Happy Trailers: High Stakes & Trailer Bills in Final Leg. Session.
A number of bills are being pushed for by the business community to clean up and clarify provisions of the California Consumer Privacy Act that is set to take effect Jan. 1, 2020. These important changes can drastically impact how the business community complies with the new privacy act.
SB 468 would create a board to review the efficacy and recommend to changes or repeals of state tax credits.
AB 1270 would extend the state False Claims Act to tax disputes, which could significantly impact how tax disputes are handled by the state.
These are just some of the major policy issues that will come to a head in the final weeks of the Legislature.
Governor Signs Tax Items
With the signing of the state budget, Gov. Newsom also signed a number of budget trailer bills, which included a number of changes to tax provisions.
AB 91 enacted The Loophole Closure and Small Business and Working Families Tax Relief Act of 2019. This bill selectively conformed state tax law to some provisions of the Federal Tax Cuts and Jobs Act as well as expanded the current California Earned Income Tax Credit (EITC). The expanded credit increased the income range for those that qualify for the EITC and the credit amount available for certain taxpayers. To offset the revenue impact of the expanded credit, the bill conformed portions of the state tax law to the federal tax laws. The conformity package, outlined below, is anticipated to increase revenues by approximately $1.6 billion:
* 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, 201 7, due to death or disability of the student.
* 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 Carrybacks: Repeals the ability for taxpayers to carry back NOLs to previous taxable years.
* Small-Business Accounting Simplification: Increases small-business accounting thresholds to conform with federal law (see details on Page 9).
* 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 Sec. 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.
See Page 9 for more details on SB 92. another trailer bill signed.
by Jason Fox
Jason Fox is CalCPA's vice president of Government Relations. You can reach him at firstname.lastname@example.org.