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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

California Tax Updates for 10/28

Update 1:

Required supplemental paid sick leave (SPSL) related to COVID-19 expired in California on Sept. 30, 2021. Specifically, that leave was required of employers with at least 26 employees. However, a number of CA localities continue to require some form of SPSL. They include Long Beach (for employers with at least 500 employees); Los Angeles city and county (also for employers with 500 or more employees); and Oakland (for employers of 50 or more workers). Sonoma County has a pending extension to a prior law.

Update 2:

California’s 529 college savings plan conforms to recent changes in the federal tax law. Those changes expanded allowable withdrawals from 529 plans to include expenses associated with participation in a registered apprenticeship program and student loan repayment, for taxable years beginning Jan. 1, 2021 or after. Also, for the same period, CA legislation disallows the deduction available on qualified education loan interest to the extent such interest is paid as a tax-free distribution from a […]

By Linkenheimer LLP|2021-10-28T17:25:37+00:00October 28th, 2021|ca, CA tax, california, college tax credit|0 Comments

California Tax Updates for 9/16

Update 1:

Moving out of California? The CA Franchise Tax Board (FTB) acknowledges that a variety of factors have led to many individuals and businesses leaving CA. If you do, be sure to update your address. It’s common, said the FTB, for taxpayers to move after filing a tax return. Without an updated address on file, taxpayers may be unreachable if the FTB needs more information to resolve an issue with a return or payment. Each year, says the FTB, thousands of refunds are returned to them because of a bad address, leaving issues unresolved. Failing to respond to a notice could bring additional penalties, fees and collection action. Contact your Linkenheimer CPA with questions.

Update 2:

Coming soon to California businesses, the Homeless Hiring Tax Credit. The CA Franchise Tax Board (FTB) has announced details of this newly enacted credit. It will be available to qualifying taxpayers who hire new employees deemed to be eligible homeless individuals. Employers may receive $2,500 to […]

By Linkenheimer LLP|2021-09-16T21:18:04+00:00September 16th, 2021|ca, CA tax, california, ftb, New Tax Laws|0 Comments

California Tax Updates from 8/20

Update 1:

Three southern California grocery stores will pay fines of $447,836, for violations of certain COVID-19-related employee benefits. The CA Labor Commissioner’s Office has cited three El Super stores for failing to inform employees of their rights to supplemental paid sick leave (SPSL). In addition, employees who had COVID-19 symptoms were forced to work while sick or were told to file for unemployment while under quarantine or isolation. Others waited months to be paid. The violations affected 95 El Super workers. Employers having more than 25 workers must provide those affected by COVID-19 with up two weeks of SPSL. This law remains in effect until Sept. 30, 2021.

Update 2:

New information is available regarding the California Competes Tax Credits. The CA Governor’s Office of Business and Economic Development (GO-Biz) has revised its announcement about the allocation of these credits for fiscal year 2021-2022. The total amount to be allocated is now $394,707,469 (up from $284,707,469). The allocation dates haven’t changed and […]

By Linkenheimer LLP|2021-08-20T18:10:01+00:00August 20th, 2021|ca, CA tax, california, covid-19, tax credit|0 Comments

California Pass-Through Entity Tax

Governor Gavin Newsom signed Assembly Bill 150 this past July. The new bill establishes an elective pass-through entity (PTE) tax framework that will allow California taxpayers to obtain relief from the current $10,000 limit on individual state and local tax deductions.

Qualifying pass-through entities include partnerships (publicly traded partnerships aren’t included) or S Corporations.

Qualifying entities must exclusively have partners/shareholders/members that are corporations, individuals, fiduciaries, estates, or trusts.
For tax years beginning on or after January 1, 2021 and before January 1, 2022
- PTE tax is due on or before the filing date of the original return. (March 15, 2022 for 12/31/2021 year-end entities)
For tax years beginning on or after January 1, 2022 and before January 1, 2026
- The greater of 50% of the elective tax paid in the prior year or $1,000 is due by June 15^th of the tax year.
- The remaining PTE tax is due on or before the filing due date of the original return.
The election must be made every year but once made, it is irrevocable.
The tax is 9.3% of qualified net income.
The PTE tax is in addition to other entity level taxes […]

By Linkenheimer LLP|2021-08-10T23:06:09+00:00August 10th, 2021|ca, CA tax, california, entity|0 Comments