Article 3. Items Specifically Excluded From Gross Income of California Revenue And Taxation Code >> Division 2. >> Part 10. >> Chapter 3. >> Article 3.

Part III of Subchapter B of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to items that are specifically excluded from gross income, shall apply, except as otherwise provided.

(a) Gross income does not include any excludable restitution payments received by an eligible individual (or the individual's heirs or estate) and any excludable interest.
  (b) For purposes of this section:
  (1) The basis of any property received by an eligible individual (or the individual's heirs or estate) as part of an excludable restitution payment shall be the fair market value of that property as of the time of the receipt.
  (2) "Eligible individual" means a person who was persecuted on the basis of race, religion, physical or mental disability, or sexual orientation by Nazi Germany, any other Axis regime, or any other Nazi-controlled or Nazi-allied country.
  (3) "Excludable restitution payment" means any payment or distribution to an individual (or the individual's heirs or estate) that is any of the following:
  (A) Is payable by reason of the individual's status as an eligible individual, including any amount payable by any foreign country, the United States of America, or any other foreign or domestic entity, or a fund established by any such country or entity, any amount payable as a result of a final resolution of a legal action, and any amount payable under a law providing for payments or restitution of property.
  (B) Constitutes the direct or indirect return of, or compensation or reparation for, assets stolen or hidden from, or otherwise lost to, the individual before, during, or immediately after World War II by reason of the individual's status as an eligible individual, including any proceeds of insurance under policies issued on eligible individuals by European insurance companies immediately before and during World War II.
  (C) Consists of interest which is payable as part of any payment or distribution described in subparagraph (A) or (B).
  (4) "Excludable interest" means any interest earned by any of the following:
  (A) Escrow accounts or settlement funds established pursuant to the settlement of the action entitled "In re: Holocaust Victim Assets Litigation," (E.D.N.Y.) C.A. No. 96-4849.
  (B) Funds to benefit eligible individuals or their heirs created by the International Commission on Holocaust Insurance Claims as a result of the Agreement between the Government of the United States of America and the Government of the Federal Republic of Germany concerning the Foundation "Remembrance, Responsibility, and Future," dated July 17, 2000.
  (C) Similar funds subject to the administration of the United States courts created to provide excludable restitution payments to eligible individuals (or eligible individuals' heirs or estates).
  (c) (1) This section shall apply to any amount received on or after January 1, 2000.
  (2) Nothing in this section shall be construed to create any inference with respect to the proper tax treatment of any amount received before January 1, 2000.

(a) Gross income does not include any excludable settlement payments received by an eligible individual (or the individual's heirs or estate) and any excludable interest.
  (b) For purposes of this section:
  (1) The basis of any property received by an eligible individual (or the individual's heirs or estate) as part of an excludable settlement payment shall be the fair market value of that property as of the time of the receipt.
  (2) "Eligible individual" means a person who was persecuted on the basis of race or religion by the regime that was in control of the Ottoman Turkish Empire from 1915 through 1923.
  (3) "Excludable settlement payment" means any payment or distribution to an individual (or the individual's heirs or estate) that is any of the following:
  (A) Is payable by reason of the individual's status as an eligible individual, including any amount payable by any foreign or domestic entity or a fund established by any entity, any amount payable as a result of a final resolution of a legal action, and any amount payable under a law providing for payments or restitution of property.
  (B) Constitutes compensation to the individual from 1915 until 1923, by reason of the individual's status as an eligible individual, including any proceeds of insurance under policies issued on eligible individuals immediately before 1915 and during the time period from 1915 until 1923.
  (C) Consists of interest that is payable as part of any payment or distribution described in subparagraph (A) or (B).
  (4) "Excludable interest" means any interest earned by any of the following:
  (A) A fund to benefit eligible individuals or their heirs created by an international commission or an international organization.
  (B) A fund subject to the administration of the United States courts created to provide excludable settlement payments to eligible individuals (or eligible individuals' heirs or estates).
  (c) (1) This section applies to any amount received on or after January 1, 2005.
  (2) This section may not be construed to create any inference with respect to the proper tax treatment of any amount received before January 1, 2005.

Any grant made in any taxable year by the Secretary of the Treasury under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5) to a person that places in service specified energy property shall not be includable in the gross income or the alternative minimum taxable income of the taxpayer, but shall be taken into account in determining the basis of the property to which that grant relates, except that the basis of that property shall be reduced using rules prescribed under Section 50(c) of the Internal Revenue Code in the same manner as a credit allowed under Section 48(a) of the Internal Revenue Code, and adjusted in accordance with rules applied by the Secretary of the Treasury under Section 1603(f) of the American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5).

Section 106(d) of the Internal Revenue Code, relating to contributions to health savings accounts, shall not apply.

Section 125(d)(2)(D) of the Internal Revenue Code, relating to the exception for health savings accounts, shall not apply.

Section 107 of the Internal Revenue Code is modified by substituting in paragraph (2) the phrase "the rental allowance paid to him or her as part of his or her compensation, to the extent used by him or her to rent or provide a home" in lieu of the phrase "the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities" contained therein.

Gross income does not include any supplementary payment received by an individual pursuant to Section 12306.6 of the Welfare and Institutions Code.

Notwithstanding any other law, for purposes of this part, the natural gas transmission line explosion on September 9, 2010, in San Bruno, California, shall be treated as a qualified disaster within the meaning of Section 139 of the Internal Revenue Code. This section shall apply to payments made on or after September 9, 2010.

Section 114 of the Internal Revenue Code, relating to extraterritorial income, shall not apply.

Section 114 of the Internal Revenue Code, relating to extraterritorial income, shall not apply.

