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R&TC § 25136.1 – Qualified Taxpayers Apportioning Business Income

Revenue and Taxation Code (R&TC) Section 25136.1 provides for special rules for qualified taxpayers for taxable years beginning on or after 1/1/2013.

Applicable for Taxable Years Beginning on or after 1/1/2013 Applicable for Taxable Years Beginning before 1/1/2013

(a) For taxable years beginning on or after January 1, 2013, a qualified taxpayer that apportions its business income under Section 25128.7 shall apply the following provisions:

(1) Notwithstanding Section 25137, qualified sales assigned to this state shall be equal to 50 percent of the amount of qualified sales that would be assigned to this state pursuant to Section 25136 but for the application of this section. The remaining 50 percent shall not be assigned to this state.
(2) All other sales shall be assigned pursuant to Section 25136.

(b) For purposes of this section:

(1) “Qualified taxpayer” means a member, as defined in paragraph (10) of subdivision (b) of Section 25106.5 of Title 18 of the California Code of Regulations as in effect on the effective date of the act adding this section, of a combined reporting group that is also a qualified group.
(2) “Qualified group” means a combined reporting group, as defined in paragraph (3) of subdivision (b) of Section 25106.5 of Title 18 of the California Code of Regulations, as in effect on the effective date of the act adding this section, that satisfies the following conditions:
(A) Has satisfied the minimum investment requirement for the taxable year.
(B) For the combined reporting group's taxable year beginning in calendar year 2006, the combined reporting group derived more than 50 percent of its United States network gross business receipts from the operation of one or more cable systems.
(C) For purposes of satisfying the requirements of subparagraph (B), the following rules shall apply:
(i) If a member of the combined reporting group for the taxable year was not a member of the same combined reporting group for the taxable year beginning in calendar year 2006, the gross business receipts of that nonincluded member shall be included in determining the combined reporting group's gross business receipts for its taxable year beginning in calendar year 2006 as if the nonincluded member were a member of the combined reporting group for the taxable year beginning in calendar year 2006.
(ii) The gross business receipts shall include the gross business receipts of a qualified partnership, but only to the extent of a member's interest in the partnership.
(3) (D) “Cable system” and “network” shall have the same meaning as defined in Section 5830 of the Public Utilities Code, as in effect on the effective date of the act adding this section. “Network services” means video, cable, voice, or data services.
(4) “Gross business receipts” means gross receipts as defined in paragraph (2) of subdivision (f) of Section 25120 (other than gross receipts from sales or other transactions between or among members of a combined reporting group, limited, if applicable, by Section 25110).
(5) “Minimum investment requirement” means qualified expenditures of not less than two hundred fifty million dollars ($250,000,000) by a combined reporting group during the calendar year that includes the beginning of the taxable year.
(6) “Qualified expenditures” means any combination of expenditures attributable to this state for tangible property, payroll, services, franchise fees, or any intangible property distribution or other rights, paid or incurred by or on behalf of a member of a combined reporting group.
(A) An expenditure for other than tangible property shall be attributable to this state if the member of the combined reporting group received the benefit of the purchase or expenditure in this state.
(B) A purchase of or expenditure for tangible property shall be attributable to this state if the property is placed in service in this state.
(C) Qualified expenditures shall include expenditures by a combined reporting group for property or services purchased, used, or rendered by independent contractors in this state.
(D) Qualified expenditures shall also include expenditures by a qualified partnership, but only to the extent of the member's interest in the partnership.
(7) “Qualified partnership” means a partnership if the partnership's income and apportionment factors are included in the income and apportionment factors of a member of the combined reporting group, but only to the extent of the member's interest in the partnership.
(8) “Qualified sales” means gross business receipts from the provision of any network services, other than gross business receipts from the sale or rental of customer premises equipment. “Qualified sales” shall include qualified sales by a qualified partnership, but only to the extent of a member's interest in the partnership.

(c) The rules in this section with respect to qualified sales by a qualified partnership are intended to be consistent with the rules for partnerships under paragraph (3) of subdivision (f) of Section 25137-1 of Title 18 of the California Code of Regulations.

(§ 25136.1 enacted by 2012 Proposition 39, § 9, approved by voters at the 11-6-2012 General Election, eff. for taxable years beginning on or after 1-1-2013.)

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