Tax News May 2026

June 15 Payment Rules for Pass-Through Entity (PTE) Elective Tax

Qualified entities must make PTE elective tax initial payment on or before June 15, 2026. The payment amount is the greater of:

• 50% of the elective tax paid the previous year; or
• $1,000.00

Changes Under Senate Bill (SB) 132 Beginning Taxable Year 2026

If the June 15 payment is missed, or less than the required amount, the qualified entity may still make a PTE elective tax election. However, if the qualified entity makes a valid election without the required June 15 payment, the PTE elective tax credit allowed to the qualified taxpayers (i.e. consenting partners, members, or shareholders) is reduced by 12.5% of their pro rata share of the unpaid amount that was due on June 15.

The payment can be made using  Web Pay,  electronic funds withdrawal by way of tax preparation software, or check or money order with a FTB 3893, Pass-Through Entity Elective Tax Payment Voucher. If the qualified entity is required to make payments electronically, it must remit the PTE elective tax electronically. Remember that PTE elective tax payments must be made separate from other tax payments, such as estimated tax payments.

The related forms and instructions are currently under revision to incorporate the provisions of SB 132 and will undergo the standard review and approval process. We will provide updates once the forms and instructions are finalized.

For more information, go to PTE elective tax credit and Help with pass-through PTE elective tax.

Exempt Organization Filing Due Date Approaching

Exempt organizations are required to file annual information returns, Form 199, Exempt Organization Annual Information Return or FTB 199N, California e-Postcard, by the 15th day of the 5th month following the close of their taxable year.

For a calendar year organization, the due date is May 15, 2026.

Certain organizations may also have filing requirements for Form 109, California Exempt Organization Business Income Tax Return or Form 100, California Corporation Franchise or Income Tax Return.

For more information, go to FTB Publication 1068, Exempt Organizations - Filing Requirements.

Extension to file

We grant an automatic 6-month extension to file a return if both of the following apply:

• The organization is not suspended on the original due date.
• The organization's return is filed on or before the extended due date.

For more information, go to Business Due Dates.

For more information, go to Charities and nonprofits.

The exempt organization call center is available to assist nonprofits with questions concerning exemption, missing returns, or balances due.

Phone:

916-845-4171

916-845-6500 (outside the U.S.)

Weekdays, 7 AM to 4:30 PM

Closed state holidays

Mail

Exempt Organization Unit MS-F120

Franchise Tax Board

PO Box 1286

Rancho Cordova CA 95741-1286

Single Member Limited Liability Companies Required to File Form 568

This may be a good time to remind your single member limited liability company (SMLLC) clients that they are required to file Form 568, even though they are considered a disregarded entity for income tax purposes. An SMLLC that is disregarded for federal tax purposes, is also disregarded for California tax purposes, and generally files their federal taxes using a Schedule C. California law also states, however, that the separate existence of the eligible business entity is not disregarded for purposes of the:

• Limited liability company (LLC) annual tax
• LLC fee
• LLC tax return filing requirement

Generally, a disregarded SMLLC must also file a tax return (Form 568) by the same deadline applicable to the owner's tax return. California grants an automatic extension of time to file a return. Please keep in mind, however, that an extension of time to file is not an extension of time to pay the LLC annual tax or fee.

In summary, SMLLC taxpayers should be aware that a disregarded SMLLC is also required to:

• File a tax return (Form 568)
• Pay the LLC annual tax
• Pay the LLC fee (if applicable)

Items of income, deduction, and credit (after applying appropriate limitations) from the SMLLC should be included in the owner’s tax return.

For more information, go to Single member LLC.

Form 593, Real Estate Withholding Statement Processing

California law requires withholding when California real estate is sold or transferred unless a full or partial exemption applies.

All remitters must ensure all applicable part(s) of Form 593, Real Estate Withholding Statement are completed, and must submit Sides 1-3 to the Franchise Tax Board (FTB) regardless of the real estate transaction. The form must be complete and accurate, or it will not be processed.

We will not process submitted Form 593 due to one or more of the following:

• Incorrect taxable year forms were submitted.
• The form was submitted with different taxable years for Side 2 and/or Side 3.
• The seller’s name and/or seller’s tax identification number was missing or incorrect on Form 593, Part II.
• The property address was missing on Form 593, Part II.
• Contradictory boxes were checked on Form 593, Part III and Part IV.
• Form was submitted with a payment, but no withholding amount was reported on Form 593, Part VII, Line 37.

If Form 593 is not processed, the withholding credit will not be applied correctly and will not be available when the seller files their California income tax return. This may result in a balance due or reduced refund for the seller.

The following resources are available for download to educate you on the withholding process at:

• Form 593, Real Estate Withholding Tax Statement Instructions
• FTB 4064, Quick Reference Guide California Real Estate Withholding
• FTB 1016, Real Estate Withholding Guidelines

For questions on real estate withholding, contact 916-845-4900.

