Section 24455.
Cal. Revenue and Taxation Code - RTC § 24455.
in effect(a)
The Franchise Tax Board may include in the gross income of the taxpayer (or a member of the taxpayer’s combined reporting group) in that taxable year the taxpayer’s pro rata share (or the pro rata share of a member of the taxpayer’s combined
reporting group) of any of those insurers’ current earnings and profits in that taxable year, but not to exceed an amount equal to the specific insurer’s net income attributable to investment income for that year minus that insurer’s net written premiums received in that same taxable year, if all of the following apply:
(1)
For any taxable year an insurer is a member of a taxpayer’s commonly controlled group.
(2)
The ratio of the five-year average net written premiums to the five-year average total income of all insurers in the commonly controlled group is equal to or less than 0.10 (or, for taxable years beginning on or after January 1, 2008, 0.15).
(3)
The accumulation of earnings and profits of the insurers in the commonly controlled group had a substantial purpose of avoidance of taxes on, according to, or
measured by income, of this state or any other state.
The amount so included shall be treated as a dividend received from an insurance company during the taxable year, and to the extent applicable, Section 24410 shall apply to that amount.
(b)
If the insurer members of the commonly controlled group constitute a predominantly captive insurance group (as defined in paragraph (6) of subdivision (e)), then the ratio described in subdivision (a) shall be 0.40.
(c)
To the extent that amounts are included in the gross income of a taxpayer (or a member of the taxpayer’s combined reporting group) pursuant to subdivision (a), those amounts shall not again be considered as investment income in the application of the ratio described in paragraph (2) of subdivision (a).
(d)
The amounts
included in gross income under subdivision (a) shall not again be included in gross income when subsequent distributions are made to the taxpayer (or a member of the taxpayer’s combined reporting group), or another taxpayer that acquires an interest in the stock of the taxpayer (or a member of the taxpayer’s combined reporting group with respect to which subdivision (a) was applied), or any successor or assign of the respective taxpayers (or a member of the taxpayer’s combined reporting group) described in this subdivision. For purposes of applying this subdivision, distributions from an insurer shall be considered first made from amounts included under subdivision (a).
(e)
For purposes of this section, the following definitions shall apply:
(1)
Except as otherwise provided, the phrases “net written premiums,” “five-year average net written premiums” and the “five-year average
total income” shall each have the same meaning, respectively, as applicable for purposes of subdivision (c) of Section 24410, whether or not a dividend is actually received from any insurer member of the taxpayer’s commonly controlled group in that taxable year.
(2)
“Net income attributable to investment income” means net income of the insurer multiplied by a ratio, the numerator of which is the insurer’s gross investment income from interest, dividends (other than dividends from members of the taxpayer’s commonly controlled group), rent, and realized gains or losses, and the denominator of which is the insurer’s gross income (other than dividends from members of the taxpayer’s commonly controlled group) from all sources. In the application of the preceding sentence, if an insurer is required to file a Statutory Annual Statement pursuant to the Annual Statement Instructions and Accounting Practices and Procedures Manual promulgated by the
National Association of Insurance Commissioners, “net income” means net income required to be reported in the insurer’s Statutory Annual Statement.
(3)
An insurer is any insurer within the meaning of Section 28 of Article XIII of the California Constitution, whether or not the insurer is engaged in business in California.
(4)
The phrase “commonly controlled group” shall have the same meaning as that phrase has under Section 25105.
(5)
The phrase “combined reporting group” means those corporations whose income is required to be included in the same combined report pursuant to Section 25101 or 25110.
(6)
A “predominantly captive insurance group” means the insurer members of a commonly controlled group where the insurers receive more than 50 percent of
their net written premiums (without regard to the weighting factors in paragraph (1) of subdivision (e) of Section 24410) from members of the commonly controlled group or the ratios in clause (i) or clause (ii) of subparagraph (B) of paragraph (1) of subdivision (d) of Section 24410 is greater than 50 percent. The provisions of paragraph (4) of subdivision (d) of Section 24410 shall apply for purposes of this paragraph.
(7)
(A)
The taxpayer’s “pro rata share” of the current earnings and profits of an insurer member of a commonly controlled group is the amount that would have been received as a dividend by the taxpayer (or a member of the taxpayer’s combined reporting group) if both of the following apply:
(i)
The insurer had directly distributed its current earnings and profits with respect to its stock held by the taxpayer (or member of the taxpayer’s
combined reporting group).
(ii)
In the case of an insurer holding the stock of another insurer, all other insurer members of the taxpayer’s commonly controlled group had distributed the same current earnings and profits with respect to their stock, in the same taxable year, until amounts were received as a dividend by the taxpayer (or a member of the taxpayer’s combined reporting group) from an insurer member of the commonly controlled group.
(B)
In the application of this section, amounts treated as a dividend received by a partnership shall be considered a dividend received by each partner that is a member of the commonly controlled group, either directly or through a series of tiered partnerships.
(f)
The Franchise Tax Board may prescribe those regulations that are appropriate to describe conditions under which
the accumulation of earnings and profits of those insurers described in paragraph (2) of subdivision (a) do not have the substantial purpose of avoidance of taxes on, according to, or measured by income, of this state or any other state.
(g)
If this section or any portion of this section is held invalid, or the application of this section to any person or circumstance is held invalid, that invalidity shall not affect other provisions of the act adding this section, or the provisions of this section that are severable.
References
referencesCal. Revenue and Taxation Code - RTC § 24410.
referencesCal. Revenue and Taxation Code - RTC § 28.
referencesCal. Revenue and Taxation Code - RTC § 25105.
referencesCal. Revenue and Taxation Code - RTC § 25101.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026