Details of Public Law 119-21, section 70430 , One Big Beautiful Bill Act

This provision replaces the term “home construction contract” with “residential construction contract” as a category of construction project exempted from the percentage of completion method of accounting for the purposes of what taxable year to include the taxable income from a long-term contract in, and as it applies to the treatment of certain long-term contracts for purposes of determining alternative minimum taxable income.

This provision would also exempt a residential construction contract that is not a home construction contract from the application of IRC section 263A if it meets the gross receipts test of IRC section 448(c) for the taxable year the contract is entered into and is estimated to be completed with the three-year period beginning on the contract commencement date, instead of the two-year period that applies to home construction and other specified construction contracts.

California generally conforms, under the PITL and CTL, to the federal long-term contract rules under IRC sections 56 and 460 as of the specified date of January 1, 2025, with modifications, and as a result, does not conform to the changes under this provision for residential construction contracts.