Why is a tax credit not allowed for net income taxes paid to another state?

A tax credit for net income taxes paid to another state is not allowed primarily due to the principle of reciprocal taxation agreements between states. Under these agreements, if one state offers tax credits for taxes paid to other jurisdictions, it helps avoid double taxation on the same income. Therefore, if the state where the income was earned permits a credit for taxes paid to California, the taxpayer is not entitled to receive a credit from California for taxes paid to that other state.

In addition to the importance of these reciprocal agreements, other factors such as whether the income was earned in another state, whether the taxpayer has income in California, or income thresholds do not specifically determine the allowance of a tax credit. Instead, it focuses solely on the policies and agreements between states regarding taxation rights. Hence, the relationships established through interstate agreements are key to understanding why a credit might be denied.