Tax insight

California IRC conformity update – CA 109 e-filing mandate, waiver guidelines, and NOL limitation decoupling

Insight
5 minute read
December 11, 2025

What happened?

California Governor Gavin Newsom on October 1 signed Senate Bill 711 (SB 711), which updates California's general "specified date" of conformity between the California Revenue and Taxation Code (RTC) and the Internal Revenue Code (IRC) for personal and corporate income tax purposes from January 1, 2015, to January 1, 2025. The legislation also explicitly decouples California from certain IRC provisions.

Why is it relevant?

This conformity update directly impacts electronic filing requirements applicable to exempt organizations with California unrelated business taxable income. Beginning with tax years starting on or after January 1, 2025, California mandates that exempt organizations subject to the unrelated business income tax electronically file Form 109, California Exempt Organization Business Income Tax Return. Organizations should take the necessary steps to comply with this electronic filing mandate.

SB 711 also provides that IRC Section 172(b)(2)(C) will not apply, thus decoupling the California tax law from the federal 80% net operating loss (NOL) limitation. However, California’s NOLs remain suspended for tax years 2024 through 2026 for taxpayers with net business income or modified adjusted gross income of $1 million or more.

Actions to consider

Confirm e-filing capabilities: Exempt organizations that report unrelated business income should validate their California Form 109 electronic filing functionality and address technical challenges with their tax software providers.
Electronic filing waiver: Consider requesting electronic filing waivers if challenges arise.
NOL impact assessment: Review NOL positions under the updated conformity provisions and evaluate potential impacts on NOL utilization and projections if applicable.
Ongoing monitoring: Track additional California Franchise Tax Board (FTB) guidance on conformity implementation and potential legislative changes.