Tax Credit for Payments Made to Other States

Provisions on credit for taxes paid under the California Personal Income Tax Law

Division 2, Part 10, Chapter 12 of the Revenue and Taxation Code addresses credits for taxes paid under the California Personal Income Tax Law.

Section 18001 allows residents to claim a credit against the “net tax” for net income taxes imposed by and paid to another state on income taxable under this part, excluding any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062. The credit is unavailable in four specified situations.

Section 18002 permits nonresidents to claim a credit against the “net tax” for net income taxes imposed by and paid to their state of residence on income taxable under this part, again excluding any preference, alternative, or minimum tax comparable to the tax imposed by Section 17062. This section lists five situations in which the credit is denied and defines the term “net income taxes.”

Section 18003 says an estate or trust is treated as a resident of the state that taxes its income, regardless of whether that income comes from sources within that state.

Section 18004 provides that when an estate or trust is a resident of California and also of another state, a credit is allowed against the taxes imposed by this part for net income taxes imposed by and paid to the other state, subject to two stated conditions.

Section 18005 states that a resident beneficiary of an estate or trust who is taxed on the estate’s or trust’s income under Chapter 9 of this part may, subject to two stated conditions, receive a credit against the taxes imposed by this part for net income taxes paid by the estate or trust to another state on that income.

Section 18006 explains that, in determining a credit under Section 18001 for residents or Section 18002 for nonresidents, both of the specified requirements apply.

Section 18007 requires a taxpayer to immediately notify the Franchise Tax Board if any taxes paid to another state, for which a credit was allowed under this chapter, are later credited or refunded to the taxpayer.

Section 18008 provides that an amount equal to the credit allowed for taxes later credited or refunded by the other state becomes due and payable by the taxpayer upon notice and demand from the Franchise Tax Board.

Section 18009 requires interest to be assessed, collected, and paid in the same manner as the tax, at the adjusted annual rate from the date the credit was allowed under this part until the date of payment.

Section 18011 states that the credit for net income taxes paid to another state is not allowed to any taxpayer or class of taxpayers if granting it would create an invalid or unlawful discrimination against another taxpayer or class of taxpayers.