Imposition of Personal Income Tax

Chapter 2 of Part 10 of Division 2 deals with the imposition of tax under the Personal Income Tax Law.

Section 17041 imposes for each taxable year upon the entire taxable income of every resident of this state who is not a part-year resident, except the head of a household, taxes in the specified amounts and at the specified rates upon the amount of taxable income computed for the taxable year as if the resident were a resident of this state for the entire taxable year and for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions.

There is imposed for each taxable year upon the taxable income of every nonresident or part-year resident, except the head of a household, a tax as calculated in this section. The tax imposed is calculated by multiplying the “taxable income of a nonresident or part-year resident” by a rate (expressed as a percentage) equal to the tax computed on the entire taxable income of the nonresident or part-year resident as if the nonresident or part-year resident were a resident of this state for the taxable year and as if the nonresident or part-year resident were a resident of this state for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, divided by the amount of that income.

Section 17041.5 states that, notwithstanding any statute, ordinance, regulation, rule or decision to the contrary, no city, county, city and county, governmental subdivision, district, public and quasi-public corporation, municipal corporation, whether incorporated or not or whether chartered or not, must levy or collect or cause to be levied or collected any tax upon the income, or any part thereof, of any person, resident or nonresident. This section is not to be construed so as to prohibit the levy or collection of any otherwise authorized license tax upon a business measured by or according to gross receipts.

Section 17042 states that Section 2(b) and (c) of the Internal Revenue Code, relating to definitions of head of household and certain married individuals living apart, applies.

Section 17043 provides, in addition to any other taxes imposed by this part, an additional tax is imposed at the rate of 1 percent on that portion of a taxpayer’s taxable income in excess of $1,000,000. Specified provisions do not apply to the tax imposed by this section.

Section 17045 states that, in the case of a joint return of spouses, the tax imposed is twice the tax which would be imposed if the taxable income were cut in one-half. A return of a surviving spouse is treated as a joint return of spouses.

Section 17046 defines the term “surviving spouse.”

Section 17048 states that individuals with taxable income of amounts as prescribed by the FTB computes their taxes under tax tables prescribed by the FTB. The tax tables reflect the tax imposed in income progressions of not less than $100, giving effect to the marital or other status of the individual. This does not apply to specified individuals and estates or trusts.

Section 17049 specifies that, if an item of income was included in the gross income of an individual for a preceding taxable year or years because it appeared that the individual had an unrestricted right to that item, a deduction is allowable for the taxable year based on the repayment of the item by the individual during the taxable year, and the amount of that deduction exceeds $3,000, then the tax imposed by this part for the taxable year on that individual is the lesser of the two specified amounts.

Section 17052 allows against the “net tax” an earned income tax credit in an amount equal to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section. The earned income tax credit authorized by this section is only operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.

Section 17052.1 allows against the “net tax” a young child tax credit to a qualified taxpayer, in an amount as determined in this section. The amount of the young child tax credit shall be equal to $1,176, multiplied by the earned income tax credit adjustment factor for the taxable year as specified. The amount of the young child tax credit specified is recomputed annually in the same manner as the recomputation of income tax brackets. The term “qualifying child” is defined.

Section 17052.6 allows against the “net tax” an amount determined in accordance with Section 21 of the Internal Revenue Code, relating to expense for household and dependent care services necessary for gainful employment, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section. The amount of the credit is a percentage of the allowable federal credit without taking into account whether there is a federal tax liability The percentage of the allowable federal credit is determined as specified. The term “adjusted gross income” is defined. The credit authorized by this section limited as specified.

Section 17052.11 allows, before January 1, 2031, to a qualified taxpayer a credit against the “net tax,” in an amount equal to the qualified amount and the following terms are defined: “electing qualified entity,” “qualified amount,” and “qualified taxpayer.”

Section 17052.12 allows against the “net tax” a credit for the taxable year an amount determined in accordance with Section 41 of the Internal Revenue Code, relating to credit for increasing research activities, except as specified. The term “qualified research” is defined.

Section 17052.2 allows against the “net tax” a foster youth tax credit to a qualified taxpayer, in an amount as determined under this section. The amount of the foster youth tax credit is equal to $1,176, multiplied by the earned income tax credit adjustment factor for the taxable year, as specified.

