Water's edge and international
Questions at the border between federal international tax architecture and state filing regimes, where federal classifications rarely port over cleanly.
9Water's edge and international articles
California
8 articles- Can a California service subsidiary of a foreign parent amend prior years to market sourcing, and where does the parent receive the benefit?Yes: a California service subsidiary can amend open years to market sourcing, to the extent its foreign parent receives the benefit outside California.Law as of Oct 15, 2026
- How does California treat IRC 367(d) deemed royalties in worldwide and water's edge years?In California, IRC section 367(d) deemed royalties may be deferred in worldwide combined years; electing water's edge brings the deferred balance into income.Law as of Oct 10, 2026
- Does California tax income a foreign corporation excludes under IRC Section 883?Generally no: California excludes IRC Section 883 income in a water's-edge report by following federal law, and for worldwide filers under section 24320.Law as of Oct 12, 2026
- How does California tax PFIC income when it does not conform to the federal PFIC rules?California does not conform to the federal passive foreign investment company rules; shareholders have California income only on distribution or disposition.Law as of Sep 28, 2026
- What happens to a California water's edge election when the group reorganizes?A California water's edge election usually survives a reorganization; if electing and nonelecting taxpayers combine, the larger by business assets decides.Law as of Oct 12, 2026
- Can a foreign-owned group that finds years of unfiled California returns still elect water's edge?A foreign-owned group cannot elect California water's edge for a year already past due, because the election requires an original, timely filed return.Law as of Oct 13, 2026
- What makes a water's edge election valid when the return and the election disagree?A California water's edge election needs a timely original return that computes tax on a water's edge basis; a late or amended return cannot make one.Law as of Oct 9, 2026
- When is a foreign corporation excluded from a California water's edge combined report?A foreign corporation is generally left out of a California water's edge combined report unless its United States factors average 20 percent or more.Law as of Oct 12, 2026
Multistate
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