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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

California Tax Updates for 3/24

Update 1:

Two more California cities, Pomona and Santa Ana, have adopted Hero Pay Ordinances to give extra pay to certain workers during the COVID-19 pandemic. Pomona’s ordinance is effective from 3/1/21 through 6/29/21, requiring qualifying retail businesses to pay an additional $4.00 per hour to their workers. Here are the details for Pomona, including which businesses are affected: https://bit.ly/3cCcAkt. Santa Ana’s ordinance also requires $4 per hour of additional pay (from 3/3/21 through 6/30/21). Here are the details for Santa Ana, including which businesses are affected. https://bit.ly/3cEREsX. Or, contact your Linkenheimer CPA with questions.

Update 2:

In his 2021 State of the State address, California Governor Gavin Newsom didn’t propose new or higher taxes. The address was delivered virtually from Dodger Stadium in Los Angeles earlier this month. Newsom devoted most of his address to the COVID-19 pandemic, highlighting the state’s progress in battling […]

By Linkenheimer LLP|2021-03-24T18:46:37+00:00March 24th, 2021|ca, CA tax, california, covid-19, small business|0 Comments

Partial Conformity to PPP Loan Tax Rules for California

Yesterday, Governor Gavin Newsom, Senate President pro Tempore Toni G. Atkins and Assembly Speaker Anthony Rendon announced that they have reached an agreement on a package of immediate actions that will speed needed relief to individuals, families and businesses suffering the most significant economic hardship from the COVID-19 Recession.

The package includes an agreement to partially conform California’s tax law to the new federal tax treatment for loans provided through the Paycheck Protection Plan (PPP). More than 750,000 PPP loans were taken out by California small businesses. The agreement allows companies to deduct up to $150,000 in expenses covered by the PPP loan. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility.

This tax treatment would also extend to the Economic Injury Disaster Loans.

While the legislative language has yet to be published, this package is expected to be part of an early budget action that is quickly passed and signed by the governor. Similar proposals have emerged in the Legislature, namely AB 281 (Burke), […]

By Linkenheimer LLP|2021-02-18T22:32:01+00:00February 18th, 2021|ca, CA tax, california, New Tax Laws, ppp|0 Comments

California Tax Update for January 20

A new federal form, Form 1099-NEC (nonemployee compensation), must also be filed in California. This form is for use by payors beginning with tax year 2020, to report payments of $600 or more to someone who isn’t their employee, paid to an individual, partnership, estate, or in some cases a corporation, for services or for fish purchases for cash, in the course of trade or business. The same form must also be filed on paper with the CA Franchise Tax Board, even if it was already filed with the IRS. For 2020, the due dates are Feb. 28, 2021, for paper and March 31, 2021, for electronic submissions. Contact your Linkenheimer CPA with questions or check here for more information: https://bit.ly/35jdC1H

By Linkenheimer LLP|2021-01-20T23:36:20+00:00January 20th, 2021|1099, New Tax Laws|0 Comments

New California Relief Grant Program For Small Businesses Opens Today

California small businesses can now begin applying for some extra relief as part of a $475 million grant program the state is offering. Round 1 for applications starts Wednesday, December 30th and runs through Friday, January 8th at 11:59pm. These grants are limited to small businesses with gross revenue under $2.5 million.

Some highlights of the grant program include:

• $475 million of funding administered by the California Office of the Small Business Advocate will be distributed by Lendistry as the Intermediary, with certain third-parties designated by Lendistry to provide additional support (“Partners”).
• Anticipate issuing grants in the following two (2) rounds of distributions:
o Round 1 – approximately $237.5 million
o Round 2 – approximately $237.5 million
• The program is not on a “first come, first served” basis.
• The application portal for each round will open for applicants for a Open to active For-Profit businesses and Non-Profits.
• Grants will range from $5,000 to $25,000 per eligible business (based on gross revenue).
• Yearly Gross revenue must be at minimum $1,000 and maximum $2.5 million.

Funds from the grant can be used to pay for an establishment’s rent, utilities, resources, employee expenses and other relevant costs.

Eligibility requirements include:

• […]

By Linkenheimer LLP|2020-12-31T01:12:49+00:00December 31st, 2020|ca, california, covid-19, New Tax Laws, small business|0 Comments