Amended California Code of Regulations (Reg.) section 25106.5-1, regarding the treatment of Deferred Intercompany Stock Accounts (DISA), was approved by the Office of Administrative Law on January 8, 2014, and will become effective April 1, 2014. The changes provide guidance regarding the treatment of brother/sister mergers, distributions through ownership tiers, and DISA reduction through capital contributions. Taxpayers tracking and reporting DISAs should consider reviewing previously reported DISAs to reflect any changes caused by these revisions, such as a DISA reduction or elimination caused by subsequent capital contributions.
The new provisions are applicable to transactions occurring on or after January 1, 2001. However, a taxpayer may elect to have the changes apply prospectively starting April 1, 2014.