Corporate tax: exclusions: qualifying shipping activities.

Elections Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Valladares
Last action: 2026-04-09
Official status: Set for hearing May 6.
Effective date: Not listed

Plain English Breakdown

The official source material does not provide specific criteria for what qualifies as a 'qualifying vessel'.

Corporate Tax Exclusion for Shipping Activities

The bill provides an exclusion from corporate gross income for certain shipping activities and special rules regarding vessel depreciation and replacement, effective January 1, 2026.

What This Bill Does

Provides an exclusion from corporate gross income for qualifying international shipping activities of electing corporations or members of electing groups starting in 2026.
Establishes special rules about the depreciation and basis of a qualifying vessel.
Allows nonrecognition of gain from selling old ships if new qualifying vessels are acquired.

Who It Names or Affects

Corporations involved in international shipping that elect to qualify under this bill.
Vessel operators who meet certain criteria for their vessels.

Terms To Know

Gross income: Total income before any deductions or exclusions are applied.
Depreciation: The decrease in value of an asset over time, which can be used to reduce tax liability.

Limits and Unknowns

Does not specify the exact criteria for what qualifies as a 'qualifying vessel'.
Only applies to taxable years starting on or after January 1, 2026.
The full impact of these changes is uncertain until more details are provided.

Bill History

2026-04-09 California Legislative Information
Set for hearing May 6.
2026-04-08 California Legislative Information
Re-referred to Com. on REV. & TAX.
2026-03-23 California Legislative Information
From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS.
2026-02-26 California Legislative Information
Referred to Com. on RLS.
2026-02-18 California Legislative Information
From printer. May be acted upon on or after March 20.
2026-02-17 California Legislative Information
Introduced. Read first time. To Com. on RLS. for assignment. To print.

Official Summary Text

SB 1113, as amended, Valladares.
Corporation taxes.
Corporate tax: exclusions: qualifying shipping activities.
The Corporation Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income.
Existing federal income tax law authorizes a qualifying vessel operator, as defined, to elect to determine its corporate tax burden for specified international shipping activities using a per-ton rate and provides an exclusion from gross income for qualifying shipping activities of an electing corporation or a member of an electing group, as specified.
This bill, for taxable years beginning on or after January 1, 2026, would provide an exclusion from
gross income for qualifying shipping activities of an electing corporation or a member of an electing group for which an election is in effect under the above-described federal law, as specified. The bill would also provide special rules relating to depreciation and basis of a qualifying vessel, as defined, and would, in conformity with federal income tax laws, provide for the nonrecognition of gain from the disposition of a qualifying vessel where the electing corporation acquires a replacement qualifying vessel, as provided.
This bill would take effect immediately as a tax levy.
The Corporation Tax Law specifies that its provisions are applicable to the corporation franchise tax, the alternative minimum tax, the corporation income tax, or the predecessor acts of the Corporation Tax Law.
This bill would make nonsubstantive changes to that provision.

Current Bill Text

Read the full stored bill text

Download Bill PDF