A taxpayer has income from earned dividends out of a CFC on the federal return, although the distribution didn't take place until after the close of the taxable year. What's the impact on the state return? The state return only includes dividends from CFCs when they are distributed, so there'd be a subtraction from income for the first year and an addition in the year of distribution. The state return is in conformity with the federal treatment, so nothing needs to be done. The taxpayer can elect to include the dividends from the CFC in either the year received or the year distributed, so the impact is based on the taxpayer's choice. The state never taxes dividends from CFCs, so the income is subtracted when it's taxable on the federal return and never needs to be addressed again on the state return