D. Stussy wrote:
- quote -

Yes, it IS automatic conformity. With respect to the estate
tax law, Part 8 of the Revenue & Taxation Code.

- quote -

Of course it's inconsistent. But it's also statutory. The
FTB and SBE only "automatically" accept federal case law
when the law in question is the same as California law as it
was in effect at the time of the case (the events at issue,
not the decision). Otherwise, federal case law does not
apply for California. If you think otherwise, please point
us to a case where the FTB or SBE followed a federal case in
a situation where California had not conformed to the
federal statute in question.

State conformity to federal tax law comes in two mutually
exclusive forms: moving conformity (i.e., state law
automatically changes when federal law changes unless the
state legislature takes action to decouple) and static
conformity (i.e., when federal law changes, state law
remains the same as it was until the legislature takes
action to adopt the federal changes). Part 8 of the R&TC
provides for moving conformity. Parts 10 and 11 provide for
static conformity. That's just the way it is.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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Katie wrote:
- quote -

.....And you don't call this latter situation "automatic
conformance?"

FTB and BoE, on the income tax side, have no problem
automatically accepting federal case law. I consider the
whole matter as inconsistent.

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Arthur L. Rubin wrote:
- quote -

You may be right about that. The old inheritance tax was
repealed by an initiative in 1982. However, the estate
(pick-up or sponge) tax was also in place at that time, so
I'm not sure those sections were amended. It certainly
never would have occurred to anybody in 1982 that the feds
would repeal the credit.

Katie in San Diego

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Katie wrote:

- quote -

I believe Part 8 was created or significantly amended by
initiative. This might explain the difference in phrasing.

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A.G. Kalman wrote:
- quote -

Oh, I'm sorry, Alan, I just came across this.

You are absolutely right, and Dieter is mistaken. CRTC Sec
17024.5(a)(1) provides that whenever there is a reference to
the Internal Revenue Code in Part 10 of the Revenue &
Taxation Code (the Personal Income Tax Law), it is to the
IRC as it was in effect as of the conformity date that
applies to the year in question (as listed in the statute).
CRTC Sec. 23051.5 provides that the same definition applies
to references to the IRC in Part 11 (the Corporation Tax
Law). Thus when either the PIT Law or the CTL refers to IRC
Sec. 61, 62, 63, etc. it is to those sections as they were
in effect as of the applicable conformity date.

There is NO automatic conformity to federal statutory
changes in either the Personal Income Tax Law or the
Corporation Tax Law. CRTC Sec. 17024.5(d) provides that
final or temporary federal regulations are applicable to the
extent that they do not conflict with CA law (e.g., reflect
federal statutory changes that have not been conformed to by
CA) or with FTB regulations.

Oddly enough there is no such provision with regard to Part
8 of the Revenue & Taxation Code, which imposes an estate
tax equal to the credit for state death taxes allowed by the
Internal Revenue Code against the federal estate tax.
Instead, references to IRC sections in that part are
specifically to the IRC sections "as amended or renumbered."
(See, e.g., CRTC Sec. 13409, Sec. 13410). That is why
California's estate tax has been phased out automatically by
the federal changes, without any action by the Legislature.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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D. Stussy wrote:
- quote -

I'm not aware of any federal regulation that CA has conformed to
that affected some part of the IRC not incorporated into the R&TC
either because of the cutoff date or conforming legislation.

--

Alan
http://taxtopics.net

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- quote -

As I have said, that is inconsistent because the [higher]
rulings they accept include those that are after the cut-off
date. If they won't accept statute changes after that date,
it is wholly inappropriate for them to accept federal
regulations (that affect state tax issues) after that date,
yet they do.

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Thanks, D. It's a relief to know there is some automatic
conformity by CA. When there isn't and should be, the
legislature does take forever to make the change.

Linda

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DORFMONT[at]aol.com wrote:

- quote -

My guess is that a CA constitutional amendment of that
nature would itself be unconstitutional, as it would appear
to create an impermissible delegation of authority from the
CA legislature to the US congress. In other words,
thereafter it would be the US congress (elected at large)
that substantially controls taxation in CA, NOT the CA
legislature (elected by the citizens of CA).

A better solution would be a FEDERAL constitutional
amendment to require uniform taxation schemes in all states.
However, short of either a civil war or me being elected
king, I doubt we'll ever see that. <grin
MTW

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D. Stussy wrote:
- quote -

Unfortunately, CA R&TC does specify that references to the
IRC are to the IRC of Jan. 1, 2001. See CA R&TC Section
17024.5. Unless there is conforming legislation or another
section of the R&TC that differs from federal law, one needs
to look at the IRC as of that date.

CA does automatically conform to any federal regulation
published that affects some part of the IRC that CA has
incorporated unless that regulation conflicts with CA law or
CA regulations. In addition, CA automatically conforms to
any federal court decision that interprets the IRC as long
as that court decision affects the 9th Circuit and the
decision relates to a section of the IRC incorporated into
CA law.

Katie... where are you?

--
Alan
http://taxtopics.net

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DORFMONT[at]aol.com wrote:

- quote -

Although operationally true, my position is that for some
things, there is automatic conformance as the CA R&TC does
not specify that its references to the IRC are static as of
a certain date. The three sections in the R&TC for "gross
income", "AGI" and "itemized deductions" (except as modified
elsewhere in the R&TC directly) directly cite the IRC
sections 61, 62, and 63 [from memory, aren't those R&TC
17041-43?]. Therefore, if the federal definitions change,
the state definitions automatically do in the absence of an
overriding statute already in the R&TC.

The BoE and FTB automatically accept U.S. Tax Court
decisions on items that flow through to the state level
income tax, so they should also accept any federal statutory
or regulatory change as well; not to do so is to be
inconsistent.

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I have never found CA automatically conforming to Fed law.
They always have to pass legislation. Consequently there
ought to be a constitutional amendment (that's what it takes
in this state) to require conformance with Fed law unless
specific exemption legislation is passed (like SSA benefits,
unemployment, Treasury interest, non-CA muni interest). When
in doubt CA does not conform. And when we do it frequently
takes until well into the filing season to get the
legislation through.

Linda Dorfmont E.A.,CFP, CSA

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Anyone know if I am correct that an adjustment to charitable
contribution deductions must be made on a 2004 CA tax return
(and again in 2005) if the taxpayer has elected to deduct
January 2005 cash contributions on the federal 2004 return?

I always get confused on what part of the CA law picks up
federal changes and what part requires conforming
legislation.

--
Alan
http://taxtopics.net

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