SECTIONS 24601-24602 - California Statutes

REVENUE AND TAXATION CODE

SECTION 24601-24602

24601. (a) Subchapter D of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to deferred compensation, etc., shall apply,
except as otherwise provided.
(b) Notwithstanding the date specified in paragraph (1) of
subdivision (a) of Section 23051.5, Part I of Subchapter D of Chapter
1 of Subtitle A of the Internal Revenue Code, relating to pension,
profitsharing, stock bonus plans, etc., shall apply, except as
otherwise provided, without regard to taxable year to the same extent
as applicable for federal income tax purposes.

24602. (a) In addition to the application of Part II (commencing
with Section 421) of Subchapter D of Chapter 1 of Subtitle A of the
Internal Revenue Code, relating to certain stock options, paragraphs
(1), (2), and (3) of Section 421(a) of the Internal Revenue Code
shall also apply to any California qualified stock option that is
granted to an individual whose earned income from the corporation
granting the California qualified stock option for the taxable year
in which that option is exercised does not exceed forty thousand
dollars ($40,000). In the event that the option does not meet the
necessary qualifications, the option shall be treated as a
nonqualified stock option.
(b) For purposes of this section, "California qualified stock
option" means a stock option that is issued and exercised pursuant to
this section and that is designated by the corporation issuing the
option as a California qualified stock option at the time the option
is granted.
(c) (1) This section shall apply only to those stock options that
are issued on or after January 1, 1997, and before January 1, 2002,
by a corporation to its employee and are exercised by the employee,
while employed by the corporation that issued those stock options (or
within three months thereof, or within one year thereof if
permanently and totally disabled as defined in Section 22(e)(3) of
the Internal Revenue Code), during the taxable year with respect to
any class of shares, or combination thereof, issued by the
corporation, to the extent that the number of shares transferable by
the exercise of the options does not exceed a total of 1,000 and have
a combined fair market value of less than one hundred thousand
dollars ($100,000). The combined fair market value of any stock shall
be determined as of the time the option with respect to that stock
is granted.
(2) Paragraph (1) shall be applied by taking options into account
in the order in which they were granted.
(d) In the case of a California qualified stock option, no amount
shall be included in the gross income of the employee until the time
of the disposition of the option (or the stock acquired upon exercise
of the option). No deduction shall be allowed under Section 162 of
the Internal Revenue Code to the employer on the grant or exercise of
a California qualified stock option.
(e) Subdivision (d) shall not apply to any stock option for which
an election has been made under Section 83(b) of the Internal Revenue
Code, relating to election to include in gross income in year of
transfer.