Income taxes: deductions: punitive damages.

The Personal Income Tax Law and the Corporation Tax Law allow various deductions in computing the income that is subject to the taxes imposed by those laws. Both laws allow a deduction for ordinary and necessary business expenses, including a deduction for amounts paid or incurred for specified types of punitive damages. This bill, for taxable years beginning on or after January 1, 2012, would, under both laws, disallow the deduction for amounts paid or incurred for punitive damages, as provided. This bill would constitute a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature. This bill would take effect immediately as a tax levy.