Assembly Bills

• AB 183 (Caballero) Principal Residence Credit (Stats. 2010, Ch. 10-12)- Legislative Change 10-04
• AB 347 (Bass) Charitable Contribution Deduction Haiti Earthquake (Stats. 2010, Ch. 10-08) – Legislative Change 10-03
• AB 658 (Hayashi,et al.) Voluntary Contribution Fund Designation/California Police Activities League Fund – Introduced 03/04/10
• AB 1700 (Gaines) Personal Exemption Credit For Dependents/Repeal Decrease In Credit January 1, 2010/Pit Rates/Repeal Temporary Increase January 1, 2010 – Introduced 02/01/10 & Amended 03/23/10
• AB 1936 (De Leon) Remove Net Operating Loss Carryback Provisions – Introduced 02/17/10
• AB 1973 (Swanson) Employer Hiring Credit/Ex-Offender – Introduced 02/17/10
• AB 1973 (Swanson) Employer Hiring Credit/Ex-Offender/Reentry Employment Business Tax Credit Act – Amended 04/05/10
• AB 2017 (Hall) California YMCA Youth and Government Fund – Introduced 02/17/10
• AB 2078 (Calderon) Use Tax/Retailers Engaged In Business In This State – Amended 04/05/10
• AB 2100 (Coto) Sweetened Beverage Tax Law – Introduced 02/18/10 & Amended 03/25/10
• AB 2126 (Garrick) Minimum Franchise Tax/Corporations That First Commence Business On Or After January 1, 2009, Exempt First Taxable Year And $100 Succeeding 9 Taxable Years – Introduced 02/18/10
• AB 2126 (Garrick, et al.) Minimum Franchise Tax/Corporations That First Commence Business On Or After January 1, 2009, Exempt First Taxable Year And $100 Succeeding 9 Taxable Years – Amended 04/05/10
• AB 2148 (Tran) Deduction For Physician’s Medical Services Contributed Free Of Charge To Local Community Clinic – Introduced 02/18/10
• AB 2458 (Saldana) Corporation Penalties – Introduced 02/19/10
• AB 2528 (Knight) Exclusion/Payments Or Vouchers From Federal Consumer Assistance To Recycle & Save Act Of 2009 (aka “Cash For Clunkers”) – Introduced 02/19/10
• AB 2564 (Swanson) State Budget/Tax Expenditures – Introduced 02/19/10 & Amended 03/25/10
• AB 2665 (Strickland) Service Station Emergency Standby Generator Credit – Introduced 02/19/10
• AB 2671 (Cook) Minimum Franchise Tax/Exempt Corporations Owned Solely By Deployed Member Of U.S. Armed Forces That Operate At A Loss Or Ceases Operation – Introduced 02/19/10
• AB 2676 (Ma) FTB Revise Income Tax Forms And Instructions To Continue To Enable A Person To Report & Pay Qualified Use Tax – Amended 04/06/10

Senate Bills

• SB 936 (Strickland) Income Exclusion for Energy Property Grants – Amended 03/08/10
• SB 1020 (Wolk, DeSaulnier, et al.) State Budget/Performance-Based Budget – Introduced 02/11/10
• SB 1036 (Cedillo/Huffman) FTB Disclosure Of Tax Return Information To Cities/Expands To Allow Disclosure By City Officials To Other Persons Designated By City Resolution – Introduced 02/12/10
• SB 1244 (Walters) LLC Employment Taxes and Contribution – Introduced 02/19/10 & Amended 04/05/10

Senate Special Session Bills

• SBX8 25 (Calderon/Correa) Mortgage Forgiveness Debt Relief Extension – Introduced 02/04/10

Assembly Bills

• AB 1662 (Portantino/Jeffries) Disaster Loss Deduction/Excess Loss Carryover/August 2009 Los Angeles County Wildfires/January 2010 Los Angeles County Winter Storms – Amended 03/10/10
• AB 1705 (Perez) Income Exclusion for Specified Energy Property Grants – Introduced 02/01/10 & Amended 03/08/10
• AB 1735 (Harkey) Back To School Tax Credit – Introduced 02/04/10
• AB 1779 (Niello) Mortgage Forgiveness Debt Relief Modification and Extension -Introduced 02/09/10
• AB 1806 (Hagman, et al.) Exclusion Of Capital Gain On Sale Of Principal Residence By Surviving Spouse -Amended 03/15/10
• AB 2177 (Torlakson/Beall) Allow Electronic Communication To Taxpayers To Inform Of Tax Change Or Obligation – Introduced 02/18/10

