Ruling Nº 2024-01 from the State of California, 2024

• Ruling Number: 2024-01
• Year: 2024
• Date: 01 September 2023
• Type of Document: Chief Counsel Ruling

STATE OF CALIFORNIA

FRANCHISE TAX BOARD

Legal Division MS A260

PO Box 1720

Rancho Cordova, CA 95741-1720

chair Malia M. Cohen| member Sally J. Lieber| member Joe Stephenshaw

tel: 916.845.4581 fax: 916.843.0405

ftb.ca.gov

Chief Counsel Ruling 2024 - 01

RE:

Request for Chief Counsel Ruling for ******

Dear **. ******,

This is in response to the Taxpayer's Chief Counsel Ruling Request of September 1, 2023,

wherein the Taxpayer seeks guidance as to whether subcomponents of an *********

**** **** or ********** may qualify as a pilot model under Internal Revenue Code

(IRC) section 174 applicable in California under Revenue and Taxation Code (RTC) section

24365.

FACTS

Taxpayer creates ***** and *********** for its California ***** ****. In many cases

Taxpayer designs and constructs a fully functional model of the **** or ********* to

evaluate and resolve underlying technical uncertainties.

Project A required several years of planning and design followed by several years to

construct. Like all ***** **** ***** and ***********, Project A, involves the unique

element of having individuals physically interact with it and/or be transported by it through

some type of interaction. This necessarily implicates questions of safety, repeatability, and

scale that are magnified when applied to a ********* **** **** that moves more

aggressively and at greater speeds than other ***** or ***********.

Project A features multiple **** ******* that were designed and developed alongside

each other, such as ********* **** **** ********, a custom ******* system,

****** and ****** **********, ******* ******* systems, a **** ******, and a

****-**** **** *****. Project A required millions of lines of computer code to

********** the ********** *******, ******** ****, ******* ***********,

and *****-****** *******.

Project A housed Subcomponents B and C. Taxpayer built Subcomponents B and C as fully

functioning models to evaluate and resolve technical uncertainty concerning their

integration into Project A. Subcomponent B includes the development and advancement of

LEG 9519 PASS (REV 12-2015) Legal Project

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Correspondence

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CCR v4

03.15.2024