(a) For taxable years beginning on or after January 1, 2005, gross income does not include the death benefits received by an eligible individual.
  (b) For purposes of this section:
  (1) "Death benefit" means the entire amount of the death benefit payment made pursuant to Chapter 3.5 (commencing with Section 850) of Division 4 of the Military and Veterans Code.
  (2) "Eligible individual" means the surviving spouse of, or a beneficiary designated by, any member of the California National Guard, State Military Reserve, or Naval Militia who dies or is killed in the performance of duty, as provided in Section 850 of the Military and Veterans Code.

Section 101 of the Internal Revenue Code, relating to certain death benefits, is modified as follows:
  (a) Section 101(h) of the Internal Revenue Code, relating to survivor benefits attributable to service by a public safety officer who is killed in the line of duty, is modified to apply to amounts received in taxable years beginning after December 31, 1996, with respect to individuals dying after December 31, 1996.
  (b) (1) Section 101 of the Internal Revenue Code, as modified by subdivision (a) is modified to additionally provide that Section 101 (h) of the Internal Revenue Code shall not apply to survivor benefits attributable to service by a public safety officer who is killed in the line of duty with respect to deaths occurring before December 31, 1996, that would otherwise be eligible for exclusion pursuant to Section 101(h) of the Internal Revenue Code, as modified by Public Law 107-15.
  (2) The amendments made to this section by Chapter 691 of the Statutes of 2005 shall apply to amounts paid after December 31, 2001, with respect to deaths occurring on or before December 31, 1996.
  (c) (1) Section 101 of the Internal Revenue Code, as modified by subdivision (b), is modified to additionally provide that Section 101 (i) of the Internal Revenue Code shall apply to any astronaut whose death occurs in the line of duty.
  (2) The amendments made to this section by Chapter 552 of the Statutes of 2004 shall apply to amounts received in taxable years beginning after December 31, 2002, with respect to deaths occurring after that date.
  (d) Section 101(j) of the Internal Revenue Code, relating to the treatment of certain employer-owned life insurance contracts, shall apply in accordance with the provisions of Section 863 of the Pension Protection Act of 2006 (Public Law 109-280), relating to effective dates, except that the phrase "January 1, 2010," shall be substituted for "the date of the enactment of this Act" contained therein.

A payment under Section 103(c)(10) of the Ricky Ray Hemophilia Relief Fund Act of 1998 (Public Law 105-369) to an individual shall be treated for purposes of this part, Part 10.2 (commencing with Section 18401) and Part 11 (commencing with Section 23001) as damages described in Section 104(a)(2) of the Internal Revenue Code.

(a) For purposes of this part, Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001), gross income shall not include any amount received from the Virginia Polytechnic Institute and State University, out of amounts transferred from the Hokie Spirit Memorial Fund established by the Virginia Tech Foundation, an organization organized and operated as described in Section 501(c)(3) of the Internal Revenue Code, if that amount is paid on account of the events on April 16, 2007, at that university.
  (b) This section shall apply without regard to taxable year.

For taxable years beginning on or after January 1, 2014, gross income shall not include any loan amount repaid by the United States Secretary of Education or canceled pursuant to Section 1098e of Title 20 of the United States Code.

Income which this state is prohibited from taxing includes interest on bonds issued by this state or a local government in this state, and the determination of whether a bond is issued by this state or a local government in this state shall be made without regard to (a) the source of payment of that bond or the security for that bond, public or private, and (b) whether or not public improvements are financed. If there is at any time following the original issuance of such a bond a separation in ownership between the bond and any right to receive interest on the bond (whether or not evidenced by a coupon), payments or accruals on that stripped bond and stripped coupon shall be treated in a manner consistent with Section 1286(d) of the Internal Revenue Code.

The following phrase (or its substantial equivalent) in other codes or statutes does not exempt the gain or loss from the sale or transfer of bonds from the provisions of this part: "The issuance, transfer and interest income earned on any bonds issued by an agency (state or local) under this article (chapter, section, etc.) is exempt from taxation of every kind by any state or local entity."

Any loan made pursuant to the Forgivable Loan Program of the California State University shall be deemed to be a student loan within the meaning of Section 108(f)(2) of the Internal Revenue Code, and Section 108(f)(1) shall apply to any discharge of the loan that is made in connection with the borrower's performance of services for the California State University.

The use of an automobile by a special agent of federal or state taxing agencies shall be treated in the manner provided for by Section 1567 of Public Law 99-514.

(a) Gross income does not include cost-share payments received by forest landowners from the Department of Forestry and Fire Protection pursuant to the California Forest Improvement Act of 1978 (Part 2.5 (commencing with Section 4790) of Division 1 of the Public Resources Code) or from the United States Department of Agriculture, Forest Service, under the Forest Stewardship Program and the Stewardship Incentives Program, pursuant to the Cooperative Forestry Assistance Act, as amended (Public Law 101-624).
  (b) The amount of any cost-share payment excluded pursuant to subdivision (a) shall not be considered with regard to either of the following:
  (1) Determining the basis of property acquired or improved.
  (2) Computing any allowable deduction to which the taxpayer may otherwise be entitled.

Section 1078 of Public Law 98-369 (Tax Reform Act of 1984), relating to exclusions from gross income of payments from the United States Forest Service as a result of restricting motorized traffic in the Boundary Waters Canoe Area, shall apply, with the following exceptions:
  (a) Section 1078(f)(2) of that act shall not be applicable.
  (b) This section shall be effective only for payments made in taxable years beginning on or after January 1, 1985.

