(a) The provisions of Section 402 of the Internal Revenue Code, relating to taxability of beneficiaries of employees’ trusts, shall be modified as follows:
(1) The amendments and transitional rules made by Public Law 99-514 shall be applicable to this part for the same transactions and the same years as they are applicable for federal purposes, except as otherwise provided.
(2) The basis of any person in an employees’ trust shall include the amount of any contributions made prior to January 1, 1987, which were not allowed as a deduction under former Sections 17503 and 17513 (including predecessor Section 17524 repealed by Chapter 488 of the Statutes of 1983) relating to special limitations for self-employed individuals.
(b) (1) There is hereby imposed a tax on lump-sum distributions computed in accordance with the provisions of Section 402(d) of the Internal Revenue Code using the rates and brackets prescribed in subdivision (a) of Section 17041 (without regard to Section 17045) in lieu of the rates and brackets in Section 1(c) of the Internal Revenue Code. The recipient of the lump-sum distribution shall be liable for the tax imposed by this paragraph.
(2) For purposes of this part, the provisions of Section 1122(h) of Public Law 99-514, as modified by Section 1011A(b) of Public Law 100-647, shall apply, except as modified by each of the following:
(A) The provisions of Section 1122(h)(3)(B) of Public Law 99-514 shall be modified to refer to Section 17041 rather than Section 1 of the Internal Revenue Code of 1986.
(B) The provisions of Section 1122(h)(3)(B)(ii) of Public Law 99-514 shall be modified to provide a tax rate of 5.5 percent rather than a tax rate of 20 percent.
(C) The provisions of Section 1122(h)(5) of Public Law 99-514 shall be modified to refer to Section 17041 rather than Section 1 of the Internal Revenue Code of 1954.
(3) For purposes of this section, a taxpayer shall elect the same special lump-sum distribution averaging method for purposes of this part as that elected for federal purposes under Section 402(d)(4)(B) of the Internal Revenue Code.
(4) The provisions of Section 1124(a) of Public Law 99-514, as amended by Section 1011A(d) of Public Law 100-647, shall apply.
(5) The provisions of Section 1124(c) of Public Law 99-514, as added by Section 1011A(d) of Public Law 100-647, shall apply.
(Amended by Stats. 1993, Ch. 873, Sec. 18. Effective October 6, 1993.)
Last modified: October 25, 2018