(a) In computing taxable income, deductions, including deductions for cost of goods sold, shall not be allowed to any taxpayer from any of his or her gross income directly derived from any act or omission of criminal profiteering activity, as defined in Section 186.2 of the Penal Code, or as defined in Chapter 6 (commencing with Section 11350) of Division 10 of the Health and Safety Code, or Article 5 (commencing with Section 750) of Chapter 1 of Part 2 of Division 1 of the Insurance Code; and deductions shall not be allowed to any taxpayer from any of his or her gross income derived from any other activities which directly tend to promote or to further, or are directly connected or associated with, those acts or omissions.
(b) A prior, final determination by a court of competent jurisdiction of this state in any criminal proceedings or any proceeding in which the state, county, city and county, city, or other political subdivision was a party thereto on the merits of the legality of the activities of a taxpayer, or predecessor in interest of a taxpayer, shall be required in order for subdivision (a) to apply and shall be binding upon the Franchise Tax Board and the State Board of Equalization.
(c) (1) Except as provided in paragraphs (2) and (3), this section shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of September 14, 1982.
(2) The amendments made to this section by Chapter 962 of the Statutes of 1984 shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of January 1, 1985.
(3) The amendments made to this section by Chapter 454 of the Statutes of 2011 shall be applied with respect to taxable years that have not been closed by a statute of limitations, res judicata, or otherwise as of the effective date of that act.
(Amended by Stats. 2012, Ch. 162, Sec. 171. (SB 1171) Effective January 1, 2013.)