Details of Public Law 119-21, section 70352 , One Big Beautiful Bill Act

This provision repeals the election that allowed a specified foreign corporation to elect, in lieu of the taxable year of the majority United States (U.S.) shareholder’s taxable year, a taxable year beginning 1 month earlier than the majority U.S. shareholder’s taxable year. For purposes of this provision, a specified foreign corporation is a controlled foreign corporation (CFC) under the subpart F regime in which a U.S. shareholder owns more than 50 percent of the voting power of all classes of stock of such corporation entitled to vote or the total value of stock of such corporation (Internal Revenue Code (IRC) section 898(b)).

This provision provides that any corporation that is a specified foreign corporation as of November 30, 2025 will be required to begin its first taxable year after November 30, 2025 and its taxable year would end at the same time as its majority U.S. shareholder or if there is no majority U.S. shareholder year, the taxable year would be the year prescribed under the regulations. In addition, if any specified foreign corporation is required by the amendments to change its taxable year for its first taxable year after November 30, 2025, then such change would be treated as if initiated by such corporation and would be treated as having been made with consent of the Secretary of the Treasury.

California does not conform to subpart F (sections 951 to 965) of the IRC, relating to CFCs, except to the extent applicable with respect to filings under a water’s-edge election.

As a result, California does not conform to the changes made by this provision.