Legal Rulings

A Legal Ruling is a published interpretation of California income or franchise tax laws by the Chief Counsel of the FTB. A Legal Ruling is the conclusion of the Chief Counsel of the FTB on how the law should be applied to a specific set of hypothetical facts, and is equivalent to an IRS Revenue Ruling. Legal Rulings are issued for the information and guidance of taxpayers, FTB personnel, and other interested parties. Because Legal Rulings are generally interpretive of existing law, they have retroactive effect unless otherwise stated in the ruling.

Each Legal Ruling represents the conclusion of the Chief Counsel of the FTB regarding the application of law to the entire statement of facts specified. Therefore, taxpayers, FTB personnel, and other interested parties are cautioned against reaching the same conclusion in other cases unless the facts and circumstances are the same. In addition, taxpayers, FTB personnel, and other interested parties should consider the effect of subsequent legislation, regulations, court decisions, legal rulings, notices, procedures, and other guidance.

We provide all Legal Rulings by year and update the list when new rulings are published.


  • Legal Ruling 2022-02 – Appropriate sourcing of Internal Revenue Code (IRC) section 751(a) gain from the disposition of a nonresident individual's partnership interest to the extent the IRC section 751 property is located in California.
  • Legal Ruling 2022-01 – Numerator Assignment of Gross Receipts from Sales of Services to Business Entities.



  • Legal Ruling 2019-03 – California Tax Return Filing Requirements and Minimum Tax Obligations of an Out-Of-State Professional Athletic Team (California Revenue and Taxation Code ("CRTC") Section 25141).
  • Legal Ruling 2019-02 – Annual Tax and Return Filing Requirements of a Limited Partnership that is Disregarded for Federal Income Tax Purposes.
  • Legal Ruling 2019-01 – Appropriate Subject Matters for Taxpayers Seeking Requests for Variance Pursuant to Section 25137.


  • Legal Ruling 2018-01 – Modification of Legal Ruling 2014-01, Business Entities that are Members of Multiple-Member Limited Liability Companies Classified as Partnerships for Tax Purposes.


  • Legal Ruling 2017-02 – Conformity to Federal Information Filing Requirements Relating to Certain Foreign Financial Assets for Nonresident Aliens.
  • Legal Ruling 2017-01 – Treatment of taxes paid to another state for purposes of the Other State Tax Credit and allowable deductions



  • Legal Ruling 2015-02 – California Tax Treatment of Transactions between IC DISCS and their Owners
  • Legal Ruling 2015-01 – Determining Whether a Tribal Member Is "Living On" or "Living Off" His or Her Tribe's Reservation for California Personal Income Tax Purposes


  • Legal Ruling 2014-0115 – Business Entities that are Members of Multiple-Member Limited Liability Companies Classified as Partnerships for Tax Purposes (Please note Franchise Tax Board issued subsequent written guidance per Notice 2017-01 [Subject: Court of Appeal Decision in Swart Enterprises, Inc. v. Franchise Tax Board] and Legal Ruling 2018-01 [Subject: Modification of Legal Ruling 2014-01, Business Entities that are Members of Multiple-Member Limited Liability Companies Classified as Partnerships for Tax Purposes].)




  • Legal Ruling 2009-02 – Recapture of Credits Under the Former Farmworker Housing Credit Provisions
  • Legal Ruling 2009-01 – Application of the REMIC Excess Inclusion Rules in a Unitary Combined Reporting Group


  • Legal Ruling 2006-03 – Apportionment of Gains Resulting from an Election Made Pursuant to Internal Revenue Code Section 338
  • Legal Ruling 2006-02 – Application of the "On Behalf Of" Exclusionary Rule of Regulation 25136(b) in the Assignment of Receipts from Sales Other Than Sales of Tangible Personal Property
  • Legal Ruling 2006-01 – Apportionment Factor Treatment of Exempt Income


  • Legal Ruling 2005-02 – Business or Nonbusiness Characterization of Income Earned with Respect to Cash Dividends, Pending Their Domestic Reinvestment Under Section 965 of the Internal Revenue Code
  • Legal Ruling 2005-1 – Personal Services for Sales Factor Purposes


