Noneconomic substance transaction

Means the disallowance of any loss, deduction or credit, or addition to income attributable to a determination that the transaction or arrangement lacks economic substance. A transaction lacks economic substance if the taxpayer cannot demonstrate a valid California business purpose other than tax savings.

Beginning March 24, 2011, the definition of noneconomic substance transaction includes any disallowance of claimed tax benefits by reason of a transaction lacking economic substance under federal law.