Governor Signs Tax Conformity as Part of State Budget.
* Achieving a Better Life Experience (ABLE) Accounts: Eliminates differences in qualification criteria for ABLE accounts between federal and California tax law to increase contribution limits and allow taxpayers to roll-over Section 529 plans to ABLE accounts.
* Student Loan Debt: Excludes from an individual's gross income the amount of student loan indebtedness discharged after Dec. 31, 2017, due to death or disability of the student.
* Federal Deposit Insurance Corporation (FDIC) Premiums: Limits the amount banks may deduct for FDIC premiums paid by disallowing deductions entirely for depository banks with assets above $50 billion, and limits them for banks with assets between $10 billion and $50 billion.
* Excess Employee Compensation: With respect to compensation in excess of $1 million, revises the definition of covered employee and publicly held corporation to limit the amount that may be deducted for ordinary and necessary expenses. Additionally, disallows the performance-based compensation and commission exceptions with respect to the deduction limitation.
* Net Operation Loss (NOL) Carrybacks: Repeals the ability for taxpayers to carry back NOLs to previous taxable years.
* Small-Business Accounting Simplification: Increases the following thresholds to conform with federal law:
1. From $5 million to $25 million the amount of average annual gross receipts of a small business to be allowed to use the cash method of accounting;
2. From $10 million to $25 million the average annual gross receipts of a taxpayer exempt from provisions precluding the deductibility of certain property costs and determining whether those costs are inventory costs or are capitalized; and
3. Exempts a small business with average annual gross receipts not exceeding $25 million from provisions that require a taxpayer to take inventories to clearly determine their income.
* Non-Corporate Business Loss Limits: Disallows deductions under the Personal Income Tax Law for excess business losses over $250,000 for a single filer and $500,000 for joint filers. Establishes these limits in perpetuity (the federal change expires in 2026), and also provides that losses cannot be carried forward as a NOL at an amount greater than the limits listed above (which they can under federal law).
* Technical Termination of a Partnership: Repeals provisions that allow for the termination of a partnership within a 12-month period and allows a partnership to elect to have this change apply to partnership taxable years beginning in 2018.
* Like-kind Exchange Rules: Eliminates like-kind exchanges of personal property, limiting these exchanges only to real property, except for personal income taxpayers with less than $250,000 for a single file and $500,000 for a joint filer.
* Elimination of Section 338 Election: Provides that if an election to treat a qualified stock purchase from a target corporation as an asset acquisition is made by a purchasing corporation for federal tax purposes, a separate state election shall not be allowed.
In a separate budget trailer bill signed by the governor, SB 92 made a number of other tax related changes, First, it created a streamlined appeals process for specified taxpayers with appeals under a certain threshold at the Office of Tax Appeals by allowing those appeals to be heard by one administrative law judge rather than the current three-ALJ panel. Second, the trailer bill contains "Wayfair cleanup" language (clarifying that a delivery network company may be deemed a marketplace facilitator). Finally, it created a two-year sales and use tax exemption for feminine hygiene products and diapers used by small children.
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|Date:||Aug 1, 2019|
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