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California SB 132 Extends the Pass-Through Entity Elective Tax — and Changes the Rules

On June 27, 2025, Governor Newsom signed Senate Bill 132 (the 2025-26 budget trailer bill) into law. The measure delivers several tax changes, but the headline for S-corporations, partnerships, and LLCs is a five-year extension — with new twists — for California’s Pass-Through Entity Elective Tax (PTE).

PTE Quick Refresher: The Pass-Through Entity Tax lets your S-corp, partnership, or LLC pay California tax at the entity level. Why does this matter? It converts state income taxes (limited by the federal SALT cap) into a fully deductible business expense at the federal level. With the federal SALT cap temporarily raised to $40,000 (for most taxpayers) through 2029, then reverting to $10,000 in 2030, the PTE election remains a valuable planning tool — especially for owners with significant state tax liabilities.

What SB 132 Means for Pass-Through Owners

PTE election extended through 2030: Qualifying entities may continue making the California PTE election for tax years 2026–2030, preserving valuable federal tax benefits for owners regardless of federal SALT cap changes.

June 15 prepayment no longer “all-or-nothing”: Missing or underpaying the mid-June deposit will not disqualify your election after 2025. Instead, each owner’s PTE credit gets reduced by 12.5% of any shortfall. Translation? […]

By Linkenheimer LLP|2025-07-18T22:02:29+00:00July 18th, 2025|ca, CA tax, california, New Tax Laws, News, pte|0 Comments

Current Pending Legislation Affecting Businesses and Individuals

Introduction

As your trusted advisors, we at Linkenheimer LLP strive to keep you informed about the latest legislative developments that could impact your business and personal financial planning. In this edition, we highlight significant pending legislation at both the state and federal levels that may affect our clients, including business owners, winery and restaurant owners, and individuals. We have not received any updates regarding potential federal adjustments for PG&E payments and Research & Development expense capitalization, and unfortunately, we remain pessimistic about any forthcoming changes. As a result, beginning July 1, 2024, we will proceed with finalizing the returns that were on hold pending this legislation.

State-Level Proposed Legislation

California AB 1181: Minimum Wage Increase

AB 1181 proposes to increase the state minimum wage to $16 per hour for all employees, regardless of the size of the business, by January 1, 2025. For small business owners, this could mean higher payroll costs and a need to revisit pricing strategies and workforce management.

California AB 543: Paid Family Leave Expansion

AB 543 seeks to extend the duration […]

By Linkenheimer LLP|2024-07-09T20:43:30+00:00July 1st, 2024|ca, CA tax, california, law, New Tax Laws, propositions|0 Comments

California Conforms To IRS Filing Extensions For California Storm Victims

The Governor’s office has announced that California will conform to the filing extensions granted by the IRS for California storm victims. This means the FTB has extended filing and payment deadlines for many individuals and businesses in California until May 15, 2023.

This relief applies to the following deadlines falling on or after January 8, 2023, and before May 15, 2023:

Individual income tax returns;
Business return filings normally due between March 15 and April 18, 2023;
Fourth and first quarter estimated tax payments due on January 17, 2023, and April 18, 2023. Individual taxpayers can skip making the fourth quarter estimated tax payment and instead include it with the 2022 return as long as the return is filed on or before May 15, 2023;
IRA and health savings account (HSA) contributions; and
Quarterly payroll and excise tax returns, normally due on January 31, 2023, and April 30, 2023.

Below is the complete press release from the Governor’s office:

SACRAMENTO – Californians impacted by winter storms are now eligible to claim a deduction for a disaster loss and will have more time to file their taxes.

“Whether it’s more time to file your taxes or getting a deduction, this […]

By Linkenheimer LLP|2023-01-16T18:32:49+00:00January 16th, 2023|ca, CA tax, california, disaster, ftb, irs, tax deadlines|0 Comments

IRS Announces Tax Relief For Victims Of Winter Storms In California

Victims of severe winter storms, flooding, and mudslides in California beginning January 8, 2023, now have until May 15, 2023, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

Following the disaster declaration issued by the Federal Emergency Management Agency, individuals and households affected by severe winter storms, flooding, and mudslides that reside or have a business in Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo, and Yuba counties qualify for tax relief.

The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after January 8, 2023, and before May 15, 2023, are granted additional time to file through May 15, 2023. As a result, affected individuals and businesses will have until May 15 to file returns and […]

By Linkenheimer LLP|2023-01-16T18:17:48+00:00January 16th, 2023|ca, CA tax, california, disaster, irs|0 Comments

California Governor Signs Two Major Bills: SB 113 and SB 114

Today, California Governor Gavin Newsom signed SB 113, which expands the passthrough entity elective tax benefits by:

Repealing the tentative minimum tax limitation on the Passthrough Entity Elective Tax Credit;
Allowing partnerships/S corporations/LLCs with owners that are partnerships to make the election (although the tax can’t be paid on behalf of the partnership owner);
Allowing SMLLCs that are passthrough entity owners to claim the Passthrough Entity Elective Tax Credit (although SMLLCs are still prohibited from making the election themselves); and
Changing the credit ordering rules related to the Passthrough Entity Elective Tax Credit to increase the benefit for taxpayers that claim the Other State Tax Credit (beginning with the 2022 tax year).

Except as noted, these changes will apply to the 2021 tax year. Yesterday, we posted more info on SB 113, which you can read here.

SB 113 also:

Fully conforms to the federal exclusion of Restaurant Revitalization Grants, retroactive to the 2020 tax year;
Partially conforms to the federal exclusion of Shuttered Venue Operator Grants, retroactive to the beginning of the 2019 tax year; and
Repeals the $5 million business credit limitation and NOL suspension for higher […]

By Linkenheimer LLP|2022-02-09T20:03:46+00:00February 9th, 2022|ca, CA tax, california, New Tax Laws|0 Comments