I am having trouble understanding how some provisions will work. Let's say S corporation with one shareholder.
Part 10.4 discusses this law from the entity's perspective. The entity may pay an elective tax at 9.3%. That is a federal deduction, and the shareholder's benefit is the federal deduction of the state payment and the credit on his individual state return.
The carryover provisions, if the entity pays more than 9.3% of its qualified net income, are in 17052.10, which is in the personal income tax section of the R&TC. The individual may carry the credit forward if the credit exceeds the "net tax".
What happens on the entity's side?
For example, let's say that the entity makes a payment of $9,300 in 2021 so that the shareholder will have the benefit of the tax deduction in 2021.
It turns out that qualified net income was only $80,000. The payment only should have been $7,440.
I think the individual has a credit carryover of $9,300 - $7,440 = $1,860.
I think the s corporation is limited to a deduction of only $7,440, so the federal net income allocated to the shareholder is $80,000 - $7,440 = $72,560. I don't think the calculation is $80,000 - $9,300 = $70,700.
What happens to that $1,860 difference on the S corporation's side?