Any amount received as a rebate or voucher from a local water or energy agency or supplier for any expenses the taxpayer paid or incurred for the purchase or installation of any of the following devices shall be treated as a refund or price adjustment of amounts payable to that water or energy agency or supplier:
  (a) A water conservation water closet that meets the performance standards of American National Standards Institute Standard A112.19.2 and uses no more than 1.6 gallons per flush, or for the installation of a urinal that meets the performance standards of American National Standards Institute Standard A112.19.2 and uses no more than one gallon per flush.
  (b) A water and energy efficient clothes washer that meets a 1.04 modified energy factor and 9.5 water use efficiency factor as determined by the State Energy Resources and Conservation Commission.
  (c) A plumbing device necessary to serve the recycled water uses described in Sections 13553 and 13554 of the Water Code.

Gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by the California Energy Commission, the Public Utility Commission, or a local publicly owned electric utility, as defined in subdivision (d) of Section 9604 of the Public Utilities Code, for any expenses paid or incurred by a taxpayer for the purchase or installation of any of the following devices:
  (a) A thermal system as defined in Section 25600 of the Public Resources Code.
  (b) A solar system as defined in Section 25600 of the Public Resources Code.
  (c) A wind energy system device that produces electricity.
  (d) A fuel cell generating system, as described in the California Energy Commission's Emerging Renewable Resources Account Guidebook, that produces electricity.

(a) For taxable years beginning on or after January 1, 2014, and before January 1, 2019, gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by a local water agency or supplier for participation in a turf removal water conservation program.
  (b) This section shall remain in effect only until December 1, 2019, and as of that date is repealed.

(a) For each taxable year beginning on or after July 1, 2015, gross income does not include an amount received as a loan forgiveness, grant, credit, rebate, voucher, or other financial incentive issued by the California Residential Mitigation Program or the California Earthquake Authority to assist a residential property owner or occupant with expenses paid, or obligations incurred, for earthquake loss mitigation.
  (b) For the purposes of this section, "earthquake loss mitigation" means an activity that reduces seismic risks to a residential structure or its contents, or both. For purposes of structural seismic risk mitigation, a residential structure is either of the following:
  (1) A structure described in subdivision (a) of Section 10087 of the Insurance Code.
  (2) A residential building of not fewer than 2, but not more than 10, dwelling units.

For taxpayers who were not allowed to deduct the vehicle smog impact fee imposed by Section 6262 when paid or incurred, any interest paid by this state in conjunction with the refund of the smog impact fee shall be excluded from gross income.

Section 139A of the Internal Revenue Code, relating to federal subsidies for prescription drug plans, shall not apply.

(a) For purposes of this section, the following terms have the following meanings as provided in the Golden State Scholarshare Trust Act (Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code):
  (1) "Beneficiary" has the meaning set forth in subdivision (c) of Section 69980 of the Education Code.
  (2) "Benefit" has the meaning set forth in subdivision (d) of Section 69980 of the Education Code.
  (3) "Participant" has the meaning set forth in subdivision (h) of Section 69980 of the Education Code.
  (4) "Participation agreement" has the meaning set forth in subdivision (i) of Section 69980 of the Education Code.
  (5) "Scholarshare trust" has the meaning set forth in subdivision (f) of Section 69980 of the Education Code.
  (b) For taxable years beginning on or after January 1, 1998, and before January 1, 2002, except as otherwise provided in subdivision (c), gross income of a beneficiary or a participant does not include any of the following:
  (1) Any distribution or earnings under a Scholarshare trust participation agreement, as provided in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code.
  (2) Any contribution to the Scholarshare trust on behalf of a beneficiary shall not be includable as gross income of that beneficiary.
  (c) For taxable years beginning on or after January 1, 1998, and before January 1, 2002:
  (1) Any distribution under a Scholarshare trust participation agreement shall be includable in the gross income of the distributee in the manner as provided under Section 72 of the Internal Revenue Code, as modified by Section 17085, to the extent not excluded from gross income under this part. For purposes of applying Section 72 of the Internal Revenue Code, the following apply:
  (A) All Scholarshare trust accounts of which an individual is a beneficiary shall be treated as one account, except as otherwise provided.
  (B) All distributions during a taxable year shall be treated as one distribution.
  (C) The value of the participation agreement, income on the participation agreement, and investment in the participation agreement shall be computed as of the close of the calendar year in which the taxable year begins.
  (2) A contribution by a for-profit or nonprofit entity, or by a state or local government agency, for the benefit of an owner or employee of that entity or a beneficiary whom the owner or employee has the power to designate, including the owner or employee's minor children, shall be included in the gross income of that owner or employee in the year the contribution is made.
  (3) For purposes of this subdivision, "distribution" includes any benefit furnished to a beneficiary under a participation agreement, as provided in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of the Education Code.
  (4) (A) Paragraph (1) shall not apply to that portion of any distribution that, within 60 days of distribution, is transferred to the credit of another beneficiary under the Scholarshare trust who is a "member of the family," as that term is used in Section 529(e)(2) of the Internal Revenue Code, as amended by Section 211 of the Taxpayer Relief Act of 1997 (P.L. 105-34), of the former beneficiary of that Scholarshare trust.
  (B) Any change in the beneficiary of an interest in the Scholarshare trust shall not be treated as a distribution for purposes of paragraph (1) if the new beneficiary is a "member of the family," as that term is used in Section 529(e)(2) of the Internal Revenue Code, as amended by Section 211 of the Taxpayer Relief Act of 1997 (P.L. 105-34), of the former beneficiary of that Scholarshare trust.
  (d) For taxable years beginning on or after January 1, 2002, Sections 529(c) and 529(e) of the Internal Revenue Code, relating to tax treatment of designated beneficiaries and contributors and to other definitions and special rules, respectively, shall apply, except as otherwise provided in Part 11 (commencing with Section 23001) and this part.