  • Legal Ruling 2003-3 – Inclusion of Business Income Dividends in the Recipient's Sales Factor
  • Legal Ruling 2003-2 – Application of Profit Split Method to Water's-Edge Taxpayers with Possessions Corporation Affiliates
  • Legal Ruling 2003-1 – Sourcing of Partnership, S corporation and Trust Items for a Part-Year Resident


  • Legal Ruling 2001-3 – California Tax Consequences of Federal Advance Refunds and Credits Provided by Internal Revenue Code Section 6428
  • Legal Ruling 2001-1 – Qualifying Educational Institution for Teacher Retention Credit


  • Legal Ruling 2000-1 – Manufacturers' Investment Credit Capitalized Costs Under Third-Party Contracts


  • Legal Ruling 1999-2 – Net Operating Losses - "Eligible Small Business" and "New Business"
  • Legal Ruling 1999-1 – Application of Public Law 86-272 (15 U.S.C. sections 381 et seq.) to Commerce Between the Commonwealth of Puerto Rico and the Fifty States



  • Legal Ruling 1997-2 – Application of 18 Cal. Code of Regs. §25137(b)(1)(B) to Timber and Mineral Royalties as Rental Equivalents in the Property Factor (December 17, 1997)
  • Legal Ruling 1997-1 – Subject: Exclusion of Gross Receipts From Incidental or Occasional Sales of Intangible Property From the Sales Factor (October 15, 1997)


  • Legal Ruling 1996-6 – Subject: Foreign Banks With United States (California) Operations Water's-Edge Election--Bad Debt Reserve Calculation (September 12, 1996)
  • Legal Ruling 1996-5 – Subject: Net Operating Losses - "Eligible Small Business" And "New Business" (August 19, 1996)
  • Legal Ruling 1996-4 – Subject: Revenue And Taxation Code Section 21015--Relief From Penalty Imposed Under Section 19011 (Electronic Funds Transfer Penalty) (July 3, 1996)
  • Legal Ruling 1996-3 – Subject: Revenue And Taxation Code Section 21015--Relief From Penalty Imposed Under Section 19141.5(a) (Form 5472/Record Maintenance Penalty) (July 3, 1996)
  • Legal Ruling 1996-2 – Subject: Application Of No admitted Insurance Tax Law To Governmental And Quasi-Governmental Entities (June 11, 1996)


  • Legal Ruling 1995-8 – Combination Of Intermediate Passive Holding Company With Unitary Operating Company Parent And Subsidiaries
  • Legal Ruling 1995-7 – Combination Of Passive Parent Holding Company With Unitary Operating Company Subsidiaries
  • Legal Ruling 1995-6 – Adoption Of Mark-To-Market Method Of Accounting For Dealers In Securities
  • Legal Ruling 1995-5 – Effect Of The Double Weighted Sales Factor On Water's Edge Group Entities And Election Fees
  • Legal Ruling 1995-4 – 1994 Water's-Edge Elections When Members Of The Group Have Different Fiscal Years
  • Legal Ruling 1995-3 – Delivery Or Shipment Of Tangible Personal Property In The Sales Factor Legal Ruling 348 Withdrawn
  • Legal Ruling 1995-2 – Crediting Tax Payments In Situations Involving Overpayments And Assessments For Corporations Included In An Election To File A Combined Unitary Group Single Return (Schedule R, Schedule R-7) Issue
  • Legal Ruling 1995-1 – Head Of Household Filing Status Nonresident Alien, Nonresident Alien Spouse


  • Legal Ruling 1994-3 – Computation Of The Alternative Minimum Tax Adjusted Current Earnings Amount For Apportioning Taxpayers
  • Legal Ruling 1994-2 – Finance Leasing And Financial Corporations




