(a) Notwithstanding any other provisions in this part to the contrary, no deduction shall be allowed for interest, taxes, depreciation, or amortization paid or incurred in the taxable year with respect to substandard housing located in this state, except as provided in subdivision (e). (b) âSubstandard housingâ means occupied dwellings from which the taxpayer derives rental income or unoccupied or abandoned dwellings for which both of the following apply: (1) Either of the following occurs: (A) For occupied dwellings from which the taxpayer derives rental income, a state or local government regulatory agency has determined that the housing violates state law or local codes dealing with health, safety, or building. (B) For dwellings that are unoccupied or abandoned for at least 90 days, a state or local government regulatory agency has cited the housing for conditions that constitute a serious violation of state law or local codes dealing with health, safety, or building, and that constitute a threat to public health and safety. (2) Either of the following occurs: (A) After written notice of violation by the regulatory agency, specifying the applicability of this section, the housing has not been brought to a condition of compliance within six months after the date of the notice or the time prescribed in the notice, whichever period is later. (B) Good faith efforts for compliance have not been commenced, as determined by the regulatory agency. âSubstandard housingâ also means employee housing that has not, within 30 days of the date of the written notice of violation or the date for compliance prescribed in the written notice of violation, been brought into compliance with the conditions stated in the written notice of violation of the Employee Housing Act (Part 1 (commencing with Section 17000) of Division 13 of the Health and Safety Code) issued by the enforcement agency that specifies the application of this section. The regulatory agency may, for good cause shown, extend the compliance date prescribed in a violation notice. (c) (1) When the period specified in paragraph (2) of subdivision (b) has expired without compliance, the regulatory agency shall mail to the taxpayer a notice of noncompliance. The notice of noncompliance shall be in a form and shall include information prescribed by the Franchise Tax Board, shall be mailed by certified mail to the taxpayer at the taxpayerâs last known address, and shall advise the taxpayer of (A) an intent to notify the Franchise Tax Board of the noncompliance within 10 days unless an appeal is filed, (B) where an appeal may be filed, and (C) a general description of the tax consequences of the filing with the Franchise Tax Board. Appeals shall be made to the same body and in the same manner as appeals from other actions of the regulatory agency. If no appeal is made within 10 days or if after disposition of the appeal the regulatory agency is sustained, the regulatory agency shall notify, in writing, the Franchise Tax Board of the noncompliance. (2) The notice of noncompliance shall contain the legal description or the lot and block numbers of the real property, the assessorâs parcel number, and the name of the owner of record as shown on the latest equalized assessment roll. In addition, the regulatory agency shall, at the same time as notification of the notice of noncompliance is sent to the Franchise Tax Board, record a copy of the notice of noncompliance in the office of the recorder for the county in which the substandard housing is located that includes a statement of tax consequences that may be determined by the Franchise Tax Board. However, the failure to record a notice with the county recorder does not relieve the liability of any taxpayer nor does it create any liability on the part of the regulatory agency. (3) The regulatory agency may charge the taxpayer a fee in an amount not to exceed the regulatory agencyâs costs incurred in recording any notice of non
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