Skip to Main Content
State of California Franchise Tax Board

Corporation Tax Law Changes


California has changed how apportioning trades or businesses are taxed in California. Taxpayers need to consider the following California Revenue and Taxation Code (R&TC) sections changes:

Taxable years beginning on or after January 1, 2013 (Proposition 39 changes):

  • R&TC Section 25128.7 - All business income from an apportioning trade or business must be apportioned to California based on sales, unless the apportioning trade or business is predominantly engaged in qualified business activities described in R&TC Section 25128(b). California business income is determined by multiplying the total business income by their sales factor (single sales factor). Taxpayers required to follow special industry apportionment and allocation regulations under Regulation Section 25137 must follow the sales factor provisions under special industry regulations, with the exception of any rule excluded by the provisions of Regulation Section 25136(g)(3). The property and payroll factors would not be used.
  • Revised R&TC Section 25136 - Requires market assignment of sales from other than tangible personal property for all apportioning trades or businesses (see R&TC Section 25136 below and California Code of Regulation (CCR) Section 25136-2).
  • R&TC Section 25136.1 provides special sales factor rules for certain cable system operators.

Get more information about Single-Sales Factor and Assignment of Sales.

Taxable years beginning on or after January 1, 2011:

  • R&TC Section 23101 - Modifies the definition of "doing business" in California. See General Information on New Rules for Doing Business in California to find out if you are considered doing business in California.
  • R&TC Section 25120 - Provides the definition of "gross receipts."
  • R&TC Section 25128.5 - Allows all trades or businesses except for qualified business activities under R&TC Section 25128(b) to elect to use a sales only formula to apportion business income subject to the franchise or income tax. See CCR Section 25128.5 for specific rules (Note: No longer effective for taxable years beginning on or after January 1, 2013).
  • R&TC Section 25135 - Adopts the Finnigan rule in assigning sales from tangible personal property.
  • R&TC Section 25136 - Requires market assignment of sales from other than tangible personal property for those apportioning trades or businesses electing single sales factor apportionment under R&TC Section 25128.5. Also see CCR Section 25136-2 for specific rules.

Contact Information

Email us if you have any questions or comments.

Chat with an FTB Representative