In what was mostly a redux of the AB1139 hearings a few months ago, the JEDE held the first in what will likely be a series of hearings relating to AB1139. Being pushed hard by the unions, AB1139 is set for vote by the Committee in January 2010. The Committee heard testimony from the usual players. Proponents of the Enterprise Zone program seem to have the upper hand in the presentations by presenting lucid, relevant data and testimony illuminating the EZ benefits. Opponents seemed to repeat the same talking points that have held little traction over the past year with legislators. At one point, a union representative began to berate the EZ consultants prompting Committee Chair Perez to sternly talk him down and ordered him to stick to the facts of his presentation. Over the next few weeks, I will post several of the articles and studies from the hearing as we gear up for more hearings and the eventual vote in January. Below is the Committee’s statement about its goal in examining the EZ program:

The Assembly Committee on Jobs, Economic Development, and the Economy (JEDE) is initiating a comprehensive examination of the California Enterprise Zone Program and the other state programs related to geographically-targeted economic development areas (G-TEDAs).

It is the Committee’s objective in undertaking this review to provide Members of the Legislature and the public with a more comprehensive understanding of where the state’s resources are being expended and the value these types of expenditures have for local communities. Given the current state of the economy, it is imperative that the Legislature ensure that economic and workforce development programs are best used to meet the immediate and longer term economic recovery needs of the state.

The Committee currently plans to hold three public hearings between August 18 and October 17, 2009. Stakeholder meetings are planned for the latter part of October and possibly into early November 2009. A reform proposal is expected to be sent to the Office of the California State Legislative Counsel in early November 2009. Copies of draft amendments will be available through the JEDE Office in early December 2009. Legislation arising from these hearings will, most likely, be heard in the first two weeks of January 2010.

In case you were on vacation, here is what has been going on in the California Tax space this month.

Registered Warrants Can Pay Your State Income Tax Bill

We accept California registered warrants (IOUs) as payment of current and past due personal and corporate tax obligations. / more+

State’s New Home Tax Credit Gone

We stopped accepting applications for the new home tax credit at midnight, Thursday, July 2, 2009. / more+

FTB Provides Guidance for California Treatment of the Revised Texas Franchise Tax

On July 20, 2009, we responded to the request for taxpayer guidance to determine the general eligibility for the Other State Tax Credit (OSTC) and the deductibility of the Revised Texas Franchise Tax (RTFT). / more+

Did You Know We Are Working Together?

We came together with the Board of Equalization, Employment Development Department, and the IRS in a cooperative partnership called the Joint Tax Agency Communications Committee. / more+

15th Annual Tax Practitioner/IRS Town Hall Meetings

In September, we will be working with the IRS and other state agencies at the 15th Annual Tax Practitioner/IRS Town Hall Meetings. / more+

Are You a Tax Professional Interested in Saving? Learn More About Doing Your Tax Stuff Online!

Register and attend one of our joint statewide workshops* to learn about the latest in e-services. / more+

Striking Gold in California

Striking Gold in California is an educational tool for small business owners that provide basic tax information from the Internal Revenue Service and the three California tax agencies, all in one place. / more+

Small Business

Converting a California LLC to a Corporation

Does your client want to convert their limited liability company (LLC) to an S-Corporation and continue to have the profits and losses flow through to its members? Did you know that you can convert an LLC into an S-corporation by making an election? / more+

Ask the Advocate

Systemic Issue Management System (SIMS) at Work

This month, I share the efforts we are taking by discussing an issue that was submitted to us and our response… / more+

Inside FTB

Tax Practitioner Hotline

Did you know that we have a call center dedicated to serving tax practitioners? / more+

Criminal Corner

Our monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time. / more+

Big Business

Disclosing Deferred Intercompany Stock Account (DISA) Balances

FTB issued Notice 2009-5 on July 17, 2009, to extend the due date until October 15, 2009, for taxpayers to file a completed FTB Form 3726, Deferred Intercompany Stack Account (DISA) and Capital Gains Information./ more+

With the current condition of California’s economy, the EZ program has become more important than ever. With that in mind, the California Chamber of Commerce is recommending local businesses to join a new coalition to protect the Enterprise Zone program.

With the recent budget cuts, the California Entperise Zone program is one of the only remaining vestiges of tax relief for the local business community. The California Chamber of Commerce brought several studies to light in their recent posting, “Several studies have established the EZ program’s effectiveness. Most recently, a March 2009 revision of a national study by University of Southern California researchers concluded that state and federal EZ programs ‘have positive, statistically significant, impacts on local labor markets in terms of the unemployment rate, the poverty rate, the fraction with wage and salary income and employment.’ ”

To have your business added to the coalition, you can contact Kyla Christoffersen at kyla.christoffersen@calchamber.com

To see the article from the California Chamber of Commerce, click here.

The Franchise Tax Board (FTB) today announced that effective Monday, August 3, it will change its call center hours of operation to 8 a.m. to 5 p.m., Monday through Friday, except for state holidays.

