SB 1113 California Senate · 2025-2026 Regular Session

Corporate tax: exclusions: qualifying shipping activities.

Summary

The Corporation Tax Law, in conformity with federal income tax law, generally defines "gross income" as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Existing federal income tax law authorizes a qualifying vessel operator, as defined, to elect to determine its corporate tax burden for specified international shipping activities using a per-ton rate and provides an exclusion from gross income for qualifying shipping activities of an electing corporation or a member of an electing group, as specified. This bill, for taxable years beginning on or after January 1, 2026, would provide an exclusion from gross income for qualifying shipping activities of an electing corporation or a member of an electing group for which an election is in effect under the above-described federal law, as specified. The bill would also provide special rules relating to depreciation and basis of a qualifying vessel, as defined, and would, in conformity with federal income tax laws, provide for the nonrecognition of gain from the disposition of a qualifying vessel where the electing corporation acquires a replacement qualifying vessel, as provided. This bill would take effect immediately as a tax levy.

Bill status in committee 1 of 4 stages cleared

Introduction

Feb 2026

Committee Review

Floor Vote

Governor

Introduced Feb 17, 2026 Last action May 14, 2026

Maddy AI version diff · 2 comparisons

What changed between versions

03/23/26 - Amended Senate → SB1113 · 1 edit

MINOR

No substantive legislative changes occurred between these two versions. The diff reflects a transition from a traditional printed bill format (with line numbers and page markers) to a web-rendered version of the same text, including website navigation elements and metadata. The actual bill content - adding Section 24316 to the Revenue and Taxation Code to exclude qualifying shipping activities from gross income for taxable years beginning on or after January 1, 2026 - is identical in both versions.

TECHNICAL

Formatting changed from a printed bill layout with line numbers and page headers to a web page rendering that includes site navigation (home, accessibility, FAQ, search) and publication metadata. No policy substance was altered.

02/17/26 - Introduced → 03/23/26 - Amended Senate · 7 edits · Mar 23, 2026

MODERATE

SB 1113 was transformed from a nonsubstantive cleanup of Section 23002 (fixing a typo) into a substantive tax bill that adds a new gross income exclusion for qualifying international shipping activities. The amended version mirrors federal Subchapter R rules, allowing electing corporations to exclude shipping income from California gross income while providing special depreciation and gain nonrecognition rules for qualifying vessels. This represents a significant policy shift from a technical fix to a major tax benefit for the international shipping industry.

Scope change

The bill's scope expanded dramatically from a nonsubstantive typographical fix to Section 23002 into a substantive tax exclusion for international shipping companies, adding an entirely new code section (24316) with multiple provisions on income exclusion, deductions, depreciation, and gain recognition.

SCOPE

Added new Section 24316 to the Revenue and Taxation Code, creating a gross income exclusion for qualifying shipping activities of electing corporations or members of electing groups under federal Subchapter R (IRC Section 1352). Applies to taxable years beginning on or after January 1, 2026.

DEFINITION

Added definitions for 'electing corporation,' 'electing group,' 'qualifying shipping activities,' and 'qualifying vessel,' all incorporating federal Internal Revenue Code definitions (Sections 1355 and 1356).

REQUIREMENT

Added rules disallowing deductions, losses, and credits related to excluded shipping income, with a special rule that interest expense is disallowed in the same ratio as provided by IRC Section 1357(c)(3).

Added nonrecognition of gain on sale or disposition of a qualifying vessel if a replacement qualifying vessel is acquired within the federal time period (IRC Section 1359(b)), with basis reduction rules for the replacement vessel.

TECHNICAL

Added a special basis rule requiring that the adjusted basis of qualifying vessels be determined using straight-line depreciation, even though depreciation deductions are otherwise disallowed against excluded income.

TIMELINE

Bill now takes effect immediately as a tax levy under Article IV of the California Constitution, rather than following the standard July 1 effective date.

FISCAL

Fiscal committee answer changed from 'no' to 'yes,' indicating the bill now has fiscal impact due to the new revenue exclusion.

Floor votes

How they voted

No floor votes recorded yet.

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

May 14, 2026

Upper · Passed

May 14 hearing: Held in committee and under submission.

upper

May 6, 2026

Upper · Passed

From committee: Do pass and re-refer to Com. on APPR. (Ayes 5. Noes 0. Page 4154.) (May 6). Re-referred to Com. on APPR.

upper

Apr 8, 2026

Committee

Re-referred to Com. on REV. & TAX.

upper

Mar 23, 2026

Upper · Passed

From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS.

upper

Feb 26, 2026

Committee

Referred to Com. on RLS.

upper

Feb 17, 2026

Introduced

Introduced. Read first time. To Com. on RLS. for assignment. To print.

upper

1 primary · 0 co-sponsors