SeeSALT Blog
Senate Bill 711 (S.B. 711) would update California’s conformity date to the Internal Revenue Code (IRC) from January 1, 2015, to January 1, 2025. If enacted, this change would apply to taxable years beginning on or after January 1, 2025, and would align California tax law with numerous federal provisions enacted over the past decade. Notable provisions include:
IRC Section 41 – Research Credit
California would conform to the election of the Alternative Simplified Credit (ASC), but with reduced credit percentages:
- 3% (vs. 14% federal) of qualified research expenses (QREs) that exceed 50% of average QREs for the prior three years.
- 1.3% (vs. 6%) if the taxpayer has no QREs in any of the previous three years.
IRC Section 1031 – Like-Kind Exchanges
California would conform to the federal limitation on like-kind exchanges to real property only, eliminating deferral for exchanges of certain non-real property.
IRC Section 163(j) – Interest Expense Limitation
California would explicitly decouple from the interest expense limitation under IRC Section 163(j).
IRC Section 56A – Corporate Alternative Minimum Tax
California would explicitly exclude conformity to the new Corporate Alternative Minimum Tax under IRC Section 56A, enacted as part of the Inflation Reduction Act.
Renewable Energy Credits
S.B. 711 would not explicitly conform to renewable energy development provisions added by the Inflation Reduction Act 2022.
On May 23, 2025, the Senate Appropriations Committee passed S.B. 711 and the bill is scheduled for a vote by the full Senate on May 27, 2025.