Assembly Special Session Bills

• ABX8 34 (Jeffries) Principal Residence Credit – Introduced 02/01/10

Senate Bills

• SB 1076 (Price) Voluntary Contribution Fund Designation/Arts Council Fund – Introduced 02/17/10
• SB 1316 (Romero) Legislative Intent To enact Legislation To Phase Out Specified Tax Credits – Introduced 02/19/10
• SB 1391 (Yee) PIT Definitions Technical Amendment – Introduced 02/19/10

Analyses Posted This Week

Assembly Bills

• AB 347 (Bass, et al.) Charitable Contribution Deduction Haiti Earthquake – Revised Original 01/27/10
• AB 347 (Bass, et al.) Charitable Contribution Deduction Haiti Earthquake – FINAL
• AB 1806 (Hagman) Exclusion Of Capital Gain On Sale Of Residence By Surviving Spouse – Introduced 02/10/10
• AB 1983 (Torrico) Safely Surrendered Baby Fund – Introduced 02/18/10

Assembly Special Session Bills

• ABX8 8 (Comm on Budget) Occupational And Professional License Suspension For Unpaid Tax/Abusive Tax Shelters/Financial Institution Record Match- Amended 02/17/10

Senate Special Session Bills

• SBX6 3 (Calderon) Principal Residence Credit – Introduced 02/08/10
• SBX8 8 (Budget Comm) Occupational And Professional License Suspension For Unpaid Tax/Abusive Tax Shelters/Financial Institution Record Match – Introduced 02/22/10
• SBX8 29 (Steinberg, et al.) FTB, BOE & Employees In Positions Funded 95 Percent By Other Sources Than General Fund Exempt From Furloughs – Introduced 02/05/10 & Amended 03/04/10
• SBX8 29 (Steinberg, et al.) FTB, BOE & Employees In Positions Funded 95 Percent By Other Sources Than General Fund Exempt From Furloughs – FINAL
• SBX8 39 (Calderon) Principal Residence Credit – Introduced 02/08/10

Top 12 tax scams

It’s a new year and a good time to remind your clients about the top tax scams. / more+

Pass-through entities must timely file original tax returns claiming new jobs tax credit in order for owners to claim the credit

A new jobs tax credit of $3,000 is available to small businesses with 20 or less employees for each additional net full-time employee hired and employed in California for tax years beginning on or after January 1, 2009. The total amount of the credit that we can allocate may not exceed $400 million, and claims must be made before a statutorily provided “cut-off” filing date. / more+

Using the Annualization Method in 2009 and 2010

Estimated tax payments have undergone many changes since we started filing season one year ago. / more+

Small Business

Timing is everything

Is your client considering making an S corporation election? Selling or exchanging 50 percent or more of the total interests in an LLC or limited partnership? / more+

Ask the Advocate

Withholding and estimate tax payment changes

This summer the California legislature again revised the estimated tax payment percentages, and also passed some clean-up legislation to clear up confusion on how wage earners with only wage withholding would meet the new estimated tax payment requirements. / more+

Inside FTB

Take a look at the changes happening here at FTB. / 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

California code of civil procedure and foreclosures

Will you clarify how California civil procedures interact with the Internal Revenue Code (IRC)? Specifically how does California Civil Procedure Code (CCP) Sections interact with IRC Section 108, Income from Discharge Indebtedness? / more+

Spidell’s Flash Email has reported the following news from the Franchise Tax Board for 2010:

The FTB will not assess the mandatory e-pay penalty for individuals in 2010. The FTB will continue to focus efforts on education and outreach so that taxpayers and their representatives can implement processes and procedures to comply with the mandatory e-pay requirement. The law requires taxpayers who make a payment of more than $20,000, or who have a tax liability of more than $80,000 in a year beginning on or after January 1, 2009, to make all future payments electronically. The FTB will continue to monitor compliance levels to determine the appropriate time to begin imposing the penalty provision of the statute.

