Personal Income Tax Law: Corporation Tax Law: sale of net operating losses.

The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions in computing the income that is subject to the taxes imposed by those laws, including a deduction for a net operating loss, as specified. This bill would allow a startup innovator, as defined, to sell a net operating loss to an unrelated taxpayer, except as provided. The bill would require the sale price of a net operating loss to be at least 80% of the value of the net operating loss being transferred, and would limit a startup innovator to selling no more than $20,000,000 worth of net operating losses in the aggregate, as provided. The bill would provide that a net operating loss sold by a startup innovator would retain the attributes it had in the hands of the seller, including any carryback or carryforward attributes. The bill would allow a purchaser of a net operating loss to apply the net operating loss for taxable years beginning on or after January 1, 2024. The bill would require a startup innovator to certify under penalty of perjury that proceeds received from the sale of a net operating loss are used for specified purposes. By expanding the crime of perjury, the bill would establish a state-mandated local program. The bill would repeal these provisions as of January 1, 2029. The Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally define "gross income" as income from whatever source derived, except as specifically excluded. Those laws also provide various exclusions from gross income. This bill would, for taxable years beginning on or after January 1, 2024, and before January 1, 2029, exclude from gross income any amount received by a startup innovator for the sale of a net operating loss. Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill would include additional information required for any bill authorizing a new tax expenditure. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. This bill would take effect immediately as a tax levy.