Details of Public Law 119-21, section 70426 , One Big Beautiful Bill Act

This provision adds a floor limitation for charitable contributions made by a corporation. This provision limits the charitable contribution deduction to the extent the contribution exceeds 1 percent of the corporation’s taxable income.

This provision adds a 5-year carryforward for disallowed charitable contributions that exceeded the 10 percent maximum taxable income threshold or did not exceed the 1percent taxable income floor. For purposes of the contribution deduction disallowed due to the 1 percent floor, the disallowed deduction may be carried forward only if the aggregate contributions also exceed the 10 percent ceiling. This provision also adds special rules for net operating loss carryovers.

California has stand-alone law, under the CTL, for corporate charitable contribution deductions that is generally similar to the federal law allowing corporations a deduction for charitable contributions. California incorporates some of the federal contribution rules by reference, as of January 1, 2025, including IRC section 170(d)(2), which includes the 5-year carry forward. In general, in any taxable year, charitable contributions by a corporation are not deductible to the extent the aggregate contributions exceed 10 percent of the corporation's net income computed without regard to net operating or capital loss carrybacks, and any excess may be carried forward for up to five years. As a result, California does not conform to the increased limitation for certain charitable contributions for corporations.