Tax News June 2026

May Tax News Flash

May 27, 2026 Pass-Through Entity (PTE) Elective Tax June 15th Payment Approaching

Senate Bill (SB) 711 – Updated Unrelated Business Taxable Income (UBTI) Conformity for Exempt Organizations

SB 711, enacted October 1, 2025, updates California’s conformity to Internal Revenue Code (IRC) section 512 as it was in effect on January 1, 2025, except where specifically modified by Revenue & Taxation Code section 23732.

Under this conformity, exempt organizations must follow federal rules requiring separate reporting of UBTI for each unrelated trade or business, as provided in IRC section 512(a)(6). This conformity aligns California with federal reporting standards and facilitates more accurate activity level reporting.

Impact to Taxpayers & Tax Professionals:

• Exempt organizations should begin to identify and separately track each unrelated trade or business in preparation to report these activities on the 2026 tax return.
• Details regarding implementation, including the applicable reporting manner and form, are currently under development and will be communicated as soon as available.

Estimated Tax Payments Paid with Credit Card

As the second quarter June 15, estimated tax payment deadline approaches, FTB reminds taxpayers and tax professionals that refunds which result from credit card payments may take longer to process.

In some cases, additional verification may be required before a refund can be issued. 

This applies to: 

• Taxpayers receiving refunds for tax years 2025 and prior, including those receiving refunds from recent credit card payments. 

• Taxpayers making estimated tax payments for tax year 2026, who may expect a refund during next year’s filing season. 

FTB works to ensure refunds are issued as quickly and securely as possible. When payments are made by credit card, additional review may be necessary to protect taxpayers and verify payment information. This review may extend the time needed to issue refunds.

Taxpayers can make estimated payments or other tax payments online at: 
Options to pay your tax or other debts 

Turf Replacement Water Conservation Program: Rebates and Tax Incentives

Many California water agencies offer incentives to homeowners who switch to water-efficient landscaping, which provides tangible benefits, such as eligibility for rebates and tax incentives.

For tax years beginning on or after January 1, 2022, and before January 1, 2027, California excludes rebates, vouchers, or other incentives for turf replacement from gross income if issued by a public water system, local government, or state agency. These payments and incentives are not taxable.

For more information about how to report the exclusion on your tax return, go to instructions for Form 540 Schedule CA Adjustments and Form 4197.

Enter your zip code at Save Our Water to access specific rebate programs in your area as well as resources for turf replacement and water-efficient landscaping.

Limited Liability Company (LLC) Fee Payment Due June 15

An LLC, including a single member LLC or an LLC taxed as a partnership, must pay the annual LLC fee if it is organized, doing business, or registered in California and has total income from all sources derived from or attributable to California of at least $250,000.

For calendar year LLCs, June 15, is the date the estimated LLC fee is due. For fiscal year LLCs, the estimated fee is due by the 15th day of the sixth month of the current taxable year. 

Fees are as follows:

California income* rounded

If the total California income rounded to the nearest whole dollar is:	The fee amount is:
$250,000 - $499,999	$900
$500,000 - $999,999	$2,500
$1,000,000 - $4,999,999	$6,000
$5,000,000 or more	$11,790

*California income for LLC fee purposes is gross income plus the cost of goods sold, that are paid or incurred in connection with the trade or business of the taxpayer. 

LLCs should use Form 3536, Estimate Fee for LLCs, to make their estimated fee payment. LLCs can also use Web Pay to make their estimated fee payment. 

If the payment is late or less than the amount owed, FTB will assess a 10 percent (10%) penalty on the underpaid fee. The underpaid fee is the difference between the current taxable year LLC fee, and the estimated fee paid on or before the estimated fee due date. 

LLCs can avoid the estimated fee penalty if their estimated fee payment is equal to or greater than their prior year’s LLC fee. For purposes of determining whether the LLC estimated fee penalty applies, there is no requirement that the prior tax year be a full 12 months. Also, there is no estimated fee penalty for the LLC’s first year filing in California. 

Internal Revenue Service Updates

We partnered with the IRS to provide monthly articles to assist our tax professional and small business communities and are excited to share this information; however, questions about the content should be directed to the IRS. 

IRS announces terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement disputes

IR-2026-65, May 13, 2026 — The IRS is announcing the terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes with the IRS.

Apply for a Low Income Taxpayer Clinic grant to serve taxpayers in your community

IR-2026-64, May 6, 2026 — The Low Income Taxpayer Clinic Program announced it will accept applications for LITC matching grants from all qualified organizations from May 6, 2026, to July 6, 2026.

