Cal. Code Regs. tit. 18 § 25106.5-0

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Current through Register 2024 Notice Reg. No. 17, April 26, 2024

Section 25106.5-0 - Table of Contents

Regulation Sections 25106.5 through 25106.5-11

§ 25106.5

(a) Combined Reporting, In General

(b) Definitions

(1) Combined Report

(2) Combined Reporting Method

(3) Combined Reporting Group

(4) Business Income

(5) Combined Report Business Income

(6) Total Group Combined Report Business Income

(7) Nonbusiness Income

(8) Apportionment

(9) Taxpayer Member's California Apportionment Percentage (Reserved)

(10) Member

(11) Taxpayer Member

(12) Principal Member

(A) Corporations Described

(B) Election to Designate Principal Member

(C) Inconsistent Principal Member

(13) Group Return

(14) Key Corporation

(15) Fiscalization

(16) California Source Carryover Item

(17) Income

(18) Total Separate Net Income

(19) Corporation

(c) Steps In Determining California Source Income From the Business Income of a Combined Reporting Group

(1) Determination of Separate Net Income

(A) Intercompany Transactions

(B) Capital, etc., Gains and Losses

(C) Net Operating Loss Deductions

(2) Accounting Methods and Elections

(3) Adjustment for Nonbusiness Income, etc.

(4) Assignment of Expenses to Business and Nonbusiness Income (Reserved)

(5) Fiscalization to Principal Member's Year

(6) Alignment of Business Income to Principal Member's Accounting Period

(7) Apportionment of Combined Income, In General

(A) Double or Single Weighted Sales Factor

(B) Taxpayer Member's Property, Payroll, and Sales Factors

(C) Taxpayer Member's California Apportionment Percentage

(D) California Source Apportioned Combined Report Business Income

(8) Fiscalization to Taxpayer Member's Income Year

(d) Steps In Determining A Taxpayer Member's Income From Sources Within This State, for Imposition of Tax

(1) Total California Business Income

(A) California Combined Report Business Income

(B) California Combined Report Business Income, Other Groups

(C) Income from Business Wholly Conducted in California

(2) Other California Source Items

(A) California Source Carryover Items

(B) California Capital, etc., Income

(C) California Source Nonbusiness Income

(3) California Source Net Operating Loss Deduction

(4) Adjustment for Charitable Contributions (Reserved)

(5) Taxpayer Member's California Source Income

(e) California Source Net Operating Loss

(f) Tax on Taxpayer Member's California Source Income

(g) Years to Which this Regulation Applies

§ 25106.5-1 Intercompany Transactions

(a) In General

(1) Purpose

(2) Conformity to Treasury Regulation Section 1.1502-13

(3) Timing Rules as a Method of Accounting

(4) Other Law

(A) Non-Applicability of IRC Section 304

(B) Non-Applicability of IRC Section 163(e)(5)

(C) Non-Applicability of IRC Section 1031

(5) Sourcing

(A) Sales Factor

(B) Property Factor

(6) Overview

(b) Definitions

(1) Intercompany Transactions

(A) In General

(B) Exceptions

(2) Combined Reporting Group

(A) Income and Apportionment Factors

(B) Affiliated Corporation

(3) Intercompany Items

(A) In General

(B) Related Costs or Expenses

(C) Amounts Not Yet Recognized or Incurred

(4) Corresponding Items

(5) Recomputed Corresponding Items

(6) Treatment as a Separate Entity

(7) Divisions of a Single Corporation

(8) Deferred Intercompany Stock Account

(9) Attributes

(c) Matching Rule

(1) Redetermination of Separate Entity Attributes

(2) Examples

(d) Acceleration Rule

(1) Additional Circumstances

(A) Conversion to Nonbusiness Use

(B) Cross Reference

(2) Circumstances Not Known by End of Year

(3) Examples

(e) Simplifying Rules

(1) General Conformity

(2) Election to Treat Intercompany Transactions on a Separate Entity Basis

(A) Federal Election Made

(B) Separate Entity Treatment Elected Under Other Rules

(C) How to Make California Election; Accounting Method

(D) Exceptions

(f) Stock of Members

(1) General Conformity

(A) Exceptions for Distributee Member

(B) Deferred Intercompany Stock Account

(2) Examples

(g) Obligations of Members

(1) In General

(2) Example

(h) Anti-Avoidance Rules

(i) Reserved

(j) Miscellaneous Operating Rules

(1) Subgroups

(A) Change in Combined Reporting Group

(B) Election

(C) Examples

(2) Entering and Leaving the State

(A) Intercompany Transactions

(B) Election

(C) Examples

(3) Partially Included Water's-Edge Corporations

(A) Coordination with Section 25110(a)(4)

(B) Coordination with Section 25110(a)(6)

