Corporate Distributions

Revenue and Taxation Code Division 2, Part 11, Chapter 8 deals with corporate distributions and adjustments under the California Corporation Tax Law.

Section 24451 provides that Subchapter C of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to corporate distributions and adjustments, applies.

Section 24451.1 states that, if an election has been made by a taxpayer under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, or where a taxpayer is deemed to have made an election under Section 338(e) of the Internal Revenue Code, relating to deemed election where purchasing corporation acquires asset of target corporation, a separate election is not allowed under this part and the federal election is binding for purposes of this part.

If an election has not been made by a taxpayer under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, or where a taxpayer has not been deemed to have made an election under Section 338(e) of the Internal Revenue Code, relating to deemed election where purchasing corporation acquires asset of target corporation, for federal income tax purposes, the taxpayer cannot make a separate state election with respect to Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, under this part.

Section 24452 states that Section 301(e)(2) of the Internal Revenue Code, relating to 20 percent corporate shareholders, is modified to refer to Section 24402 in lieu of Sections 243, 244, and 245 of the Internal Revenue Code.

Section 24453 states that Section 302(c)(2) of the Internal Revenue Code, relating to determining termination of interest, is modified as specified.

Section 24454 states that Section 304(b)(5)(B) of the Internal Revenue Code, relating to special rule in case of foreign acquiring corporation, applies.

Section 24454.1 states that the amendments to Section 367(a) of the Internal Revenue Code, relating to repeal of the exception for transfers of certain property used in the active conduct of a trade or business, does not apply.

Section 24455 allows the FTB to include in the gross income of the taxpayer (or a member of the taxpayer’s combined reporting group) in that taxable year the taxpayer’s pro rata share (or the pro rata share of a member of the taxpayer’s combined reporting group) of any of those insurers’ current earnings and profits in that taxable year, but not to exceed an amount equal to the specific insurer’s net income attributable to investment income for that year minus that insurer’s net written premiums received in that same taxable year, if all of the specified conditions apply.

Section 24456 states that Section 306(f) of the Internal Revenue Code, relating to source of gain, does not apply.

Section 24458 states that Section 312(k)(3)(B)(ii) of the Internal Revenue Code, relating to special rule for real estate investment trusts, does not apply.

Section 24458 states that Internal Revenue Service Notice 2008-83, relating to the treatment of deductions under Section 382(h) of the Internal Revenue Code following an ownership change, is not applicable for purposes of taxes imposed under Part 11 with respect to any ownership change occurring at any time.

Section 24459 states that Section 382(n) of the Internal Revenue Code, relating to special rule for certain ownership changes, does not apply. Section 382(d)(3) of the Internal Revenue Code, relating to application to carryforward of disallowed interest, does not apply. The amendments made by Section 13301(b)(3) of the Tax Cuts and Jobs Act, 2017, relating to loss corporation, does not apply.

Section 24461 states that the provisions of Section 633 of Public Law 99-514, relating to effective dates for recognition of gain and loss on distributions of property in liquidation, apply except as otherwise provided. The provisions of Section 633(e) of Public Law 99-514, relating to other transition rules, do not apply. The amendments to Section 633 of Public Law 99-514, relating to effective dates for recognition of gain and loss on distributions of property in liquidation, are declaratory of existing law.

Section 24465 provides that if in connection with any exchange described in Section 332, 351, 354, 356, or 361 of the Internal Revenue Code, a taxpayer transfers property to an insurer, the insurer is not, for purposes of determining the extent to which gain is recognized on that transfer, to be considered to be a corporation for purposes of this part.

Section 24471 states that Section 381(c) of the Internal Revenue Code, relating to items of the distributor or transferor corporation, is modified as specified.

Section 24471.5 states that Section 381(c)(20) of the Internal Revenue Code, relating to carryforward of disallowed business interest, does not apply.

Section 24472 states that the amendments to Section 382 of the Internal Revenue Code made by Section 13226 of the Revenue Reconciliation Act of 1993, relating to modifications of discharge of indebtedness provisions, apply.

Section 24481 states that Section 383 of the Internal Revenue Code, relating to special limitations on certain excess credits, is modified to apply to credits allowable.