EXAMPLE: Corporation A earns 80%, 75%, 37%, and 78% of its total gross income from dealings in money or moneyed capital, for years #1, #2, #3, and #4, respectively. Assuming A meets all the other requirements of being classified as a financial corporation, it will be classified as such for year #3 as well as for years #1, #2 and #4, respectively. Assuming A meets all the other requirements for being classified as a financial corporation, it will be classified as such for year #3 as well as for years #1, #2, and #4, because the gross income of 37% in year #3 is within the acceptable range for an occasional variation from the 50% standard ((80 + 75 + 37) / 3 = 64%).
EXAMPLE: Corporation B is a stock brokerage firm. Sixty percent of its total gross income is attributable to fees charged for buying and selling stocks and bonds on behalf of customers. B is not a financial corporation because the buying and selling of stocks and bonds on behalf of others does not constitute dealing in moneyed capital.
EXAMPLE: Corporation C engages exclusively in purchasing, at a discount, conditional sales contracts of household furnishings and other low price articles of personal property from small local retail sellers of those articles under such contracts. C never makes loans. From 60% to 100% of the contracts were purchased by C without recourse to the seller. C requires credit references and information from the buyers named in the contracts, which must meet C's approval before it will purchase the contracts. No part of the payment to the seller for the contracts is withheld as a reserve to protect C if the credit buyer defaulted. National banks in the same area as C make personal loans for the purchase of household equipment, but rely solely on the buyer's credit and do not take the property as security. Those national banks also purchase at a discount conditional sales contracts from sellers of household equipment, but rely solely upon the credit of the seller rather than the buyer named in the contract; take all contracts with recourse; and withhold payment to the seller of 20% to 40% of the price as a reserve against default under the contract. C is a financial corporation.
EXAMPLE: Corporation D is a wholly owned subsidiary of E corporation. E engages exclusively in the sale of retail household items and clothing to the general public. E corporation extends credit to its customers by issuing credit cards. F then sells to D the credit card customer receivables arising out of E's retail business. D engages exclusively in purchasing these receivables from E and collecting on those receivables. D is a financial corporation.
EXAMPLE: Corporation F makes loans which are secured by first mortgages or first deeds of trust on real estate. The loans made by F are government insured FHA or VA loans, or conventional or uninsured loans. A substantial number of such loans are similar to real estate loans made by national banks. All loans made are intended for subsequent sale to institutional investors, usually within six months from the time they are originally made. After the loans are sold, F services them by collecting installments and providing other services, such as making certain that the underlying properties are kept insured and that taxes upon them are paid. F services only those loans made by it. F is a financial corporation.
Cal. Code Regs. Tit. 18, § 23183
Note: Authority cited: Section 26422, Revenue and Taxation Code. Reference: Section 23183, Revenue and Taxation Code.