Details of Public Law 119-21, section 70331 , One Big Beautiful Bill Act

An applicable taxpayer is required to pay a tax equal to the Base Erosion Minimum Tax (BEMT) amount for the taxable year. Under this provision, the BEMT amount is the excess of 10.5 percent of the modified taxable income of the taxpayer for the taxable year over an amount equal to the regular tax liability (defined in Internal Revenue Code (IRC) section 26(b)) of the taxpayer for the taxable year reduced (but not below zero) by the excess (if any) of the credits allowed under Chapter 1 against such regular tax liability over the sum of: (1) the credit allowed under IRC section 38 for the taxable year which is properly allocable to the research credit determined under IRC section 41(a), plus (2) the portion of the applicable IRC section 38 credits not in excess of 80 percent of the lesser of the amount of such credits or the BEMT amount (determined without regard to this clause).

This provision repeals the modifications established under the Tax Cuts and Jobs Act (Public Law 115-97, section 14401), including repealing the increase in the percentage of modified taxable income used to calculate the BEMT from 10 percent to 12.5 percent and instead replaced 10 percent with 10.5 percent, redesigned several subsections and made other technical changes to conform to the amendments under this section.

California does not have a tax comparable to the tax imposed under IRC section 59A, relating to tax on base erosion payments of taxpayers with substantial gross receipts. As a result, California does not conform to the changes made by this provision.