Cal. Code Regs. tit. 18 § 23504
Every corporation, the income of which was included in the measure of tax imposed under Chapter 2, and which becomes subject to the tax imposed by this article, shall, in the income year that the change occurs, remain subject to the tax imposed under Chapter 2. In subsequent years its income, to the extent derived from sources in this State, is taxable under this article.
Such corporations are also required to file a return for the calendar year in which such change occurs, even though in most cases, because its tax will have been prepaid under Chapter 2, no tax is due. The provisions of this paragraph may be illustrated by the following example:
EXAMPLE:
The A Corporation was doing business in California and reporting on a calendar year basis. It commenced doing business in 19X1 and ceased business activities and surrendered its right to do intrastate business in this State on June 30, 19X8, but continued to derive income from sources within this State; thereby becoming subject to the tax imposed by this article. It filed a franchise tax return for the income year ended December 31, 19X7, which under Section 23222 paid its tax for taxable year ending December 31, 19X8. A is required to file a tax return for information purposes for the income year ended December 31, 19X8, even though no tax may be due. If A continues to derive income from sources within this State, it will be required to file an income tax return under this article for the income year ending December 31, 19X9, and subsequent income years. The fact that A is required to file an information return for the income year ended December 31, 19X8, does not affect A's right to have its tax prorated for the year of withdrawal. See Reg. 23331, 23332 and 23334.
Cal. Code Regs. Tit. 18, § 23504
Note: Authority cited: Section 26422, Revenue and Taxation Code. Reference: Section 23504, Revenue and Taxation Code.