Cal. Code Regs. tit. 18 § 24402
Taxpayers are permitted a deduction, under Section 24402, for dividends received which were declared from income included in the measure of the tax of the declaring corporation under this part.
EXAMPLE (1).
The A Corporation receives dividends from B Corporation, whose entire income is also subject to tax under this part and has no other earnings not taxable under this part. A is allowed a deduction for all such dividends received from B.
EXAMPLE (2).
The A Corporation receives dividends from B Corporation, which is not subject to tax in California. None of the dividends received from B are deductible.
EXAMPLE (3).
The A Corporation receives dividends from B Corporation, whose income is subject to allocation because its activities are carried on within and without the State. B's allocation percentage is 50 percent. The percentage of the dividends received by A which are deductible is determined by formula. The variance from 50 percent will be affected by the extent of nonunitary and nontaxable income.
Cal. Code Regs. Tit. 18, § 24402