(C) Separate Entity Election

(D) Examples

(4) Earnings and Profits

(5) Foreign Country Operations

(6) Reserved

(7) Non-Disclosure of DISA Balance

(8) Recordkeeping

(k) Effective Date

§ 25106.5-2. Capital, Section 1231 of the Internal Revenue Code, and Involuntary Conversion Gains and Losses

(a) Gains Or Losses From The Sale Or Exchange Of Capital, etc., Assets

(b) Classification as Business or Nonbusiness Income

(c) Assignment to Principal Member's Year; Apportionment

(d) Netting of Apportioned and Allocated Income from Capital, etc., Assets

(e) Application of Section 1231 Gains

(f) Application of California Source Income from Capital, etc., Assets

(g) Capital Loss Carryforward

(h) Years to Which This Regulation Applies

§ 25106.5-3Accounting Methods and Elections

(a) Accounting Methods and Elections, In General

(1) Consistency of Member's Income Between Combined Reports

(2) Effect of the Election

(b) Allowance of Late Elections Under an Audit Examination, In General

(1) Effect of a U.S. Election

(2) Time for Making a Late Election

(3) Protective Elections

(4) Effect on Subsequent Years

(5) Effect of a California Election by a Taxpayer

(c) Years to Which This Regulation Applies

§ 25106.5-4. Fiscalization

(a) Fiscalization, In General

(b) Interim Closing Method

(1) Income Data from Actual Books and Records

(2) Apportionment Data from Actual Books and Records

(3) Combination with Principal Member

(c) Pro Rata Method

(1) Election to Use Pro Rata Method

(2) Property Factor Under Pro Rata Method

(3) Combination with Principal Member

(4) Estimation and Amended Returns

(d) Fiscalization to Taxpayer Member's Income Year

(e) Years to Which This Regulation Applies

§ 25106.5-5. Interest Offset

§ 25106.5-6California Source Carryover Items (Reserved)

§ 25106.5-7Charitable Contributions (Reserved)

§ 25106.5-8 Alternative Minimum Tax (Reserved)

§ 25106.5-9. Partial Combined Reporting Periods

(a) Partial Combined Reporting Period, In General

(b) Partial Combination if Short-Period Return Not Required

(c) Election to Use Principal Member's Accounting Period

(1) Principal and Full Year Member's Income and Apportionment Data

(2) Partial Period Member's Income and Apportionment Data

(3) Computation of Short-Period Combined Income Under Principal Member's Accounting Period

(4) Assignment to Taxpayer Member's Income Year; Application of Taxpayer Member's Other California Source Income

(d) Years to Which This Regulation Applies

§ 25106.5-10Foreign Combination (Renumbered from Original § 25106-3)

(a) In General

(1) Unitary Business

(2) Translation Method for Determining Income

(3) General Application of UDITPA Regulations

(b) Determination of Income

(1) Steps for Computing Unitary Income

(A) Profit and Loss Computed in Local Currency

(B) Adjustments to Reflect U.S. Accounting

(C) Adjustments to Reflect California Revenue and Taxation Code

(D) Currency Translation to Parent's Currency

(E) Identification of Business and Nonbusiness Income

(F) Allocation of Nonbusiness Income

(G) Combination of Business Income

(H) California Source Income in Dollars; Computation of Tax

(2) Combined Reporting from Consolidated Profit and Loss Statements

(A) Adjustments to Consolidated Profit and Loss Statements

(B) Identification of Business and Nonbusiness Income

(C) Allocation of Nonbusiness Income

(D) Combination of Business Income

(E) California Source Income in Dollars; Computation of Tax

(3) Special Rules

(A) Adjustments to Reflect U.S. Accounting

(B) Tax Accounting Adjustments

(C) Requirements of Materiality

(4) Currency Translations

(A) Depreciation, Depletion, Amortization

(B) Other Items

(c) Computation of Factors

(1) Property Factor

(A) Fixed Assets

(B) Rental Property

(C) Inventories

(D) Financial Corporations

(E) Computation in Currency of the Parent

(2) Payroll and Receipts Factors

(A) Currency Translation

(B) Effect of Substantial Fluctuation in Currency Values

(C) Computation in Currency of the Parent

(d) Exchange Rates

(1) Determination of Exchange Rates

(2) Substantial Fluxuation, Defined

(e) Application of Regulation

(1) Reasonable Approximations

(2) Advance Determination

§ 25106.5-11Group Returns (Reserved)

Cal. Code Regs. Tit. 18, § 25106.5-0

1. New section filed 7-13-99; operative 8-12-99 (Register 99, No. 29).
2. Amendment filed 11-1-2000; operative 12-1-2000 (Register 2000, No. 44).
3. Amendment filed 12-28-2000; operative 1-1-2001 pursuant to Government Code section 11343.4(d) (Register 2000, No. 52).
4. Change without regulatory effect amending subsection (c)(1)(A) filed 3-11-2002 pursuant to section 100, title 1, California Code of Regulations (Register 2002, No. 11).