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2022 Pass-through Entity Elective Tax (PTE) Payment Due June 15

Beginning with the 2022 taxable year, taxpayers wanting to make election for 2022 tax year must make a pre-payment by June 15, 2022.

The amount due by June 15 is at least the greater of:

50% of the elective tax paid for the prior year;
$1,000.

Entities that did not elect to pay PTE in 2021 will pay $1,000 on June 15 to preserve the right to make the election for 2022. Entities that have elected PTE for 2021 tax year, or plan to elect if on extension, must pay in at least 50% of the final 2021 PTE tax liability. If the 2021 return is on extension, taxpayers should consider making a larger than needed estimate to provide a cushion and ensure that their estimate is equal to 50% of 2021 final PTE tax liability. There are no exceptions to the 50% of prior-year tax requirement for the June 15 payment, even if income is expected to decrease. If the June prepayment is underpaid, then the taxpayer is ineligible to make the election for that taxable year. (R&TC §19904) The June 15 payment deadline applies to both calendar- and fiscal-year taxpayers.

The remaining 2022 […]

By Linkenheimer LLP|2022-05-25T16:05:28+00:00May 25th, 2022|entity, tax, tax deadlines|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

California Tax Law Changes Await Governor’s Signature

Governor Newsom is expected to sign SB 113 soon, which contains several tax-related changes that impact 2021 tax returns and the current filing season.

Expansion of the Pass-through Entity (PTE) Tax for Additional Relief from State and Local Tax (SALT) Deduction Limits In 2021, California established an elective PTE tax framework to allow certain California taxpayers to pay their California personal income tax in a way that provides relief from the current $10,000 federal limit on individual SALT deductions. While implementing the new framework, limitations were identified that would prevent taxpayers from realizing the full intended benefit of the PTE tax and subsequent credit. SB 113 address some of these issues:

For taxable years on or after Jan. 1, 2021:
- Clarification that a taxpayer can apply the full PTE credit against their California tax liability as originally intended without limitation due to tentative minimum tax.
- Expansion of eligible taxpayers to include tiered partnerships and those that own their share of a business through a disregarded entity, such as a single-member LLC.
- Clarify that PTE tax provisions can apply to guaranteed payments as part of the distributive share of net income from an entity.

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By Linkenheimer LLP|2022-02-08T23:50:01+00:00February 8th, 2022|CA tax, california, New Tax Laws, ppp|0 Comments

California Tax Updates for 11/17

Update 1:

The rules for property tax appeals in California have changed. Effective June 21, 2021, four rules for tax appeals in CA changed, involving: petitions for redetermination; innocent spouse relief; rules for rescheduling or postponing appeals; and filing documents. These rules are classified as Rule 100 changes, which means they have no regulatory effect. The rule changes were made because the CA State Board of Equalization’s Board Proceedings Division has physically moved to a new location. The mailing address hasn’t changed. The appropriate email address for appeals-related communication is appealsscheduling@boe.ca.gov or fax to: (916) 324-3984. Here’s more: https://bit.ly/3kp5PHj

Update 2:

The passage of California Assembly Bill 150 in July 2021 brought many changes effective for taxable years beginning in 2021 (but before 2026). One is the Small Business Relief Act, which allows qualified pass-through entities (PTEs) to annually pay an elective tax of 9.3% of the pro rata […]

By Linkenheimer LLP|2021-11-17T16:56:24+00:00November 17th, 2021|business, property tax|0 Comments