Income Tax Deductions

Revenue and Taxation Code Division 2, Part 10, Chapter 3, Article 6 deals with deduction in computing taxable income under the California Personal Income Tax Law.

Section 17201 provides that Part VI of Subchapter B of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to itemized deductions for individuals and corporations, applies Part VII of Subchapter B of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to additional itemized deductions for individuals, applies. Part IX of Subchapter B of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to items not deductible, applies.

Section 17201.1 states that Section 174 of the Internal Revenue Code, relating to amortization of research and experimental expenditures, applies. Section 217(k) of the Internal Revenue Code, relating to the suspension of the moving expense deduction for taxable years 2018 to 2025, does not apply. The amendments made by Section 13304 of the Tax Cuts and Jobs Act, 2017 to Section 274 of the Internal Revenue Code, relating to limitation on deduction by employers of expenses for fringe benefits, do not apply. The amendments made by Section 13202(a) of the Tax Cuts and Jobs Act, 2017 to Section 280F of the Internal Revenue Code, relating to limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes, do not apply.

Section 17201.2 states that the amendments made by Section 13531(a) of the Tax Cuts and Jobs Act to add Section 162(r) to the Internal Revenue Code, relating to the disallowance of FDIC premiums paid by certain large financial institutions, apply.

Section 17201.4 states that Section 179B of the Internal Revenue Code, relating to deductions for capital costs incurred in complying with Environmental Protection Agency sulfur regulations, does not apply.

Section 17201.5 states that Section 181 of the Internal Revenue Code, relating to treatment of certain qualified film and television productions, does not apply.

Section 17201.6 states that Section 199A of the Internal Revenue Code, relating to qualified business income, does not apply.

Section 1701.7 states that the amendments made by Section 302(b)(2) of Division O of the Further Consolidated Appropriations Act, 2020, relating to coordination with deduction for student loan interest, applies.

Section 17202 states that there is allowed to an employer as an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business (as provided in Section 162(a) of the Internal Revenue Code), the expenses involved in carrying out a parking cash-out program.

Section 17203 defines the terms “compensation” and “earned income.”

Section 17204 states that Section 165(h)(3) of the Internal Revenue Code, relating to special rules for losses in federally declared disasters, does not apply. Section 165(h)(5) of the Internal Revenue Code, relating to limitation for taxable years 2018 to 2025, does not apply.

Section 17204.2 states that the amendments made by Section 11050 of the Tax Cuts and Jobs Act, 2017 to Section 165(d) of the Internal Revenue Code, relating to wagering losses, do not apply.

Section 17207 states that an excess disaster loss is carried to other taxable years with respect to losses resulting from any of the 43 specified disasters. In the case of any loss allowed under Section 165(c) of the Internal Revenue Code, relating to limitation of losses of individuals, any excess disaster loss is carried forward to each of the five taxable years following the taxable year for which the loss is claimed.

Section 17207.4 states that Section 165(i) of the Internal Revenue Code is modified.

Section 17207.14 states that, before January 1, 2029, Section 165(i) of the Internal Revenue Code, relating to disaster losses, applies to any loss sustained as a result of any disaster occurring in any city, county, or city and county in this state that is proclaimed by the Governor to be in a state of emergency. The election under Section 165(i) of the Internal Revenue Code, relating to disaster losses, may be made on a return or amended return filed on or before the due date of the return, determined with regard to any extension of time for filing the return, for the taxable year in which the disaster occurred.

Section 17208.1 allows as a deduction the amount of interest paid or incurred by a taxpayer during the taxable year on any loan or financed indebtedness obtained from a publicly owned utility company for the purpose of acquiring and installing any energy efficient product or equipment to a qualified residence located in this state. The following terms are defined: “energy efficient product or equipment,” “energy efficient product or equipment,” “zone heating products,” “publicly owned utility company,” “qualified residence,” and “publicly owned utility company loan or financial indebtedness.”

Section 17209 states that, before January 1, 2030, Section 280E of the Internal Revenue Code, relating to expenditures in connection with the illegal sale of drugs, does not apply to the carrying on of any trade or business that is commercial cannabis activity by a licensee. The terms “commercial cannabis activity” and “licensee” are defined.

Section 17215 states that Section 220(a) of the Internal Revenue Code, relating to deduction allowed, is modified. Section 220(f)(4) of the Internal Revenue Code, relating to additional tax on distributions not used for qualified medical expenses, is modified.

Section 17215.1 states that Section 220(f)(5) of the Internal Revenue Code, relating to rollover contributions, does not apply.