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 issues Whistleblower Alert, expands efforts to uncover fraud

IR-2026-54, April 17, 2026 — The IRS issued a Whistleblower Alert highlighting an area of concern about misuse, diversion or fraudulent use of federal funds by tax-exempt organizations, individuals and businesses, and urged the public to provide information.

IRS launches new online tool to help taxpayers resolve tax debt

IR-2026-53, April 16, 2026 — The IRS announced a new online tool to help taxpayers understand and resolve tax debt.

If you need more time to file, request an extension

IR-2026-52, April 14, 2026 — As the end of filing season approaches, the IRS reminds taxpayers they can get an extension to file their federal income tax return until Oct. 15, 2026, but they must request the extension by April 15, 2026, in order to avoid penalties.

IRS hosting free webinar to share last-minute tips for the filing season

IR-2026-51, April 13, 2026 — The IRS announced it will be hosting a free 30-minute webinar for taxpayers and tax professionals to provide last-minute tips for filing season on Tuesday, April 14, at 1 p.m. Eastern time.

Treasury, IRS issue final regulations listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill

IR-2026-49, April 10, 2026 — The Department of the Treasury and the IRS issued final regulations on the “No Tax on Tips” provision.

Treasury, IRS issue proposed regulations on the new remittance transfer tax established under the One, Big, Beautiful Bill

IR-2026-48, April 10, 2026 — The Department of the Treasury and the IRS issued proposed regulations that would provide rules and definitions related to the new excise tax imposed on certain remittance transfers, also referred to as the remittance transfer tax, under the One, Big, Beautiful Bill.

Treasury, IRS provide guidance to States for nominating census tracts as qualified opportunity zones under the One, Big, Beautiful Bill

IR-2026-45, April 6, 2026 — The Department of the Treasury and the IRS issued guidance to the Chief Executive Officers of any State, the District of Columbia, and U.S. territories regarding the procedure for nominating population census tracts to be designated as qualified opportunity zones (QOZs) under the One, Big, Beautiful Bill.

IRS expands Business Tax Account access to partnerships, government entities, and tax-exempt organizations

IR-2026-46, April 6, 2026 — The IRS announced a major expansion of its Business Tax Account, making the online self-service platform available to partnerships, federal, state, and local governments, Indian tribal governments, and tax-exempt organizations.

Act now to file, pay, or request an extension

IR-2026-44, April 3, 2026 — With the April 15 tax deadline fast approaching, the IRS reminds taxpayers that there is still time to file their federal income tax return electronically and request direct deposit for any refund due.

Tax filing season progressing smoothly with timely refund processing and a high use of electronic filing

IR-2026-43, April 2, 2026 — The IRS continues to deliver excellent service to taxpayers during the 2026 filing season with the rise in tax refunds, the smooth pace at which taxpayers are getting their refunds and the high use of electronic filing.

Ask the Advocate

Filing Season Wraps Up – Your Feedback Moves Us

As we wrap up another filing season, I want to extend my sincere appreciation to California’s dedicated tax professionals. Each year, your expertise and commitment help taxpayers navigate a complex and ever changing landscape. I recognize the tremendous effort that goes into serving your clients during the demanding filing season, and I truly appreciate the professionalism and consistency you bring to the process.

From the perspective of the Taxpayers’ Rights Advocate, your role extends far beyond filing returns. As tax professionals on the front lines, you observe firsthand the patterns, recurring challenges, and administrative barriers that taxpayers encounter. These observations are essential to identifying issues that may be systemic issues that, if left unaddressed, can impact large groups of taxpayers and create unnecessary burden.

To ensure these issues are captured, reviewed, and addressed effectively, I encourage you to report them through our Systemic Issue Management System (SIMS) online portal.

Using the SIMS portal ensures your concerns are formally documented, routed to the appropriate program areas, and assessed for broader tax administration impact. This process helps my office identify trends, analyze root causes, and advocate for meaningful improvements that reduce administrative complexity.

Although we do not respond to every SIMS submission, we actively review, research, and evaluate all submissions. If we determine that an issue is systemic, we will collaborate with the appropriate FTB program area(s) to resolve the issue.

Systemic issues can arise from notices, forms, e filing processes, system interactions, or any step in the experience that affects multiple taxpayers. When you take a moment to submit what you witness, you play a direct role to improve tax administration.

I have shared systemic issue resolution in previous Ask the Advocate articles. You can find examples of systemic issues my team has evaluated and resolved in the July 2024, September 2024, or March 2025 articles.

Thank you again for your hard work throughout this filing season and for the valuable insight you provide year-round. I look forward to our continued collaboration.