Section 529 of the Internal Revenue Code, relating to qualified state tuition programs, shall apply, except as otherwise provided.
  (a) Section 529 (a) of the Internal Revenue Code is modified as follows:
  (1) By substituting the phrase "under this part and Part 11 (commencing with Section 23001)" in lieu of the phrase "under this subtitle."
  (2) By substituting "Article 2 (commencing with Section 23731)" in lieu of "Section 511."
  (b) A copy of the report required to be filed with the Secretary of the Treasury under Section 529(d) of the Internal Revenue Code shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.

For taxable years beginning on or after January 1, 2016, Section 529A of the Internal Revenue Code, relating to qualified ABLE programs, added by Section 102 of Division B of Public Law 113-295, shall apply, except as otherwise provided.
  (a) Section 529A(a) of the Internal Revenue Code is modified as follows:
  (1) By substituting the phrase "under this part and Part 11 (commencing with Section 23001)" in lieu of the phrase "under this subtitle."
  (2) By substituting "Article 2 (commencing with Section 23731)" in lieu of "Section 511."
  (b) Section 529A(c)(3)(A) of the Internal Revenue Code is modified by substituting "2.5 percent" in lieu of "10 percent."
  (c) A copy of the report required to be filed with the Secretary of the Treasury under Section 529A(d) of the Internal Revenue Code, relating to reports, shall be filed with the Franchise Tax Board at the same time and in the same manner as specified in that section.

(a) Pursuant to Section 206 of the Servicemembers Civil Relief Act (50 U.S.C. Appen. Sec. 526), the period of a servicemember' s military service may not be included in computing any period limited by law, regulation, or order for the bringing of any action or proceeding under this part, Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), by or against the servicemember or the servicemember's heirs, executors, administrators, or assigns.
  (b) Section 19521 is modified to provide that, pursuant to Section 207 of the Servicemembers Civil Relief Act (50 U.S.C. Appen. Sec. 527), the maximum rate of interest on any underpayment incurred by a servicemember, or the servicemember and the servicemember's spouse jointly, before the servicemember enters military service may not bear interest at a rate in excess of 6 percent per year during the period of military service.
  (c) Pursuant to Section 511 of the Servicemembers Civil Relief Act (50 U.S.C. Appen. Sec. 571):
  (1) A servicemember not domiciled in this state does not become a resident of this state by reason of being present in this state solely in compliance with military orders.
  (2) Compensation for military service of a servicemember not domiciled in this state is not income for services performed or from sources within this state.
  (3) The military compensation of a servicemember not domiciled in this state may not be used to increase the tax liability imposed on other income of that servicemember or that servicemember's spouse.
  (4) A Native American servicemember whose legal residence or domicile is a federal Indian reservation shall be treated as living on the federal Indian reservation and the compensation of that servicemember for military service shall be deemed to be income derived wholly from federal Indian reservation sources.
  (d) For purposes of this part and Part 10.2 (commencing with Section 18401), in the case of a servicemember not domiciled in this state, all of the following shall apply:
  (1) Compensation for military service shall not be included in any of the following:
  (A) Gross income of that servicemember or the spouse of that servicemember.
  (B) "Entire taxable income" for purposes of computing the tax imposed under subdivision (b) or (d) of Section 17041.
  (C) "Alternative minimum taxable income" for purposes of computing tax imposed under subparagraph (B) of paragraph (3) of subdivision (b) of Section 17062.
  (2) Paragraph (2) of subdivision (h) of Section 17024.5 is modified to provide that references to "adjusted gross income" for purposes of computing limitations based upon adjusted gross income, shall mean the amount required to be shown as adjusted gross income on the federal tax return for the same taxable year reduced by the amount of the compensation for military service for that taxable year of a servicemember not domiciled in this state.
  (e) (1) "Federal Indian reservation," "servicemember," "military service," "period of military service," and "compensation for military service" shall have the same meanings as applicable for purposes of the Servicemembers Civil Relief Act (50 U.S.C. Appen. Sec. 501 et seq.).
  (2) "Native American" has the same meaning as the term "Indian" for purposes of applying Section 511(e) of the Servicemembers Civil Relief Act (50 U.S.C. Appen. Sec. 571(e)) for federal purposes.
  (f) The amendments made to this section by the act adding this subdivision shall apply to any taxable year for which the period for making assessments or allowing a claim for refund or credit has not expired as of December 19, 2003.

Gross income does not include income derived from an obligation of a Community Energy Authority established under the provisions of Part 3 (commencing with Section 52000) of Division 1 of Title 5 of the Government Code.

(a) Gross income shall not include any amount received by an employee from an employer to compensate for the additional federal income tax liability incurred by the employee because, for federal income tax purposes, the same-sex spouse or domestic partner of the employee is not considered the spouse of the employee under Section 105(a) or Section 106(a) of the Internal Revenue Code, including any compensation for the additional federal income tax liability incurred with respect to those amounts.
  (b) This section shall remain in effect only until January 1, 2019, and as of that date is repealed.

Sections 111(b) and 111(c) of the Internal Revenue Code, relating to credits and treatment of credit carryovers, shall be applicable with respect to credits allowable under this part.

(a) For purposes of the following provisions of the Internal Revenue Code, a qualified hazardous duty area shall be treated in the same manner as if it were a combat zone (as determined under Section 112 of the Internal Revenue Code):
  (1) Section 2 (a)(3) (relating to a special rule where a deceased spouse was in missing status).
  (2) Section 112 (relating to certain combat zone compensation of members of the Armed Forces).
  (3) Section 692 (relating to income taxes of members of Armed Forces upon death).
  (4) Section 7508 (relating to time for performing certain acts postponed by reason of service in combat zone).
  (b) "Qualified hazardous duty area" means Bosnia and Herzegovina, Croatia, or Macedonia, if, as of March 20, 1996, any member of the Armed Forces of the United States is entitled to special pay under Section 310 of Title 37 of the United States Code (relating to special pay; duty subject to hostile fire or imminent danger) for services performed in that country. "Qualified hazardous duty area" includes any country only during the period that entitlement is in effect. Solely for purposes of applying Section 7508 of the Internal Revenue Code, in the case of an individual who is performing services as part of Operation Joint Endeavor outside the United States while deployed away from the individual's permanent duty station, the term "qualified hazardous duty area" includes, during the period for which that entitlement is in effect, any area in which those services are performed.