Section 17215.4 states that Section 223 of the Internal Revenue Code, relating to health savings accounts, does not apply.

Section 17220 states that Section 164(a)(3) of the Internal Revenue Code, relating to the deductibility of state, local, and foreign income, war profits, and excess profits taxes, does not apply. Section 164(b)(5) of the Internal Revenue Code, relating to general sales taxes, does not apply. Section 164(b)(6) of the Internal Revenue Code, relating to the limitation on individual deductions for taxable years 2018 to 2025, does not apply.

Section 17222 prohibits a deduction from being allowed for the tax deducted and withheld under Section 18662 and Section 13020 of the Unemployment Insurance Code either to the employer or to the recipient of the income in computing taxable income under this part.

Section 17224 states that Section 163(e) of the Internal Revenue Code is modified.

Section 17225 states that Section 163(h)(3)(E) of the Internal Revenue Code, relating to mortgage insurance premiums treated as interest, does not apply. Section 163(h)(3)(F) of the Internal Revenue Code, relating to special rules for taxable years 2018 to 2025, does not apply.

Section 17228 states that a deduction is not allowed for the amount of any fine or penalty paid or incurred by an owner of all or part of a professional sports franchise, where that fine or penalty is assessed or imposed by the professional sports league that includes that franchise.

Section 17230 states that payments made to the California Housing Finance Agency by the borrower are to be considered payments of interest for purposes of Section 163 of the Internal Revenue Code.

Section 17240 states that the fee imposed by Section 9008 of the Patient Protection and Affordable Care Act (Public Law 111-148), is considered a tax described in Section 275(a)(6) of the Internal Revenue Code.

Section 17241 states that Section 213(a) of the Internal Revenue Code, relating to allowance of deduction, is modified.

Section 17250 states that Section 168 of the Internal Revenue Code is modified.

Section 17250.1 states that Section 170(b)(1)(A)(ix) of the Internal Revenue Code, relating to percentage limitations, does not apply. Section 170(b)(1)(G) of the Internal Revenue Code, relating to increased limitation for cash contributions, does not apply. Section 170(b)(1)(E)(vi) of the Internal Revenue Code as it read on January 1, 2015, relating to termination, applies.

Section 17250.2 states that Section 170(p) of the Internal Revenue Code, relating to special rule for taxpayers who do not elect to itemize deductions, does not apply.

Section 17250.5 states that Section 167(g) of the Internal Revenue Code, relating to depreciation under income forecast method, is modified in four specified ways. Section 167(h) of the Internal Revenue Code, relating to amortization of geological and geophysical expenditures, does not apply.

Section 17255 states that Section 179(b)(1) of the Internal Revenue Code, relating to dollar limitation, does not apply and in lieu thereof, the aggregate cost which may be taken into account under Section 179(a) of the Internal Revenue Code for any taxable year cannot exceed $25,000. Section 179 of the Internal Revenue Code is modified.

Section 17256 states that Section 179A of the Internal Revenue Code, relating to deduction for clean-fuel vehicles and certain refueling property, does not apply.

Sectn 17257 states that Section 179C of the Internal Revenue Code, relating to election to expense certain refineries, does not apply.

Section 17257.2 states that Section 179D of the Internal Revenue Code, relating to energy efficient commercial buildings deduction, does not apply.

Section 17257.4 states that Section 179E of the Internal Revenue Code, relating to election to expense advanced mine safety equipment, does not apply.

Section 17260 provides that no deduction, other than depreciation, is allowed for expenditures for tertiary injectants as provided by Section 193 of the Internal Revenue Code.

(b) Section 263(a) of the Internal Revenue Code does not apply to expenditures for which a deduction is allowed. Section 263(c) of the Internal Revenue Code, relating to intangible drilling and development costs in the case of oil and gas wells and geothermal wells, does not apply to intangible drilling and development costs, in the case of oil and gas wells.

Section 17269 states that the provisions of Section 162(a) of the Internal Revenue Code are not applicable to expenses incurred by a taxpayer with respect to expenditures made at, or payments made to, a club which restricts membership or the use of its services or facilities on the basis of ancestry or any characteristic listed or defined in state law, except for genetic information. The terms “expenses” and “club” are defined.

Section 17270 states that, for purposes of Section 162(a)(2) of the Internal Revenue Code, relating to travel expenses, the two specified conditions apply. The provisions of Section 280C(a) of the Internal Revenue Code (relating to rule for employment credits) does not apply.

