(a)The Legislature finds and declares all of the following:
(1)In 1966, the California Legislature enacted the Uniform Division of Income for Tax Purposes Act under Sections 25120 through 25139, inclusive, of the Revenue and Taxation Code.
(2)That act provides for the allocation and apportionment of income of taxpayer having income from business activities which is taxable both within and without the state.
(3)On April 28, 2006, the Franchise Tax Board issued Franchise Tax Board Legal Ruling 2006-1 (the Legal Ruling), regarding the treatment of apportionment factors attributable to income exempt from income tax
under the Corporation Tax Law.
(4)It is the intent of the Legislature that the Legal Ruling shall apply with respect to apportionment factors attributable to the income o
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(a)
The Legislature finds and declares all of the following:
(1)
In 1966, the California Legislature enacted the Uniform Division of Income for Tax Purposes Act under Sections 25120 through 25139, inclusive, of the Revenue and Taxation Code.
(2)
That act provides for the allocation and apportionment of income of taxpayer having income from business activities which is taxable both within and without the state.
(3)
On April 28, 2006, the Franchise Tax Board issued Franchise Tax Board Legal Ruling 2006-1 (the Legal Ruling), regarding the treatment of apportionment factors attributable to income exempt from income tax
under the Corporation Tax Law.
(4)
It is the intent of the Legislature that the Legal Ruling shall apply with respect to apportionment factors attributable to the income of taxpayers subject to tax under the Corporation Tax Law.
(5)
It is the intent of the Legislature that this section does not constitute a change in, but is declaratory of, existing law.
(6)
It is the intent of the Legislature that the clarification in this section apply to any apportionment formula currently and formerly allowed under this article.
(b)
(1)
A transaction or activity, to the extent that it generates income or loss not included in “net income,” as defined in Section 24341, subject to apportionment, shall be excluded from the apportionment formulas
under this part, including Sections 25128, 25128.7, and 25141, and former Section 25128.5.
(2)
For the purposes of this section, “not included in ‘net income,’” means income from transactions and activities that is not included in net income subject to apportionment for any reason, including, but not limited to, exclusion, deduction, exemption, elimination, or nonrecognition.
(c)
(1)
The Franchise Tax Board may adopt regulations that are necessary or appropriate to carry out the purpose of this section, which is to prevent inclusion within the apportionment formula of transactions and activities that give rise to income that is not subject to apportionment.
(2)
The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code)
shall not apply to any regulation, standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
(d)
This section shall apply to taxable years beginning before, on, or after the effective date of the act adding this section.