under this part to the extent that they do not conflict with
this part or with regulations issued by the Franchise Tax Board.
(e) Whenever this part allows a taxpayer to make an election, the
following rules shall apply:
(1) A proper election filed with the Internal Revenue Service in
accordance with the Internal Revenue Code or regulations issued by
"the secretary" shall be deemed to be a proper election for purposes
of this part, unless otherwise expressly provided in this part or in
regulations issued by the Franchise Tax Board.
(2) A copy of that election shall be furnished to the Franchise
Tax Board upon request.
(3) (A) Except as provided in subparagraph (B), in order to obtain
treatment other than that elected for federal purposes, a separate
election shall be filed with the Franchise Tax Board at the time and
in the manner that may be required by the Franchise Tax Board.
(B) (i) If a taxpayer makes a proper election for federal income
tax purposes prior to the time that taxpayer becomes subject to the
tax imposed under this part or Part 10 (commencing with Section
17001), that taxpayer is deemed to have made the same election for
purposes of the tax imposed by this part, Part 10 (commencing with
Section 17001), and Part 10.2 (commencing with Section 18401), as
applicable, and that taxpayer may not make a separate election for
California tax purposes unless that separate election is expressly
authorized by this part, Part 10 (commencing with Section 17001), or
Part 10.2 (commencing with Section 18401), or by regulations issued
by the Franchise Tax Board.
(ii) If a taxpayer has not made a proper election for federal
income tax purposes prior to the time that taxpayer becomes subject
to tax under this part or Part 10 (commencing with Section 17001),
that taxpayer may not make a separate California election for
purposes of this part, Part 10 (commencing with Section 17001), or
Part 10.2 (commencing with Section 18401), unless that separate
election is expressly authorized by this part, Part 10 (commencing
with Section 17001), Part 10.2 (commencing with Section 18401), or by
regulations issued by the Franchise Tax Board.
(iii) This subparagraph applies only to the extent that the
provisions of the Internal Revenue Code or regulations issued by "the
secretary" authorizing an election for federal income tax purposes
apply for purposes of this part, Part 10 (commencing with Section
17001), or Part 10.2 (commencing with Section 18401).
(f) Whenever this part allows or requires a taxpayer to file an
application or seek consent, the rules set forth in subdivision (e)
shall apply to that application or consent.
(g) When applying the Internal Revenue Code for purposes of
determining the statute of limitations under this part, any reference
to a period of three years shall be modified to read four years for
purposes of this part.
(h)
(g) When applying, for purposes of this part, any
section of the Internal Revenue Code or any applicable regulation
thereunder, all of the following shall apply:
(1) For purposes of Chapter 2 (commencing with Section 23101),
Chapter 2.5 (commencing with Section 23400), and Chapter 3
(commencing with Section 23501), the term "taxable income" shall mean
"net income."
(2) For purposes of Article 2 (commencing with Section 23731) of
Chapter 4, the term "taxable income" shall mean "unrelated business
taxable income," as defined by Section 23732.
(3) Any reference to "subtitle," "Chapter 1," or "chapter" shall
mean this part.
(4) The provisions of Section 7806 of the Internal Revenue Code,
relating to construction of title, shall apply.
(5) Any provision of the Internal Revenue Code that becomes
operative on or after the specified date for that taxable year shall
become operative on the same date for purposes of this part.
(6) Any provision of the Internal Revenue Code that becomes
inoperative on or after the specified date for that taxable year
shall become inoperative on the same date for purposes of this part.
(7) Due account shall be made for differences in federal and state
terminology, effective dates, substitution of "Franchise Tax Board"
for "secretary" when appropriate, and other obvious differences.
(8) Any provision of the Internal Revenue Code that refers to a
"corporation" shall, when applicable for purposes of this part,
include a "bank," as defined by Section 23039.
(9) Except as otherwise provided, any reference to Section 501 of
the Internal Revenue Code shall be interpreted to also refer to
Section 23701.
(i)
(h) Any reference to a specific provision of the
Internal Revenue Code shall include modifications of that provision,
if any, in this part.
SEC. 13. Section 24273.5 of the Revenue and Taxation Code is
amended to read:
24273.5. (a) Noncash patronage allocations from farmers'
cooperative and mutual associations (whether paid in capital stock,
revolving fund certificates, retain certificates, certificates of
indebtedness, letters of advice or in some other manner that
discloses the dollar amount of such noncash patronage allocations)
may, at the election of the taxpayer, be considered as income and
included in gross income for the taxable year in which received.
(b) If a taxpayer exercises the election provided for in
subdivision (a), the amount included in gross income shall be the
face amount of such allocations.
(c) If a taxpayer elects to exclude noncash patronage allocations
from gross income for the taxable year in which received, such
allocations shall be included in gross income in the year that they
are redeemed or realized upon.
(d) If a taxpayer exercises the election provided for in
subdivision (c), the face amount of such noncash patronage
allocations shall be disclosed in the return made for the taxable
year in which such noncash patronage allocations were received.
(e) If a taxpayer exercises the election provided for in
subdivision (a) or (c) for any taxable year, then the method of
computing income so adopted shall be adhered to with respect to all
subsequent taxable years unless with the approval of the Franchise
Tax Board a change to a different method is authorized.
(f) If a taxpayer has made the election provided for in
subdivision (c), then (1) the statutory period for the assessment of
a deficiency for any taxable year in which the amount of any noncash
patronage allocations are realized shall not expire prior to the
expiration of four three years from the
date the Franchise Tax Board is notified by the taxpayer (in any
manner as the Franchise Tax Board may by regulation prescribe) of the
realization of gain on such allocations; and (2) that deficiency may
be assessed prior to the expiration of the four-year
three-year period, notwithstanding the
provisions of Section 19057 or the provisions of any other law or
rule of law which would otherwise prevent such assessment.
SEC. 14. Section 24945 of the Revenue and Taxation Code is amended
to read:
24945. If a taxpayer has made the election provided in Section
24944(a), then--
(a) The statutory period for the assessment of any deficiency, for
any taxable year in which any part of the gain on such conversion is
realized, attributable to such gain shall not expire prior to the
expiration of four three years from the
date the Franchise Tax Board is notified by the taxpayer (in such
manner as the Franchise Tax Board may by regulations prescribe) of
the replacement of the converted property or of an intention not to
replace; and
(b) Such deficiency may be assessed before the expiration of such
four-year three-year period
notwithstanding the provisions of any other law or rule of law which
would otherwise prevent such assessment.