To participate in the PTE regime , a qualifying taxpayer must make a first payment of $ 1,000 or 50 percent of the prior year ’ s PTE payment — whichever is greater .
2023 Tax Season Toolkit
CALIFORNIA
California Developments and Opportunities
Income Tax Perspective
There are updates or updated guidance for some tax rules , including the elective pass-through entity ( PTE ) tax , nexus considerations and the enforcement of the Franchise Tax Board ( FTB ) treatment of certain transactions for nonresident taxpayers .
Interest Rates Effective Jan . 1 , 2023 , the FTB pays 2 percent interest on corporate overpayments . This rate is effective through June 30 , 2023 . Effective June 31 , 2023 , the FTB pays 5 percent interest on corporate overpayments .
The interest rate for personal income tax underpayments and overpayments , corporation underpayments and estimate penalties is 7 percent , effective July 1 , 2023 . From Jan . 1 , 2023 – June 30 , 2023 , the interest rate for personal income tax underpayments and overpayments , corporation underpayments and estimate penalties was 5 percent .
For interest rates after Dec . 31 , 2023 , the FTB will provide more information at ftb . ca . gov / pay / penaltiesand-interest / interest-andestimate-penalty-rates . html as it becomes available . Historic interest rates can also be found on the same site .
One-Time Penalty Abatement On June 30 , 2022 , Gov . Gavin Newsom signed Assembly Bill 194 into law , which included the addition of Section 19132.5 to the Revenue and Taxation Code ( RTC ).
Section 19132.5 gives the FTB the authority to grant California taxpayers a one-time abatement of timeliness penalties , including the
BY NICK WEST & OSSIE RAVID
Many tax trends continued to align with pre-pandemic frameworks in 2023 , as well as several new developments for California taxpayers . In the following , you ’ ll find more details on income tax changes , recent judicial decision updates , disaster declarations and a development related to unclaimed property enforcement .
failure-to-file penalty ( RTC 19131 ) and a failure-to-pay penalty ( RTC 19132 ). The relief applies only to individuals subject to personal income tax and is only for taxable years beginning on or after Jan . 1 , 2022 .
How to Request Penalty Abatement The FTB began to accept abatement requests on April 17 , 2023 . The abatement can be requested verbally by calling 1 ( 800 ) 689-4776 or in writing by filing FTB 2918 ( ftb . ca . gov / forms / misc / 2918 . pdf )
To participate in the PTE regime , a qualifying taxpayer must make a first payment of $ 1,000 or 50 percent of the prior year ’ s PTE payment — whichever is greater .
How to Qualify for Penalty Abatement All the following requirements must be satisfied :
• The individual has not previously been granted a one-time penalty abatement , ever ;
• The individual has filed all required income tax returns ;
• The individual has paid in full , or is current on an approved installment agreement to pay , all outstanding liabilities other than the timeliness penalty .
Elective Pass- Through Entity Tax
California enacted a pass-through entity ( PTE ) tax regime in 2021 ( mossadams . com / articles / 2021 / 08 / ca-income-tax-credit-for-ptes ). For California , the election is administered by the FTB but provides federal benefits . The PTE program can be an avenue for qualifying taxpayers , which includes most partnerships or S corporations , to mitigate the tax impact of the federal $ 10,000 cap on the deductibility of taxes imposed at the state and local level on shareholders or partners . The PTE regime does this by shifting the incidence of tax off individual partners or shareholders and onto qualifying entities .
To participate in the PTE regime , a qualifying taxpayer must
www . calcpa . org DECEMBER 2023 CALIFORNIA CPA 11