- 27 -
the second taxable year it shall pay a tax for said
year, at the rate applicable to that year, based upon
its net income received during that year, allowing a
credit for the prepayment; but in no event, except as
provided in Section 23332, shall the tax for the second
taxable year be less than the amount of the prepayment
for that year, and said return for its second taxable
year shall also be the basis for the tax of said
taxpayer for its third taxable year, if the second
taxable year constitutes a period of 12 months. [Id.
sec. 23222(a).]
Cal. Rev. & Tax Code sec. 23222(a) was in effect prior to
December 31, 1960.9 Thus, prior to December 31, 1960, where a
taxpayer’s first taxable year was a period less than 12 months,
the income from the short year was not used as the basis for
computing the franchise tax for the second taxable year; rather,
the income earned in the taxpayer’s second taxable year was used
as a measure of its franchise taxes for the second taxable year.
Petitioner argues that under the law as it existed prior to
December 31, 1960 (prior to the 1972 amendment), its first year
ending December 31, 1987, constituted both its first income year
and its first taxable year, and that its franchise tax liability
based on 1987 income would have become fixed on the last day of
1987, even if petitioner had dissolved on January 1, 1988.
Similarly, petitioner argues that since its first taxable year
was a period less than 12 months, its second taxable year (the
9Pursuant to the 1972 amendment, sec. 23222(a) of the Cal.
Code applies only to taxpayers who commenced doing business in
California prior to Jan. 1, 1972. Cal. Rev. & Tax Code sec.
23222(b) (West 1992).
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011