Sections 103 and 141 to 150, inclusive, of the Internal Revenue Code, relating to interest on governmental obligations, shall not apply.

(a) Section 108(b)(2)(B) of the Internal Revenue Code, relating to general business credit, is modified by substituting "this part" in lieu of "Section 38 (relating to general business credit)."
  (b) Section 108(b)(2)(G) of the Internal Revenue Code, relating to foreign tax credit carryovers, shall not apply.
  (c) Section 108(b)(3)(B) of the Internal Revenue Code, relating to credit carryover reduction, is modified by substituting "11.1 cents" in lieu of "33 1/3 cents" in each place in which it appears. In the case where more than one credit is allowable under this part, the credits shall be reduced on a pro rata basis.
  (d) Section 108(g)(3)(B) of the Internal Revenue Code, relating to adjusted tax attributes, is modified by substituting "($9)" in lieu of "($3)."
  (e) (1) If a taxpayer makes an election for federal income tax purposes under Section 108(c) of the Internal Revenue Code, relating to treatment of discharge of qualified real property business indebtedness, a separate election shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5 and the federal election shall be binding for purposes of this part.
  (2) If a taxpayer has not made an election for federal income tax purposes under Section 108(c) of the Internal Revenue Code, relating to treatment of discharge of qualified real property business indebtedness, then the taxpayer shall not be allowed to make that election for purposes of this part.
  (f) Section 108(i) of the Internal Revenue Code, relating to deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument, shall not apply.

(a) Section 108(a)(1)(E) of the Internal Revenue Code, is modified to provide that the amount excluded from gross income shall not exceed $500,000 ($250,000 in the case of a married individual filing a separate return).
  (b) Section 108(h)(2) of the Internal Revenue Code, is modified by substituting the phrase "(within the meaning of section 163(h)(3) (B), applied by substituting '$800,000 ($400,000' for '$1,000,000 ($500,000' in clause (ii) thereof)" for the phrase "(within the meaning of section 163(h)(3)(B), applied by substituting '$2,000,000 ($1,000,000' for '$1,000,000 ($500,000' in clause (ii) thereof)" contained therein.
  (c) This section shall apply to discharges of indebtedness occurring on or after January 1, 2007, and, notwithstanding any other law to the contrary, no penalties or interest shall be due with respect to the discharge of qualified principal residence indebtedness during the 2007 or 2009 taxable year regardless of whether or not the taxpayer reports the discharge on his or her return for the 2007 or 2009 taxable year.
  (d) The amendments made by Section 202 of the American Taxpayer Relief Act of 2012 (Public Law 112-240) to Section 108 of the Internal Revenue Code shall apply.
  (e) The changes made to this section by the act adding this subdivision shall apply to discharges of indebtedness that occur on or after January 1, 2013, and before January 1, 2014, and, notwithstanding any other law, no penalties or interest shall be due with respect to the discharge of qualified principal residence indebtedness during the 2013 taxable year, regardless of whether the taxpayer reports the discharge on his or her income tax return for the 2013 taxable year.

(a) Section 108(f)(1) of the Internal Revenue Code is modified to additionally provide that in the case of an individual, gross income does not include any amount that, but for this section, would be includable in gross income by reason of the discharge, in whole or in part, of any student loan if the individual is an eligible individual for the taxable year.
  (b) Section 108(f)(2) of the Internal Revenue Code, relating to student loan, is modified to additionally provide that a student loan means a student obligation note or other debt evidencing a loan to any individual for the purpose of attending a for-profit higher education company or for the purpose of consolidating or refinancing a loan used to attend a for-profit higher education company, which is either a guaranteed student loan, an educational loan, or a loan eligible for consolidation or refinancing under Part B of Title IV of the Higher Education Act of 1965, as amended (20 U.S.C. Sec. 1071 et seq.).
  (c) For purposes of this section, an individual is an eligible individual for a taxable year if any of the following apply during the taxable year:
  (1) The individual is granted a discharge of any student loan pursuant to the discharge agreement.
  (2) The individual is granted a discharge of any student loan pursuant to paragraph 23 of the William D. Ford Federal Direct Loan Program Borrower's Rights and Responsibilities Statement because of either of the following:
  (A) The individual could not complete a program of study because the school closed.
  (B) The individual successfully asserts that the school did something wrong or failed to do something that it should have done.
  (3) The individual attended a Corinthian Colleges, Inc. school on or before May 1, 2015, is granted a discharge of any student loan made in connection with attending that school, and that discharge is not covered by paragraph (1) or (2).
  (d) For purposes of this section, "discharge agreement" means the agreement between ECMC Group, Inc., Zenith Education Group, and the Consumer Financial Protection Bureau concerning the purchase of certain assets of Corinthian Colleges, Inc., dated February 2, 2015.
  (e) This section shall apply to discharges of indebtedness occurring on or after January 1, 2015, and before January 1, 2020.
  (f) This section shall remain in effect only until December 1, 2020, and as of that date is repealed.