1990 and older

  • Legal Ruling 431 – Qualified Plan Contributions - Nonresident Partner
  • Legal Ruling 419 – California Treatment Of The Federal Safe Harbor Leasing Private Rules Under IRC Section 168 (f) (8)
  • Legal Ruling 418 – Farmers' Cooperatives. Amounts Allocated To Members Which Are Attributable To Nonmember Rates Of Transactions Are Deductible
  • Legal Ruling 417 – Retroactive Changes To Bad-Debt Reserve For Savings And Loan Associations
  • Legal Ruling 413 – Allocation And Apportionment Treatment Of Installment Sales
  • Legal Ruling 410 – Ownership Requirement For Combined Reporting Purposes Where The Parent Is A General Corporation
  • Legal Ruling 409 – Value Is To Be Ascribed To Replacement Property Acquired As The Result Of An Involuntary Conversion Or An Exchange For Property Factor Purposes
  • Legal Ruling 396 – Taxation Of Income Generated By The Offshore Oil Operations Of A Unitary Business—Modification Of Legal Memorandum No. 604
  • Legal Ruling 395 – Franchise Tax—Protests And Petitions For Reassessment By Transferees
  • Legal Ruling 389 – Franchise—Farmers' Cooperative Associations—Income Deductible—A Farmers' Cooperative Association May Deduct From Its Gross Income All Income, Regardless Of Source, Which Is Properly Allocated
  • Legal Ruling 386 – Claim For Refund—Sufficiency Of Various Federal Reports
  • Legal Ruling 385 – Treatment Of Insurance Company Affiliates For Combined Reporting Purposes
  • Legal Ruling 382 – Application Of Corporate Commencing Year Tax As Credit To Tax For Year Of Dissolution For Corporations "Doing Business" Prior To Enactment Of Original Bank And Corporation Franchise Tax Act And Prior To The 1933 Amendment
  • Legal Ruling 379 – Franchise Tax—Interest Equivalent Offset Computation Under Section 24344(b)
  • Legal Ruling 375 – Tax Credit For Accumulated Distributions Made By A Nonresident Trust To Resident Beneficiaries
  • Legal Ruling 372 – Applicability Of Public Law 86-272 To Certain Nonresident Salesmen
  • Legal Ruling 366 – Taxation Of Income Generated By The Offshore Oil Operations Private Of A Unitary Business
  • Legal Ruling 346 – Statute Of Limitations—Refund Claims
  • Legal Ruling 345 – Nonresidents—Source Of Income
  • Legal Ruling 300 – Military Personnel: Treated as Nonresidents When They Leave California
  • Legal Ruling 292 – Cooperative: Deductibility of Dividends Paid on its Capital Stock
  • Legal Ruling 289 – Cooperative: Deduction of Excess Expenses
  • Legal Ruling 288 – Subsidiary Corporations: Intercorporate Payments After Commencement of Liquidation
  • Legal Ruling 284 – Cooperative: Marketing Operations Ceased
  • Legal Ruling 264 – Doing Business: Litigation by a Liquidating Corporation
  • Legal Ruling 238 – Trusts:—Accumulated Income; Taxation When There Are Both Resident And Nonresident Trustees And Beneficiaries
  • Legal Ruling 234 – Allocation: Apportionment Of The California Income Of A Unitary Business
  • Legal Ruling 211 – Dividends: Deductibility Under Section 24402
  • Legal Ruling 203 – Nonresidents: Taxability Of Oil Royalties To Nonresidents
  • Legal Ruling 184 – Suspended Corporation: Validity Of Refund Claims
  • Legal Ruling 179 – Nonresidents: Income From Intangibles
  • Legal Ruling 174 – Nonresidents: Income From California Sources
  • Legal Ruling 173 – Cooperatives: Taxability Of Foreign Members Of A Domestic Cooperative
  • Legal Ruling 145 – Royalty Income: Source
  • Legal Ruling 233 – Income: Source In California
  • Legal Ruling 123 – Nonresidents: Income From California Sources
  • Legal Ruling 122 – Residence: Students
  • Legal Ruling 90 – Doing Business: Foreign Corporations
  • Legal Ruling 84 – Income From California Sources
  • Legal Ruling 80 – Federal Waivers: Effect Of Parent Corporations Waiver On Subsidiaries
  • Legal Ruling 76 – Doing Business
  • Legal Ruling 75 – Gross Income: Income Received By A Corporate Beneficiary Of A Trust Subject To The Personal Income Tax Law
  • Legal Ruling 59 – Interest: Federal Tax Deficiencies
  • Legal Ruling 40 – Overpayment Of Tax: Credit For Overpayment Disallowed
  • Legal Ruling 38 – Doing Business: Liquidating Activities
  • Legal Ruling 13 – Dividend Income: Parent Subsidiary
  • Legal Ruling 12 – Doing Business: Liquidating Activities
  • Legal Ruling 11 – Doing Business: Activities After Withdrawal