Section 25106 Of Article 1. General Provisions From California Revenue And Taxation Code >> Division 2. >> Part 11. >> Chapter 17. >> Article 1.
25106
. (a) (1) In any case in which the income of a corporation is
or has been determined under this chapter with reference to the
income and apportionment factors of one or more other corporations
with which it is doing or has done a unitary business, all dividends
paid by one to another of any of those corporations shall, to the
extent those dividends are paid out of the income previously
described of the unitary business, be eliminated from the income of
the recipient and, except for purposes of applying Section 24345,
shall not be taken into account under Section 24344 or in any other
manner in determining the tax of any member of the unitary group.
(2) (A) For purposes of this section, the dividends described in
paragraph (1) include dividends paid out of the income previously
described of the unitary business by a member of the unitary group to
a corporation formed subsequent to the accrual of the income, if the
recipient corporation was part of the unitary group during the
period from its formation to its receipt of those dividends.
(B) The Franchise Tax Board may deny any dividend elimination for
the dividends described in this paragraph if the board determines
that a transaction is entered into or structured with a principal
purpose of evading the tax imposed by this part.
(3) For purposes of this section, "income previously described of
the unitary business" shall include income earned by members of the
unitary group during taxable years when no member of the unitary
group was taxable in this state to the extent that the income of the
unitary group would have been determined under this chapter had any
member of the corporation's unitary group been subject to tax in this
state at the time that income was earned.
(b) The Franchise Tax Board may prescribe any regulations that may
be necessary or appropriate to carry out the purpose of this
section, which is to prevent taxation of dividends received by a
member of a unitary group where those dividends were paid from the
income previously described of the unitary business by another member
of the same unitary group.