(a) A regulated investment company, as defined in Section 851 of the Internal Revenue Code, relating to definition of regulated investment company, or series thereof, is qualified to pay exempt-interest dividends to its shareholders if, at the close of each quarter of its taxable year, at least 50 percent of the value of its total assets consists of obligations which, when held by an individual, the interest therefrom is exempt from taxation by this state.
  (b) For purposes of this section:
  (1) "Aggregate reported amount" means the aggregate amount of dividends reported by the company under paragraph (4) as exempt-interest dividends for the taxable year (including exempt-interest dividends paid after the close of the taxable year described in Section 855 of the Internal Revenue Code).
  (2) "Excess reported amount" means the excess of the aggregate reported amount over the exempt interest of the company for the taxable year.
  (3) "Exempt interest" means, with respect to any regulated investment company, the excess of the amount of interest received by it during its taxable year on obligations, interest on which, if held by an individual, is exempt from taxation by this state, over the amounts that, if it were treated as an individual, would be disallowed as deductions under Section 17280 of this part or Section 171(a)(2) of the Internal Revenue Code.
  (4) (A) Except as provided in subparagraph (B), "exempt-interest dividend" means any dividend or part thereof (other than a capital gain dividend) paid by a regulated investment company or series thereof and reported by the company as an exempt-interest dividend in written statements furnished to its shareholders.
  (B) If the aggregate reported amount with respect to the company for any taxable year exceeds the exempt interest of the company for such taxable year, an exempt-interest dividend is the excess of the reported exempt-interest dividend amount over the excess reported amount which is allocable to such reported exempt-interest dividend amount.
  (C) (i) Except as provided in clause (ii), the excess reported amount (if any) which is allocable to the reported exempt-interest dividend amount is that portion of the excess reported amount which bears the same ratio to the excess reported amount as the reported exempt-interest dividend amount bears to the aggregate reported amount.
  (ii) In the case of a taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, clause (i) shall be applied by substituting "post-December reported amount" for "aggregate reported amount" and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year.
  (5) "Post-December reported amount" means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year.
  (6) "Reported exempt-interest dividend amount" means the amount reported to its shareholders under paragraph (4) as an exempt-interest dividend.
  (7) "Series" means a segregated portfolio of assets, the beneficial interest in which is owned by the holders of a class or series of stock of the regulated investment company that is preferred over all other classes or series with respect to that portfolio of assets.
  (8) "Value" means, with respect to securities (other than those of majority-owned subsidiaries) for which market quotations are readily available, the market value of those securities; and with respect to other securities and assets, fair market value as determined in good faith by the board of directors or trustees, except that in the case of securities of majority-owned subsidiaries that are investment companies, as defined in the Investment Company Act of 1940, that fair value shall not exceed market value or asset value, whichever is higher.
  (c) An exempt-interest dividend shall be treated by recipients thereof as an item of interest excludable from income.
  (d) In the case of a qualified fund of funds, as defined in Section 852(g)(2) of the Internal Revenue Code, relating to fund of funds, that fund shall be qualified to pay tax-exempt dividends to its shareholders without regard to whether that fund satisfies the requirements of subdivision (a).
  (e) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after December 23, 2010.

The compensation of employees of a foreign country shall be determined in accordance with Section 893 of the Internal Revenue Code.

(a) Gross income does not include any income which is received as a reward from a crime hotline that is authorized by any governmental entity.
  (b) For the purposes of this section, "crime hotline" means any method of direct communication established by a government agency or a private, nonprofit organization exempt from taxation under Section 23701d for the purpose of permitting individuals to report criminal activity to that agency or organization, or any other designated government agency.
  (c) This section shall not apply to an employee of an agency or organization establishing or operating a crime hotline or to an employee of an organization that has contributed to the reward described in subdivision (a).

(a) Gross income does not include compensation or the fair market value of any other benefit, except salary or wages, received by an employee from an employer for participation in any ridesharing arrangement in California, including those specified in subdivision (b).
  (b) For purposes of this section, compensation or the fair market value of any other benefit received for participation in a ridesharing arrangement in California includes compensation or other benefit received for:
  (1) Commuting in a vanpool.
  (2) Commuting in a private commuter bus or buspool.
  (3) A transit pass for use by the employee or his or her dependents, other than transit passes for use by elementary and secondary school students who are dependents of the employee.
  (4) Commuting in a subscription taxipool.
  (5) Commuting in a carpool.
  (6) Free or subsidized parking.
  (7) An employee's bicycling to or from his or her place of employment.
  (8) Commuting by ferry.
  (9) The use of an alternative transportation method, other than a method otherwise specified in this subdivision, that reduces the use of a motor vehicle by a single occupant to travel to or from that individual's place of employment.
  (10) Travel to or from a telecommuting facility.
  (c) For purposes of this section:
  (1) "Vanpool" means seven or more persons commuting on a daily basis to and from work by means of a vehicle with a seating arrangement designed to carry 7 to 15 adults, including the driver, that is used to transport those persons who commute to and from work on a regular basis.
  (2) "Transit pass" means any purchase of transit rides that entitles the holder to any number of transit rides to and from the workplace, whether at a discount rate or the base fare rate.
  (3) "Transit" means transportation service for use by the general public that utilizes buses, railcars, or ferries with a seating capacity of 16 or more persons.
  (4) "Subscription taxipool" means a type of service in which employers or groups of employees contract with a public or private taxi operator to provide daily commuter service for a group of preassembled subscribers on a prepaid or daily fare basis following a relatively fixed route and schedule tailored to meet the needs of the subscribers.
  (5) "Ridesharing arrangement" means the transportation of persons in a motor vehicle where that transportation is incidental to another purpose of the driver. The term includes ridesharing arrangements known as carpools, vanpools, and buspools.
  (6) "Carpool" means two or more persons commuting on a daily basis to and from work by means of a vehicle with a seating arrangement designed to carry less than seven adults, including the driver.
  (7) "Buspool" means 16 or more persons commuting on a daily basis to and from work by means of a vehicle with a seating arrangement designed to carry more than 15 adult passengers.
  (8) "Private commuter bus" means a highway vehicle which meets all of the following criteria:
  (A) Has a seating capacity of at least seven adults, including the driver.
  (B) At least 50 percent of the mileage of which can be reasonably expected to be used for the purpose of transporting employees to and from work.
  (C) Is acquired by the taxpayer on or after the date of enactment of this section.
  (D) With respect to which the taxpayer makes an election under this paragraph on his or her return for the taxable year in which the vehicle is placed in service.
  (9) "Free or subsidized parking" means the benefit received from an employer for parking while participating in a ridesharing arrangement within California.
  (10) "Alternative commute program" means any alternative transportation method or program the purpose of which is to reduce the use of a motor vehicle by a single occupant to travel to and from that individual's place of employment.