The amount is recomputed annually in the same manner as the recomputation of income tax brackets. The foster youth tax credit is reduced by $20 for each $100, or fraction thereof, by which the qualified taxpayer’s earned income exceeds the threshold amount.

Section 17052.25 allows against the “net tax” an amount equal to 50 percent of the costs paid or incurred by a taxpayer for the adoption of any minor child who is a citizen or legal resident of the United States and was in the custody of a public agency of either this state or a political subdivision of this state. The credit cannot exceed $2,500 per minor child. The term “costs” is defined. The credit authorized by this section is claimed for the taxable year in which the decree or order of adoption is entered.

Section 17053.5 states that there is allowed a credit against the renter’s “net tax”. The amount of the credit is as specified. For spouses, if each spouse maintained a separate place of residence and resided in this state during the entire taxable year, each spouse is allowed one-half the full credit allowed to married persons provided. The term “qualified renter” is defined.

Section 17053.6 allows a credit against the “net tax” an amount equal to 10 percent of the amount of wages paid or incurred during the taxable year to each prisoner who is employed in a joint venture program established through agreement with the Director of Corrections. The Department of Corrections must forward annually to the Franchise Tax Board a list of all employers certified by the Department of Corrections as active participants in a joint venture program.

Section 17053.7 allows a credit against the “net tax” an amount equal to 10 percent of the amount of wages paid to each employee who is certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code. The credit under this section does not apply to an individual unless, on or before the day on which that individual begins work for the employer, the employer meets two specified conditions.

The credit under this section does not apply to wages paid in excess of $3,000 during a taxable year by a taxpayer to the same individual. With respect to each qualified employee, the aggregate credit under this section cannot exceed $600. The credit under this section does not apply to wages paid to an individual in four specified circumstances.

Section 17053.12 provides that, in the case of a taxpayer who transports any agricultural product donated, there is allowed as a credit against the “net tax” an amount equal to 50 percent of the transportation costs paid or incurred by the taxpayer in connection with the transportation of that donated agricultural product.

If any credit allowed by this section is claimed by the taxpayer, any deduction otherwise allowed under this part for that amount of the cost paid or incurred by the taxpayer which is eligible for the credit that is claimed is reduced by the amount of the credit allowed. Upon delivery of the donated agricultural product by a taxpayer authorized to claim a credit, the nonprofit charitable organization must provide a certificate to the taxpayer who transported the agricultural product. The certificate must contain specified information.

Section 17053.40 allows before January 1, 2036 a credit against the “net tax” for a qualified taxpayer in an amount equal to 20 percent of the qualified expenditures paid or incurred by the qualified taxpayer during the taxable year, not to exceed $20,000,000 per qualified taxpayer per taxable year. The following terms are defined: “bank,” “eligible transmission project,” “qualified expenditures,” “qualified taxpayer,” and “qualified wages.” 

If the credit allowed by this section is claimed by the qualified taxpayer, a deduction otherwise allowed under this part for any amount of qualified expenditures paid or incurred by the qualified taxpayer is reduced by the amount of the qualified expenditures taken into account in calculating the credit allowed by this section. If the credit allowed by this section is claimed by the qualified taxpayer, the taxpayer cannot earn a return on equity for the eligible transmission project.

The bank is required to inform the Franchise Tax Board of any eligible transmission project that the bank approves for financial assistance and provide any other information the FTB requires for administration of the credit allowed by this section.

Section 17053.42 provides a credit against the “net tax” the amount paid or incurred for eligible access expenditures. The credit is allowed in accordance with Section 44 of the Internal Revenue Code, relating to expenditures to provide access to disabled individuals, except that the credit amount is specified. The credit amount allowed under this section is 50 percent of the eligible access expenditures for the taxable year as do not exceed $250.

Section 17053.75 provides a qualified taxpayer a credit against the “net tax” for an amount greater than dues paid in that taxable year by the qualified taxpayer multiplied by the workers’ tax credit adjustment factor. The following terms are defined: “bona fide labor organization,” “dues,” and “qualified taxpayer.” The credit allowed is in lieu of any other credit or deduction that the qualified taxpayer may otherwise be allowed under this part with respect to amounts taken into account in calculating the credit allowed by this section.

