Details of Public Law 119-21, section 70342 , One Big Beautiful Bill Act

This provision modifies the definition of adjusted taxable income, for purposes of computing the business interest deduction limitation, to disregard amounts included in gross income from subpart F income of a United States (U.S.) shareholder (Internal Revenue Code (IRC) section 951), the net controlled foreign corporation (CFC) tested income of a U.S. shareholder (IRC section 95A), and any gross up amount treated as a dividend received from a CFC with respect to which the U.S. corporation is a U.S. shareholder (IRC section 78).

California conforms, under the Personal Income Tax Law to the federal rules for the deduction of interest under IRC section 163, as of the specified date of January 1, 2025. As a result, California does not conform to the changes made by this provision under the PITL.

Under the Corporation Tax Law (CTL), to the federal rules for the deduction of interest under IRC section 163, as of the specified date of January 1, 2025, with modifications, but does not conform to the federal limitations on deductions of business interest. As a result, California does not conform to the changes made by this provision under the CTL.

The estimated revenue impact to conform to the above provisions would result in the following gain:

26/27 27/28 28/29 29/30 $17,000,000 $12,000,000 $10,000,000 $9,600,000