(a) Gross income of an employee does not include any amounts, not exceeding an aggregate amount of five thousand two hundred fifty dollars ($5,250) per calendar year, that is paid or incurred by the employer for educational assistance to the employee pursuant to an educational assistance program.
  (b) For purposes of this section, the following definitions shall apply:
  (1) "Educational assistance" means the payment by an employer of expenses incurred by or on behalf of an employee for the employee's education, and includes, but is not limited to, payments for books, supplies, equipment, tuition, and fees, and similar payments. "Educational assistance" includes the provision by an employer of courses of instruction for an employee, including the provision of books, supplies, and equipment. "Educational assistance" does not include any payment for, or the provision of, any of the following:
  (A) Any tools or supplies that may be retained by the employee after completion of a course of instruction.
  (B) Any meals, lodging, or transportation.
  (C) Any course or education involving sports, games, or hobbies.
  (D) Any course or education taken at the graduate level of a kind normally taken by an individual pursuing a program leading to a law, business, medical, or other advanced academic or professional degree. This subparagraph applies only to any course or education taken at the graduate level beginning after June 30, 1996, and before January 1, 2000.
  (2) "Educational assistance program" means a separate written plan of an employer for the exclusive benefit of his or her employees to provide those employees with educational assistance. The program shall meet the following requirements:
  (A) The program benefits employees who qualify under a classification established by the employer and found by the Franchise Tax Board not to be discriminatory in favor of employees who are highly compensated employees (within the meaning of Section 414(q) of the Internal Revenue Code) or their dependents. For purposes of this subparagraph, there shall be excluded from consideration employees who are not included in the program and who are included in a unit of employees covered by an agreement that the Franchise Tax Board finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that educational assistance benefits were the subject of good faith bargaining between the employee representatives and the employer or employers.
  (B) Not more than 5 percent of the amounts paid or incurred by the employer for educational assistance during the year may be provided for the class of individuals who are owners (or their spouses or dependents), each of whom, on any day of the year, owns more than 5 percent of the capital or profits interest in the employer.
  (C) The program does not provide eligible employees with a choice between educational assistance and other remuneration includable in gross income. For purposes of this section, the business practices of the employer, as well as the written program, shall be taken into account.
  (D) The program need not be funded.
  (E) Reasonable notification of the availability and terms of the program is provided to eligible employees.
  (3) "Employee" includes self-employed individuals within the meaning of Section 401(c)(1) of the Internal Revenue Code.
  (c) For purposes of this section:
  (1) Any individual who owns the entire interest in an unincorporated trade or business shall be treated as his or her own employee.
  (2) A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (3) of subdivision (b).
  (3) (A) An educational assistance program shall not be considered to fail to meet any of the requirements of paragraph (2) of subdivision (b) on the sole basis of either of the following:
  (i) Different utilization rates for the different types of educational assistance made available under the program.
  (ii) Successful completion or attainment of a particular course grade is required for or considered in determining reimbursement under the program.
  (B) This section shall not be construed to affect the deduction or inclusion in income of amounts that are paid or incurred or received as reimbursement for educational expenses under Section 117, 162, or 212 of the Internal Revenue Code.
  (d) No deduction or credit shall be allowed to the employee with respect to any amount that the employee excludes from income pursuant to this section.
  (e) Section 127 of the Internal Revenue Code shall not apply.
  (f) This section shall apply with respect to expenses relating to courses beginning after June 30, 1996.

