Credit for Taxes Paid

Division 2, Part 10, Chapter 12 of the Revenue and Taxation Code deals with credit for taxes paid under the California Personal Income Tax Law.

Section 18001 provides that residents are allowed a credit against the “net tax” for net income taxes imposed by and paid to another state (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) on income taxable under this part. The credit is not allowed in four specified instances.

Section 18002 states that nonresidents are allowed a credit against the “net tax” for net income taxes imposed by and paid to the state of residence (not including any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062) on income taxable under this part. Five specified instances of when the credit is not to be allowed are set forth in this section. The term “net income taxes” is defined.

Section 18003 states that an estate or trust is considered a resident of the state which taxes the income of the estate or trust irrespective of whether the income is derived from sources within that state.

Section 18004 provides that, if an estate or trust is a resident of this State and also a resident of another state, there is allowed a credit against the taxes imposed by this part for net income taxes imposed by and paid to the other state, subject to the two specified conditions.

Section 18005 states that a resident beneficiary of an estate or trust who is taxable on the income of the estate or trust under Chapter 9 of this part is to be allowed, subject to the two specified conditions, a credit against the taxes imposed by this part on the income for net income taxes paid by the estate or trust to another state on the income.

Section 18006 provides that, for purposes of determining a credit under Section 18001 (relating to residents) or Section 18002 (relating to nonresidents), both of the specified requirements apply.

Section 18007 states that, if any taxes paid to another state for which a taxpayer has been allowed a credit under this chapter are at any time credited or refunded to the taxpayer, the taxpayer is required to immediately report that fact to the Franchise Tax Board.

Section 18008 provides that a tax equal to the credit allowed for the taxes credited or refunded by the other state is due and payable from the taxpayer upon notice and demand from the Franchise Tax Board.

Section 18009 requires interest to be assessed, collected and paid in the same manner as the tax at the adjusted annual rate established from the date the credit was allowed under this part to the date of payment.

Section 18011 states that the credit against the taxes imposed by this part for net income taxes paid to another state is not allowed to any taxpayer or any class of taxpayers if the allowance of the credit will result in an invalid or illegal discrimination against another taxpayer or another class of taxpayers.