Advisory Board Recognizes Dedication

At the FTB Advisory Board October meeting, we presented David Doerr, Chief Tax Consultant for the California Taxpayer’s Association, with a certificate of appreciation recognizing his 50 years of service to California taxpayers. / more+

540X Easy Reply Amended Return Pilot Program

We will soon begin a pilot program giving certain taxpayers the option of quickly concluding an audit when first contacted by us, if the taxpayer agrees with the proposed adjustments to their return. / more+

Useful Information Found on MyFTB Account – Tell your clients

MyFTB Account is a resource that’s available for your clients to access useful tax information 24/7. / more+

Documents, Second Mortgages, Tax Reporting – How to Handle a Foreclosed Home for Tax Purposes

In our July 2009, Foreclosure and Short Sales, and October 2009, Business Foreclosures or Short Sales, issues of Tax News, we addressed some of the questions we received related to a foreclosure. / more+

FTB/CSEA Liaison Meeting a Success

On September 25, we attended the California Society of Enrolled Agents (CSEA) annual Liaison meeting. / more+

540NR Booklet Mass Mailing Discontinued

We decided to discontinue the mass mailing of our Nonresident or Part-Year Resident Income Tax Booklet California 540NR directly to taxpayers. / more+

Small Business

Announcing the California Child Support Guide for Business

DCSS announces the California Child Support – A Guide for Business — a complete step-by-step web-based guide designed to help employers meet child support requirements in California. / more+

Ask the Advocate

Taxpayers’ Rights Advocate Role

As the Taxpayers’ Rights Advocate, I continue to be pro-active, visible, and accessible to taxpayers. / more+

Inside FTB

Take a look at the changes happening here at FTB. / more+

Criminal Corner

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

Here is the FTB’s October 2009 Tax News. Enjoy.

Click to Read

Click to Download PDF

California’s Franchise Tax Board has begun sending out letters to businesses who have been delinquent in filing. The FTB performs an initial state assessment to get a general sense of what businesses have yet to file, which is how they’ve created the list of companies to contact.

In 2008, this action brought in an additional $31 million in previously unpaid taxes. The letter has been sent out to over 35,000 businesses around the state requesting payment or the reason they have not filed.

This action is meant to lower the difference between the amount of taxes paid compared to what is fully owed. It is estimated that each year, California has a tax gap of $6.5 billion.

Enterprise Zone credits may reduce AMT, says Board
The Board of Equalization has denied the FTB’s petition for rehearing in the Appeal of Nassco Holdings, Inc. (February 25, 2009) Cal. St. Bd. of Equal. Case No. 317434. The Board has also directed its staff to draft a formal opinion in the matter, for consideration.
In the original, unpublished letter decision of Nassco, the Board ruled that a taxpayer may use Enterprise Zone tax credits to reduce AMT. Similarly situated taxpayers, who want to apply their Enterprise Zone credits against AMT, must file claims for refund citing the same arguments that the taxpayer cited in the Nassco appeal.

In the July issue of the FTB’s tax news, the FTB allowed non profits to claim the Enterprise Zone net interest deduction. Here is the FTB’s new position:

“California provides for special tax incentives to encourage investment in specific geographic areas targeted for economic revitalizing called Enterprise Zones within the state. One of these incentives is the net interest deduction. It is available to banks and other lenders. The requirements are simple. If a bank or lender makes a qualified loan to a qualified debtor, it is allowed to deduct the net interest received from such loan against its California taxable income. To be a qualified transaction, the loan must be made to a debtor that is engaged in a “trade or business” in an Enterprise Zone. The term “trade or business” is generally defined for tax purposes as “an activity engaged in for profit.” When a bank or lender makes an otherwise qualified loan to a nonprofit organization, the question arises as to whether a nonprofit is engaged in a trade or business, and thus considered to be a qualified debtor for the purposes of the net interest deduction.

In the past, we disallowed debts made to nonprofit organizations based on the general presumption that nonprofit organizations are not engaged in a trade or business as defined under various tax provisions in the Internal Revenue Code and the California Revenue and Taxation Code.

However, we recently revised this policy based on statutory authority in the California Corporation Code that suggests a nonprofit could be recognized as being engaged in a trade or business. The California Corporation Code which governs nonprofit entities affirms the nonprofit’s right to “carry on a business at a profit,” and use that profit for any lawful activity.” Many nonprofit organizations accept donations, conduct fundraising activities, or charge fees. This revenue is used to sustain the organization, pay salaries, interest, fund capital improvements, expansions, etc. These activities are similar to a trade or business engaged to earn a profit.

Therefore, qualified loans made to nonprofit organizations can qualify for the Enterprise Zone net interest deduction if the debtor meets all the other required qualifications.”