The amendments made by Section 13206(d)(2)(A) of the Tax Cuts and Jobs Act, 2017 to Section 280C(c) of the Internal Revenue Code, relating to credit for increasing research activities, does not apply.

Section 17271 states that the amendments made to Section 162(m) of the Internal Revenue Code by Section 13601(e)(2) of the Tax Cuts and Jobs Act, 2017, relating to exception for binding contracts, applies with modifications.

Section 17273 states that Section 162(l)(1) of the Internal Revenue Code, relating to applicable percentage, is modified.

Section 17274 states that no deduction is allowed for interest, taxes, depreciation, or amortization paid or incurred in the taxable year with respect to substandard housing located in this state. The term “substandard housing” is defined.

Section 17275 states that no deduction is allowed for abandonment fees or tax recoupment fees paid.

Section 17275.2 states that Section 170(e)(3)(C) of the Internal Revenue Code, relating to special rule for contributions of food inventory, does not apply.

Section 17275.4 provides a deduction for a charitable contribution to an educational organization that is a postsecondary institution or to the Key Worldwide Foundation, pursuant to Section 170 of the Internal Revenue Code, Section 162 of the Internal Revenue Code, relating to trade or business expenses, are not be allowed to a taxpayer who meets all of the specified conditions.

Section 17275.5 states that no deduction is to be denied under Section 170(f)(8) of the Internal Revenue Code, relating to substantiation requirement for certain contributions, upon a showing that the requirements in Section 170(f)(8) of the Internal Revenue Code have been met with respect to that contribution for federal purposes. Section 170(f)(10)(F) of the Internal Revenue Code, relating to excise tax on premiums paid, does not apply.

Section 17275.6 states that the amendments adding paragraph (7) to Section 170(h) of the Internal Revenue Code, relating to limitation on deduction for qualified conservation contributions made by passthrough entities, applies. Section 170(h)(7)(G) of the Internal Revenue Code, relating to regulations, does not apply. The amendments made by Section 605(a)(3) of Public Law 117-328, relating to extension of statute of limitations for listed transactions, applies as modified.

Section 17276 provides a deduction pursuant to Section 172 of the Internal Revenue Code, relating to net operating loss deduction, as modified in this section.

Section 17276.7 defines the term “qualified taxpayer” to include a person or entity that conducts a farming business that is directly affected by Pierce’s disease and its vectors. All of the specified rules apply.

Section 17278 states that there is allowed as a deduction to a taxpayer those payments of the taxpayer which are made pursuant to an interindemnity arrangement specified in Section 1280.7 of the Insurance Code and which are paid to a trust of members of a cooperative corporation organized and operated and the members of which consist solely of physicians and surgeons licensed in this state.

Section 17278.5 states that the deduction allowed by Section 194 of the Internal Revenue Code, relating to amortization of reforestation expenditures, is available only with respect to qualified timber property located in this state.

Section 17279 states that Section 197 of the Internal Revenue Code, relating to amortization of goodwill and certain other intangibles, is modified.

Section 17279.4 states that Section 198 of the Internal Revenue Code, relating to expensing of environmental remediation costs, is modified.

Section 17279.6 states that Section 198A of the Internal Revenue Code, relating to expensing of qualified disaster expenses, does not apply.

Section 17280 states that a deduction is allowed despite Section 265 of the Internal Revenue Code, relating to expenses and interest relating to tax-exempt income. However, no deduction is allowed for three specified amounts.

Section 17282 provides that, in computing taxable income, deductions, including deductions for cost of goods sold, they are not allowed to any taxpayer from any of his or her gross income directly derived from any act or omission of criminal profiteering activity, and deductions are not allowed to any taxpayer from any of his or her gross income derived from any other activities which directly tend to promote or to further, or are directly connected or associated with, those acts or omissions.

Section 17286 states that, in addition to the deduction denied under Section 162(c)(1) of the Internal Revenue Code, relating to payments made to officials or employees of a foreign government, no deduction is allowed for any payment that would be unlawful under the laws of the United States, if those laws were applicable to the payment and to the official or employee.

Section 17287 states that Section 269A of the Internal Revenue Code is modified.

Section 1799.8 allows the FTB to disallow a deduction under this part to an individual or entity for amounts paid as remuneration for personal services if that individual or entity fails to report the payments required under Section 13050 of the Unemployment Insurance Code or Section 18631 on the date prescribed.

Section 17299.9 states that, in the case of a taxpayer who owns real property and has either failed to provide information required, or has provided information which is either false, misleading, or incomplete in the information return required, no deduction is allowed for interest, taxes, depreciation, or amortization paid or incurred with respect to that real property.