Accrual basis corporation and state income tax refund

Client is S Corp, on accrual basis, and has a CA state income tax refund. I believe it's not taxable because it was never deducted in the first place. There are complex rules for deducting state taxes when a corporation is on the accrual basis. You deduct the taxes which were owed in 2017 in 2018 (at least that is my understanding). If you want to avoid a migraine do not read the following article "Deducing State Taxes - Timing is Everything (Sec 461(d). If you already have one, then you can just go ahead and read it. You can probably just search for the title. I don't have a link. Thanks.

The article that you cited indicates that if 2017 taxes are paid within 8-1/2 months after the end of the year, and also satisfy section 461(d), they are deducted in 2017. If you're talking specifically about the CA franchise taxes at the end of the article, then section 461(d) isn't satisfied. Thus, they are deducted in 2018.

In general, an accrual basis taxpayer bases a deduction on the amount of the tax liability for a given period regardless of what amount of the tax liability was paid or refunded in that period. So, refunds shouldn't matter.

Helpful. Thank you.