Currently, general taxpayer assistance phones lines are open from 7 a.m. to 6 p.m. The change stems from budget constraints.

Taxpayers with general questions can call FTB at 800.852.5711. FTB responds to more than 2.6 million taxpayer calls per year. Taxpayers can also access FTB’s website for state tax information, forms, e-services, and answers to frequently asked tax questions at ftb.ca.gov.

Below is a news release from the Franchise Tax Board:

(Sacramento) – The Franchise Tax Board (FTB) announced it accepts California registered warrants (IOUs) as payment of current and past due personal and corporate tax obligations.

To pay a tax liability with an IOU, endorse the IOU on the reverse side with the phrase “Pay to the order of Franchise Tax Board” and your signature then mail it with the tax bill or estimated tax voucher. By law, FTB cannot deposit the IOU until it is payable, but FTB will credit the taxpayer’s account on the date the IOU is received to stop the accrual of interest. If the IOU is not sufficient to pay the outstanding balance, taxpayers should send an additional payment for the difference. Otherwise, the taxpayer will receive a bill reflecting the new balance due.

On October 2, 2009, FTB will redeem the IOUs it has received with the Treasurer. If a taxpayer submits an IOU after October 2, FTB will deposit it and then credit the account with the face value of the warrant plus applicable interest.

Taxpayers wanting to receive the accrued interest from their IOUs must hold them until October 2, 2009, the date IOUs are redeemable.

A registered warrant is a “promise to pay,” with interest, that is issued by the State when there is not enough cash to meet all of the State’s payment obligations. If there is sufficient cash available, registered warrants will be paid by the State Treasurer on October 2, 2009. For more information, see the Treasurer’s website STO Registered Warrant Informationor the Controller’s website California State Controller’s Office: Frequently Asked Questions about Registered Warrants (IOUs).

Rebecca Matt from the HCD announced that several zones now have final TEAs including Kings County, LA East, Yuba Sutter and Siskiyou County. The HCD is close to finalizing Richmond, Delano, San Joaquin, Santa Ana, Merced, Oakland and West Sacramento. This will allow these newly designated Enterprise Zones to qualify employees for the credit.

The law firm Skin Gump Strauss Hauer & Feld LLP on behalf of Charles Young have filed suit challenging the two-thirds vote on tax issue currently being debated in California.  In 1978, Proposition 13 was voted on by the public and passed, cutting property taxes and requiring a two-thirds majority in the legislature to raise taxes – it is this proposition that is currently being discussed.

With approximately $1 billion dollar tax shortfall, the majority of local representatives are pushing for increased taxation, however with the current makeup of the legislature, a two-thirds majority looks to be doubtful.

Despite the fact that several republican represantatives have gone against party lines and voted for increased taxes, the majority of conservatives, including Governor Schwarzenegger suggest that state spending cuts and not increased taxation, is the key to stabilizing California’s economy.

This morning, CAEZ president Craig Johnson announced that on July 21 & 22, members of the “CAEZ Board of Directors will have the opportunity to meet in Sacramento with members of the Housing and Community Development management team and representatives from the Franchise Tax Board, who will be assuming the position formerly held by our good friend Jeanne Harriman.” Frank Luera recently left his post as head of the HCD and Harriman recently left her post at the FTB. The new government liaisons for the Enterprise Zone program are eagerly anticipated.

California continues to expand state spending and ultimately its tax burden on a regular basis.  Despite only growing its population by 5% over the past several years, state spending has increased by 31%!  Which is why California continues to be one of the highest taxed states in the country. Josephy Henchman, from the TaxFoundation.org blog had this to say about the state’s current tax position:

“California is a high tax state. They are sixth highest in state-local tax burden as a percentage of state income. The sales tax is the highest state rate in the country even before the recent 1% increase, and numerous county rates keep them in the top 5 of state-local combined rates. Their individual income tax top rate is the second highest in the country, eclipsed only recently by Hawaii, and is sixth highest in the country in terms of collections. The corporate income tax is one of the highest in the country and sixth highest per capita in collections. Even the gas tax is the third highest in the country and the state Lottery has the fifth highest implicit tax rate in the country. Only on property taxes is California “low”: 28th highest in collections per capita.”

With this in mind, it is vital that companies that run their businesses in California take advantage of every tax break possible, especially companies that reside in one of the California Enterprise Zones.  If you have a business in one of the state regions, contact us to receive a free consultation.

California assemblyman Juan Arambula split with the democratic party [some language from article about his history as being moderate]. Assemblyman Arambula has authored legislation dictating strict reporting requirements for California’s Enterprise Zone. His legislation was widely seen as positive in that it required the Enterprise Zone to keep better record so the tremendous benefits of the Enterprise Zone tax credit program can be more fully understood and documented. This will go a long way to quieting detractors of the enterprise zones when the benefits will be fully reported.