FTB hosts virtual stakeholder meetings December 2020 Tax News

Recently, we hosted 2 stakeholder meetings to gain input from the public. We appreciated the attendees taking the time to participate and share their thoughts.

Legislative Proposal Stakeholder Meeting

On Tuesday, November 10, 2020, we hosted our annual Legislative Proposal (LP) Stakeholder Meeting. This year’s meeting was held virtually with, and approximately 40 participants joined the meeting to discuss the LPs.

We presented five LPs, which are summarized here:

21-A Modified Conformity to the Federal Alternative Simplified Credit (ASC) and Elimination of the Alternative Incremental Research Credit (AIRC)

Under this proposal, the ASC method for computing the California research credit would be available as an election for taxable years beginning on or after January 1, 2022. The election would remain in effect unless revoked with the consent of the FTB. The proposal would also eliminate the AIRC method for calculating the California research credit, consistent with elimination of the AIRC method at the federal level.

Eliminating the AIRC method and conforming to the ASC method would provide businesses and individuals conducting research in California with a simplified calculation option, eliminate differences between federal and state law, and reduce recordkeeping requirements.

21-B Real Estate Withholding/ Internal Revenue Code (IRC) section 1031 Deferred Like-kind Exchange/Failure to Withhold by Qualified Intermediaries (QI)/ Cash-Poor Exchange

Under this proposal, Revenue and Taxation Code (R&TC) Section 18662 relating to real estate withholding would be amended to limit the QI’s withholding obligation to available funds in those situations where the QI does not receive sufficient funds from escrow or the QI disbursed funds for the purpose of completing an exchange under IRC Section 1031. This proposal would also authorize FTB to prescribe regulations to implement this change by clarifying when a disbursement is for the purpose of completing an IRC Section 1031 exchange.

21-C Taxation of Income from an Incomplete Gift Non-Grantor (ING) Trust

This proposal would amend the Personal Income Tax Laws to require that the net income derived from an ING trust’s assets be included in the grantor’s gross income and be subject to California income tax. It would treat grantors who transfer assets into an ING trust in the same manner as grantors of a grantor trust and provide consistent and fair treatment of income distributed to similarly situated taxpayers.

21-D Taxpayers’ Bill Of Rights Annual Report to the Legislature/Change Due Date From December 1st to January 15th

This proposal would change the due date of the statutorily-required Taxpayers’ Bill of Rights Annual Report from December 1st to January 15th. Changing the due date to January 15th will allow the FTB to inform the legislature on the most current issues, including FTB's legislative proposals for the upcoming year.

21-E State Controller’s Office Unclaimed Property Data Sharing

This proposal would amend R&TC Section 19554 to allow the FTB to share additional specified tax return information with the State Controller’s Office to aid them in identifying holders of unclaimed property.

Next Steps for LPs

The five LPs will be presented for approval at the next three-member Franchise Tax Board (Board) Meeting, scheduled for December 18, 2020. Should the Board approve the LPs, the FTB will begin to look for legislative sponsors for the approved proposals.

Conformity Stakeholder Meeting Highlights

On Wednesday, November 18, 2020, we hosted our Conformity Stakeholder Meeting to seek feedback and input on conformity to federal law. The meeting was also held virtually and nearly 50 attendees participated. The discussion included Public Laws (PL) enacted in 2020 that amended the IRC and the department’s Summary of Federal Income Tax Changes (SOFITC) report and new tool for accessing information from the report.

R&TC Section 19522 requires FTB to submit an annual report, which summarizes changes to the IRC and their impact to California. Federal Laws discussed during the conformity meeting included:

  • Families First Coronavirus Response Act (PL 116-127)
  • Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act (PL 116-136)
  • Paycheck Protection Program and Health Care Enhancement Act (PL 116-139)
  • Paycheck Protection Program Flexibility Act of 2020 (PL 116-142)

The conformity discussion was followed by a demonstration of the new SOFITC report tool. This tool will allow users to access an interactive version of the report, by allowing them to filter the SOFITC report using the PL number, the R&TC Section, or other key words.

Next Steps for the SOFITC Report

Our staff is working on finalizing the SOFITC report, which is generally due on January 10. We will release the SOFITC report by the due date.

At the conclusion of both meetings, the Legislative Services Bureau’s email address (FTBLegislativeServices@ftb.ca.gov) was provided should stakeholders wish to provide additional comments.