Amendments to California’s market-based sourcing rules define “marketable securities,” specify how sales of such securities should be assigned and provide guidance on the assignment of interest receipts, dividends and goodwill.
“What’s most interesting about these amendments is what they don’t include—examples showing how to assign asset management fees,” Eric J. Coffill, senior counsel with Sutherland in Sacramento told Bloomberg BNA Sept. 23. The examples appeared in earlier iterations of the amendments, but were not included in the recent adoption, Coffill said.
Amendments to Cal. Reg. tit. 18, § 25136-2 define “marketable securities” as “any security that is actively traded in an established stock or securities market and is regularly quoted by brokers or dealers in making a market.” Unlike general corporations which must exclude from their sales factor amounts received from treasury functions, taxpayers who are principally engaged in purchasing and selling intangible assets must include gross receipts from such transactions in their sales factor, under the amendments, from the sales factor.
Under the amendments, sales of marketable securities are sourced to the location of the customer as follows:
Gross receipts from interest are sourced under the amendments as follows:
Loans are defined as “any extension of credit resulting from direct negotiations between the taxpayer and its customer, and/or the purchase, in whole or in part, of such extension of credit from another person. Loans include participations, syndications, and leases treated as loans for federal income tax purposes.”
Gross receipts from dividends or goodwill are assigned according to the same rules applicable to the sale of shares of stock or an ownership interest in a pass-through entity.
The amendments are applicable to taxable years beginning or after Jan. 1, 2015. But a taxpayer may elect to apply the new provisions retroactively to taxable years beginning on or after Jan. 1, 2012, assuming a return filed in those years is open to adjustment under applicable statutes of limitation.
Continue the discussion on LinkedIn: How will California’s new regulations play out in the audit process?
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)