IRS updates conservation easement site; settlement opportunity details forthcoming

IR-2026-63, May 6, 2026 — The IRS announces updates to its Conservation Easement page, expanding information on abusive conservation easement transactions, recent court decisions, and warning signs for investors.

IRS requests applications for 2027 IRSAC membership

IR-2026-62, May 5, 2026 — The IRS is accepting applications for the Internal Revenue Service Advisory Council through June 5, 2026.

IRS recognizes importance of small businesses, provides helpful resources

IR-2026-61 May 5, 2026 — The IRS announced a series of resources and events to support small businesses during National Small Business Week, which runs through May 9.

IRS seeking applications for Tax Counseling for the Elderly and Volunteer Income Tax Assistance program grants

IR-2026-60 May 1, 2026 — The IRS is now accepting applications for the Tax Counseling for the Elderly and Volunteer Income Tax Assistance grants.

Ask the Advocate

Assisting Taxpayers through Franchise Tax Board (FTB) Installment Agreements

What Taxpayers and Tax Professionals Need to Know

As your Advocate, I recognize that situations involving tax debts may be both challenging and stressful for your clients experiencing financial hardships. My role is to guide you through available options such as an approved Installment Agreement. 

An installment agreement may help prevent, or pause, certain involuntary collection actions, such as wage garnishments or bank levies, provided the taxpayer remains compliant with the agreement terms. Taxpayers must continue to file all required tax returns and pay future tax obligations on time to maintain their installment agreement and avoid default. Remaining compliant facilitates positive resolution of outstanding liabilities. 

What is an FTB Installment Agreement?

An installment agreement allows taxpayers to satisfy California tax liabilities through monthly payments over time rather than in a lump sum. FTB may approve payment plans for both individual and business taxpayers when full immediate payment is not feasible.

Balances generally continue to accrue: 

• Interest 
• Applicable penalties 
• Collection costs 

Eligibility Criteria

Assembly Bill 1765 expanded the installment agreement terms. As of January 1, 2024, individuals who apply for an installment agreement for a tax liability not to exceed $25,000, and not to exceed a 60-month payment plan, will no longer be required to complete the self-certification of financial hardship. 

Additional criteria include: 

• All required California tax returns for the prior five years have been filed.
• The taxpayer is compliant with current filing obligations. 
• The taxpayer is not already in default on another FTB payment arrangement.

How to Apply

Taxpayers may request an installment agreement through several methods: 

1. Eligible individuals can apply through the FTB online payment plan system. Only newly assessed liabilities may qualify for an online application. 
2. FTB provides an automated phone application process for qualifying taxpayers. Call 1-800-689-4776. For persons with hearing or speaking limitations, call California Relay Service 711 or 1-800-735-2929 
3. By mail using a FTB 3567 Installment Agreement Request.  

Financial Information Requirements

If your client falls into one of the scenarios below: 

• Balances exceed $25,000 
• Requested terms exceed 60 months 
• The taxpayer has prior defaults 
• Collection activity has already begun 

FTB may request: 

• Income verification 
• Asset disclosures 
• Bank statement information 
• Monthly living expenses 
• Business financial statements 

Liens: How They Interact with Installment Agreements

One of the most misunderstood areas for taxpayers is whether entering into an installment agreement prevents a lien filing. The answer is, not necessarily. 

FTB collection procedures indicate liens are commonly considered when: 

• Balances are significant (exceed $25,000) 
• Requested terms exceed 60 months 
• There is a history of nonpayment 
• Prior agreements defaulted 
• Collection risk exists

Even taxpayers with approved installment agreements may still have a lien filed to secure the state’s interest. 

However, compliant taxpayers may avoid lien filings in some circumstances, particularly when balances are lower, do not exceed 60 months, and payments remain current. 

Missed Payments 

If a client misses an installment agreement payment, immediate action is critical. It is important not to ignore missed payments or assume the agreement will remain in good standing automatically. Taxpayers should make the missed payment as soon as possible and contact the FTB promptly to discuss reinstatement before the agreement defaults and collection activity resumes.  

In Summary 

FTB installment agreements can provide meaningful relief for taxpayers unable to fully pay liabilities immediately, but they are not a shield against all collection activity. 

Taxpayers and tax professionals should proactively evaluate: 

• Eligibility thresholds 
• Compliance history
• Financial disclosure requirements 
• Lien exposure 
• Future filing obligations 

It is important to understand how installment agreements and liens interact to manage client expectations and reduce the likelihood of involuntary collection enforcement. Future compliance is just as important as making monthly payments.

Helpful Resources: 

• FTB Installment Agreements (Payment Plans) 
• Payment Plan Assistance 
• Lien Information 

Please feel free to contact me with any questions or concerns. My role is to support your compliance journey and help address any challenges that may arise.