This course explains the many differences between the California and federal rules that determine the dividends received deduction. It also explains the recent changes in the California deduction resulting from case law and legislation.

California does not incorporate the federal dividends received deduction, but the state has its own provisions allowing the deduction. However, in recent years, controversy has surrounded the deduction, as several of the California provisions have been struck down as unconstitutional. As a result, there has been much confusion with regard to both remedies for past unfair treatment and for future application of the California dividends received deduction.

As a result of all the litigation and controversy, the difficulty in calculating the California dividends received deduction has been stunning. In addition to the usual problem of understanding how California law differs from federal, it is imperative to understand the taxpayer’s options for relief for past wrongs as well as the future impact of the court decisions and new legislation.