Section 17053.98.1 allows to a qualified taxpayer a credit against the “net tax,” subject to a computation and ranking by the California Film Commission and the allocation amount categories, in an amount equal to 35 or 40 percent, whichever is the applicable credit percentage of the qualified expenditures for the production of a qualified motion picture in California. A credit is not allowed under this section for any qualified expenditures for the production of a motion picture in California if a credit has been claimed for those same expenditures under other provisions of law.

The credit allowed for the taxable year in which the California Film Commission issues the credit certificate for the qualified motion picture, and is for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture. The amount of the credit allowed to a qualified taxpayer is limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission.

The following terms are defined: “applicable period,” “Los Angeles zone,” “original photography,” “qualified expenditures relating to original photography outside the Los Angeles zone,” “ancillary product,” “budget,” “clip use,” “credit certificate,” Diversity workplace checklist,” “employee fringe benefits,” “independent film,” “jobs ratio,” “licensing,” “new use,” “pilot for a new television series,” “portproduction,” “preproduction,” “principal photography,” “production period,” “qualified entity,” “qualified expenditures,” “qualified individual,” and “qualified motion picture.

Section 17053.99 provides that a taxpayer seeking certification of a certified studio construction project by the California Film Commission is required to make specified certifications to the California Film Commission.

Section 17054 provides that the following credits for personal exemption may be deducted from the tax imposed, less any increases imposed. In the case of a single individual, a head of household, or a spouse making a separate return, a credit of $52. In the case of a surviving spouse, or spouses making a joint return, a credit of $104. If one spouse was a resident for the entire taxable year and the other spouse was a nonresident for all or any portion of the taxable year, the personal exemption is divided equally.

Section 17054.1 provides that, in the case of any taxpayer whose federal adjusted gross income for the taxable year exceeds the threshold amount, each credit to which this section applies must be reduced by $6 for each $2,500, or fraction thereof, by which the taxpayer’s federal adjusted gross income exceeds the threshold amount. This section applies to the two specified credits.

Section 17054.5 allows as a credit against the “net tax” of a qualified individual an amount equal to 30 percent of the net tax. The terms “qualified individual,” “qualified joint custody head of household,” and “qualified taxpayer” are defined. The terms “qualified joint custody head of household,” “qualifying child,” and “qualified taxpayer” are defined.

Section 17054.7 provides a credit against the “net tax” for a “qualified senior head of household” an amount equal to 2 percent of the taxable income.

Section 17055 explains that an individual who is a nonresident or a part-year resident is allowed all credits provided under this part against the “net tax,” except those described, relating to taxes paid to another state, in the same proportion as the ratio that “taxable income of a nonresident or part-year resident” bears to “total taxable income.” Credits allowed under this part that are conditional upon a transaction occurring wholly within California and the credit allowed is to be allowed in their entirety.

Section 17056 defines the term “dependents.”

Section 17057.5 contains a statement of legislative intent regarding the amount of the state low-income housing tax credit allocated to a project.

Section 17058 allows as a credit against the “net tax” a state low-income housing tax credit in an amount equal to the amount determined in law and computed in accordance with Section 42 of the Internal Revenue Code, relating to low-income housing credit, except as otherwise provided in this section.

Section 1705.2 states that, before January 1, 2030, there is allowed as a credit against the “net tax,” an amount as determined by the committee and approved. The credit under this section is allocated by GO-Biz with respect to fiscal years. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section is set forth in a written agreement between GO-Biz and the taxpayer and is based on the twelve specified factors. The written agreement entered into is required to include three specified items. The terms “committee” and “GO-Biz” are defined. GO-Biz is required to do eight specified duties. The Franchise Tax Board is required to do three specified activities.

Section 17061 provides that, in the case of a person entitled to a refund pursuant to Section 1176 of the Unemployment Insurance Code, there is a credit against the tax imposed under this part in the amount of the refund. If the tax due after deduction of any other credit under this part is less than the credit allowable pursuant to this section, the difference is a tax refund.

If the FTB disallows the refund or credit provided for by this section, the FTB is required to notify the claimant accordingly. The FTB’s action upon the credit or refund is final unless the claimant files a protest with the Director of Employment Development. None of the remedies provided by this part are available to a claimant.