Closing out a process that began nearly nine years ago, the California Franchise Tax Board (FTB) recently submitted proposed amendments to its market sourcing regulation, California Code of Regulations, title 18, section 25136-2, to the Office of Administrative Law (OAL) for final approval. The version submitted to OAL includes the same simplifying presumptions for sourcing receipts from services, special sourcing rules for receipts from asset management services, and special assignment rule for professional services provided to more than 250 customers that had appeared in recent drafts. The latest version also includes clarifying language regarding how a taxpayer may substantiate where the benefit of a service is received. Additionally, the effective date of the amendments has been revised, with the amendments applicable to taxable years beginning on or after January 1, 2026. Under California’s Administrative Procedure Act, OAL has 30 working days to approve or disapprove the rulemaking action.
See our prior coverage here and here for additional information on the proposed amendments and background on the entire process.