The measure updates rules on deductions, credits, net operating losses, and accounting methods, while notably adopting a modified version of the federal Alternative Simplified Credit for R&D and maintaining the state’s separate corporate alternative minimum tax system.
California Governor Gavin Newsom signed Senate Bill 711 (SB 711) into law on 1 October 2025, bringing the state’s tax code into conformity with various Internal Revenue Code (IRC) provisions from 1 January 2015 through 1 January 2025.
SB 711, outlines extensive amendments to the California Revenue and Taxation Code primarily concerning taxation and federal conformity. The legislation modifies numerous existing sections, adds new ones, and repeals others to align California tax law with various provisions of the Internal Revenue Code, sometimes with state-specific modifications or exceptions.
Key areas addressed include deductions, credits, net operating losses, and accounting methods, often specifying whether California will adopt or reject certain federal tax provisions, such as those related to the Tax Cuts and Jobs Act of 2017 and recent federal disaster relief acts.
Alternative simplified credit (R&D tax credit)
SB 711 updates the calculation methods for the research credit available to California taxpayers. Starting with tax years beginning on or after 1 January 2025, taxpayers can choose to apply the Alternative Simplified Credit (ASC). The Alternative Incremental Research Credit (AIRC) method has been abolished.
For taxable years beginning on or after 1 January 2025, the state adopts the federal alternative simplified credit approach, but modifies the rates significantly for corporate taxpayers:
- The federal 14% reference is modified to 3%.
- The federal 6% reference is modified to 1.3%.
Corporate alternative minimum tax (CAMT)
SB 711 maintains the state’s existing Corporate Alternative Minimum Tax (AMT) structure and decisively rejects the federal book minimum tax system introduced in recent years.
SB 711 explicitly preserves the federal alternative minimum tax as of 1 January 2015, thereby decoupling from the federal Corporate Alternative Minimum Tax (CAMT), which imposes a minimum tax on applicable corporations based on adjusted financial statement income.
State AMT rate
The tentative minimum tax for corporations subject to the state AMT is generally imposed at a rate of 7% (or 6.65% percent for taxable years beginning on or after 1 January 1997).
Business interest limitation
The state provides a key advantage to corporations regarding debt financing by specifically declining conformity to the federal limitation on the deduction of business interest.
Treatment of foreign transfers
The state also retains exceptions regarding the tax treatment of transferring property to foreign entities.
