Personal Income Tax Law and Corporation Tax Law: federal conformity

The law aligns California personal and corporate income-tax references with the federal tax code as of January 1, 2025, reducing outdated or confusing cross-references. It also keeps California from applying the federal cap on business-interest deductions to individual taxpayers.

What the law does ​

• Updates California’s general conformity date to the federal tax code as of January 1, 2025.
• Removes obsolete references to repealed federal tax provisions and makes related technical corrections.
• Exempts individual taxpayers from the federal limitation on deducting business interest, beginning in tax year 2025.
• Updates California’s research-credit rules for tax years beginning in 2025, including its alternative simplified credit calculation.
• Retains California-specific rules for depreciation, business losses, net operating losses, partnerships, foreign partners, and other tax items.

Who it affects ​

• California individual taxpayers with business-interest expenses.
• Corporations, partnerships, and their owners filing California income or franchise tax returns.
• Businesses claiming California research credits or reporting federal partnership-audit adjustments.
• Farmers seeking specified tax treatment for losses or grapevine replacements tied to Pierce’s disease or phylloxera.