More than 40 years ago, Congress enacted Sec. 461(d), primarily toprevent the states from changing their property tax lien dates toprovide their citizens with a double deduction of property taxes in asingle tax year. However, application of this seemingly sensibleprovision to California franchise tax liabilities has resulted in one ofthe most confusing and misunderstood tax accounting rules.
Sec. 461(d) provides:
In the case of a taxpayer whose taxable income is computed under an accrual method of accounting, to the extent that the time for accruing taxes is earlier than it would be but for any action of any taxing jurisdiction taken after Dece