Section 121 of the Internal Revenue Code, relating to exclusion of gain from sale of principal residence, is modified as follows:
  (a) The two-year period in Section 121(a) of the Internal Revenue Code shall be reduced by the period of the taxpayer's service, not to exceed 18 months, in the Peace Corps during the five-year period ending on the date of the sale or exchange.
  (b) If the taxpayer is prohibited from filing a joint return pursuant to Section 18521, Section 121(b)(2)(A) of the Internal Revenue Code shall nevertheless be treated as being satisfied if the taxpayer files a joint return for federal income tax purposes for the same taxable year. However, in no instance shall the total amount excludable from gross income under Section 121(a) of the Internal Revenue Code with respect to any sale or exchange exceed the maximum amount allowed by Section 121(b) of the Internal Revenue Code.
  (c) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 121(f) of the Internal Revenue Code not to have Section 121 of the Internal Revenue Code apply to a sale or exchange, Section 121 of the Internal Revenue Code shall not apply to that sale or exchange for state purposes, a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, the federal election shall be binding for purposes of this part, and that election shall be treated as an election to include in gross income for purposes of this part all the gain from the sale or exchange of that property, including that amount which, but for that election, would have been excluded from income under Section 121(a) of the Internal Revenue Code for state purposes.
  (2) If a taxpayer fails to make an election for federal purposes under Section 121(f) of the Internal Revenue Code to not have Section 121 of the Internal Revenue Code apply to a sale or exchange, no election under Section 121(f) of the Internal Revenue Code shall be allowed for state purposes, Section 121 of the Internal Revenue Code shall apply to that sale or exchange for state purposes, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.
  (d) (1) If a taxpayer has, at any time, made an election for federal purposes under Section 312(d)(2) of the Taxpayer Relief Act of 1997 (Public Law 105-34), relating to sales before date of enactment, or Section 312(d)(4) of that act, relating to binding contracts, to not have the amendments made by Section 312 of the Taxpayer Relief Act of 1997 (Public Law 105-34) apply to a sale or exchange, the amendments made by the act adding this subdivision shall not apply to that sale or exchange, Sections 1, 4, and 6 of Chapter 610 of the Statutes of 1997 shall not apply to that sale or exchange, a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, and the federal election shall be binding for purposes of this part.
  (2) If a taxpayer fails to make an election for federal purposes under Section 312(d)(2) of the Taxpayer Relief Act of 1997 (Public Law 105-34), relating to sales before date of enactment, or Section 312(d)(4) of that act, relating to binding contracts, to not have the amendments made by Section 312 of the Taxpayer Relief Act of 1997 (Public Law 105-34) apply to a sale or exchange, an election under Section 312(d)(2) of the Taxpayer Relief Act of 1997 (Public Law 105-34), relating to sales before date of enactment, or Section 312 (d)(4) of that act, relating to binding contracts, shall not be allowed for state purposes, the amendments made by the act adding this subdivision shall apply to that sale or exchange, Sections 1, 4, and 6 of Chapter 610 of the Statutes of 1997 shall apply to that sale or exchange, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.
  (e) (1) If a taxpayer has, at any time, made or revoked an election for federal purposes under Section 121(d)(9) of the Internal Revenue Code to suspend the running of the five-year period described in Sections 121(a), 121(c)(1)(B), and 121(d)(7) of the Internal Revenue Code, that election or revocation of election to suspend the five-year period under Section 121(d)(9) of the Internal Revenue Code shall be applicable for state purposes, a separate election or revocation of election for purposes of Section 121(d)(9) of the Internal Revenue Code may not be allowed under paragraph (3) of subdivision (e) of Section 17024.5, and the federal election or revocation of election shall be binding for purposes of this part.
  (2) If a taxpayer fails to make an election for federal purposes under Section 121(d)(9) of the Internal Revenue Code to suspend the running of the five-year period described in Sections 121(a), 121(c) (1)(B), and 121(d)(7) of the Internal Revenue Code, that five-year period may not be suspended under Section 121(d)(9) of the Internal Revenue Code for state purposes, and a separate election for state purposes shall not be allowed under paragraph (3) of subdivision (e) of Section 17024.5.
  (f) Section 121(d)(11) of the Internal Revenue Code, relating to property acquired from a decedent, shall not apply.
  (g) The amendments made by Section 417 of the Tax Relief and Health Care Act of 2006 (Public Law 109-432) to Section 121(d)(9) of the Internal Revenue Code, relating to uniformed services, foreign service, and intelligence community, shall apply to sales or exchanges that occur on or after January 1, 2010.
  (h) The amendments made by subdivision (a) of Section 7 of the Mortgage Forgiveness Debt Relief Act of 2007 (Public Law 110-142) to Section 121 of the Internal Revenue Code, relating to exclusion of gain from sale of principal residence, shall apply to sales or exchanges that occur on or after January 1, 2010.

Gross income does not include any amount received for empty beverage containers by a consumer from a recycling center or recycling location as the recycling value, as defined in Chapter 2 (commencing with Section 14502) of Division 12.1 of the Public Resources Code.

Section 132(j)(8) of the Internal Revenue Code, relating to application of section to otherwise taxable educational or training benefits, is modified by substituting "which are not excludable under Section 17151" in lieu of "which are not excludable under Section 127".

Gross income shall not include either of the following:
  (a) (1) Any amount, including any interest or property, that is received as compensation in any taxable year by a taxpayer pursuant to the German Act Regulating Unresolved Property Claims, as amended (Gesetz zur Regelung offener Vermogensfragen).
  (2) For purposes of this subdivision, the basis of any property received pursuant to the German Act Regulating Unresolved Property Claims shall be the fair market value of the property at the time of receipt by the taxpayer.
  (b) (1) Any amount received by a taxpayer who is a Holocaust victim or the heir or beneficiary of a Holocaust victim as a result of a settlement of claims against any entity or individual for any recovered asset.
  (2) For purposes of this subdivision:
  (A) "Holocaust victim" means a person who was persecuted by Nazi Germany or any Axis regime during any period from 1933 to 1945, inclusive.
  (B) "Recovered asset" means any asset of any type, including any bank deposits, insurance proceeds, or artwork owned by a Holocaust victim during any period from 1920 to 1945, inclusive, withheld from that Holocaust victim or his or her heirs or beneficiaries from and after 1945, and not recovered, returned, or otherwise compensated to a Holocaust victim or his or her heirs or beneficiaries until 1995, or thereafter. "Recovered asset" shall also include any interest earned on any of these assets.

Gross income does not include any amount received as reparation payments paid by the German Foundation known as Remembrance, Responsibility, and the Future, or any other source of humanitarian reparations made for purposes of redressing the injustice done to persons who were required to perform slave or forced labor during World War II.

(a) Gross income shall not include any amount received as compensation in any taxable year by a taxpayer pursuant to Assembly Bill 110 of the 1999-2000 Regular Session.
  (b) This section shall apply to taxable years beginning on or after January 1, 1999.

Gross income does not include any amount received as reparation payments paid by the Canadian government for the purpose of redressing the injustice done to persons of Japanese ancestry who were interned in Canada during World War II.

Gross income shall not include any amount received in any taxable year by a claimant pursuant to Section 4904 of the Penal Code.