California Revenue and Taxation Code

§ 25111

RTC § 25111 Effective Sep 30, 2003Div. 2 · Part 11 · Ch. 17 · Art. 1.5

Statute text

(a)For taxable years beginning before January 1, 2003, the making of a water’s-edge election as provided for in Section 25110 shall be made by contract with the Franchise Tax Board in the original return for a year and shall be effective only if every taxpayer that is a member of the water’s-edge group and which is subject to tax under this part makes the election. A single taxpayer that is engaged in more than one business activity subject to allocation and apportionment as provided in Article 2 (commencing with Section 25120) of Chapter 17 may make a separate election for each business. The form and manner of making the water’s-edge election shall be prescribed by the Franchise Tax Board. Each contract making a water’s-edge election shall be for an initial term of 84 months, except as provided in subdivision (b). Each contract shall provide that on the anniversary date of the contract or any other annual date specified by the contract a year shall be added automatically to the initial term unless notice of nonrenewal is given as provided in subdivision (d). An affiliated corporation that is a member of the water’s-edge group and subsequently becomes subject to tax under this part or is a nonelecting taxpayer that is subsequently proved to be a member of the water’s-edge group pursuant to a Franchise Tax Board audit determination, as evidenced by a notice of deficiency proposed to be assessed or a notice of tax change, shall be deemed to have elected. No water’s-edge election shall be made for a taxable year beginning prior to January 1, 1988.

(b)A water’s-edge election may be terminated by a taxpayer prior to the end of the 84-month period if either of the following occurs:

(1)The taxpayer is acquired directly or indirectly by a nonelecting entity which alone or together with those affiliates included in its combined report is larger than the taxpayer as measured by equity capital.

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Legislative history

Amended by Stats. 2003, Ch. 633, Sec. 9. Effective September 30, 2003.