California Tax: New law updates Internal Revenue Code Conformity, but continues to decouple from many provisions

On April 12, 2010, Governor Arnold Schwarzenegger signed into law Senate Bill 401 that updates California's federal tax conformity date to the Internal Revenue Code as enacted on January 1, 2009, and is generally applicable to taxable years beginning on or after January 1, 2010. However, certain provisions have retroactive applicability, and other provisions become effective January 1, 2011. Prior to the adoption of this new law, California's federal conformity date (which continues to apply to taxable years beginning before January 1, 2010) was January 1, 2005.

This Multistate Tax Alert summarizes significant aspects of S.B. 401, including specified effective dates and modifications, and highlights certain areas of continued non-conformity.