Legislative update 2020 November 2020 Tax News

The following bills impacting FTB were chaptered in the second half of the 2019-2020 session of the California State Legislature.

AB 85 (Chapter 8, Statutes of 2020), Budget Trailer Bill - State Taxes and Charges

• Sections 6 and 14: For taxable years 2020, 2021, and 2022, under the California Personal Income Tax Law (PITL) and under the Corporation Tax Law (CTL), required that business tax credits reduce tax liability by no more than $5 million. This provision extended the credit carryover period for credits disallowed under this provision.
• Sections 7 and 15: Extended the new motion picture production credit carryover period from six to nine years.
• Sections 8 and 16: Suspended the use of Net Operating Loss (NOL) deductions, for taxable years 2020, 2021, and 2022. The suspension does not apply to taxpayers, under PTIL, with a net business income or modified adjusted gross income of less than $1 million, or to taxpayers under CTL with income subject to tax of less than $1 million. This provision also extended the carryover period for NOL deductions disallowed under this provision.
• Sections 9, 10, 11 and 24: Provided for a first year exemption from the annual tax for limited partnerships, limited liability companies, and limited liability partnerships under the PITL.
• Section 13: Under the CTL, allows the credit related to new advanced strategic aircraft to reduce tentative minimum tax.
• Sections 12, 17, 18 and 19: For the Individual Shared Responsibility Penalty, modified collection priority; limited the maximum monthly penalty for a responsible individual with a household size of five or more; corrected references to “responsible individual” and “applicable household member;” and exempted the FTB regulations from the Administrative Procedures Act requirements until January 1, 2022.

AB 93 (Chapter 19, Statutes of 2020), California Earned Income Tax Credit (CalEITC)/Young Child Tax Credit (YCTC) /Identification numbers. AB 93 was replaced with provisions of AB 1876 discussed below.

Under the PITL, the CalEITC was modified by removing restrictions on the use of certain SSNs and allowed the limited use of federal ITINs by eligible individuals. Eligible individuals are those with a qualifying child under six years old as of the last day of the taxable year and other specified individuals. As a result of the changes to the CalEITC, this act also expanded eligibility for the YCTC.

AB 1876 (Chapter 87, Statutes of 2020), California Earned Income Refundable Tax Credit (CalEITC)/ Young Child Tax Credit (YCTC)/Identification Numbers

Under the PITL, the CalEITC was further modified (and effectively superseded AB 93). These changes allow the use of federal ITINs for all eligible individuals, eligible individuals’ spouses, and qualifying children.

AB 102 (Chapter 21, Statutes of 2020), Retirement Savings Trust Act (CalSavers)

• Under the Government Code (GC), the California Secure Choice Retirement Savings Trust Act was renamed to the CalSavers, and authorized the CalSavers Retirement Savings Board (CalSavers Board) to enforce eligible employer compliance. This includes referring noncompliant employer accounts to the FTB for collection, as specified, and making other changes.
• Under the Revenue and Taxation Code (R&TC), authorized the FTB to take specified collection action for an eligible employer referred by the CalSavers Board for noncompliance and conduct eligible employer appeals related to the imposition of penalties for noncompliance.

AB 107 (Chapter 264, Statutes of 2020), Tax Voucher Study/Disclosure

• Required the FTB to consult with the Department of Finance and the Treasurer to create a plan for a California Economic Improvement Tax Voucher Program to be considered by the legislature.
• Allows FTB to share information with the Department of Social Services and the Employment Development Department for specific purposes.

AB 276 (Chapter 62, Statutes of 2020), Coronavirus Aid, Relief, and Economic Security Act (CARES) Act-Qualified Employer Plan Loans

Under the PITL, conformed California law to a provision of the CARES Act (Public Law 116-136) relating to loans from qualified retirement plans.

AB 323 (Chapter 341, Statutes of 2020), Worker Status: Newspapers and Advertising Outreach

Extended the exemption for newspaper distributors or carriers to January 1, 2022, and deleted the condition that a newspaper carrier work under a contract with a newspaper publisher or distributor.

AB 499 (Chapter 155, Statutes of 2020), State Agencies Report When Full Social Security Number (SSN) Mailed

Under the GC, restricted a state agency from sending mail to an individual that contains an individual’s SSN, as specified, and created a reporting requirement. FTB is currently in compliance with this requirement.

AB 846 (Chapter 322, Statutes of 2020), Public Officers or Employees Declared to be Peace Officers

• Under the GC, modified the minimum standards for public officers and peace officers and required a study, review, and update of related regulations and screening materials.
• Under the Penal Code, required entities that employ peace officers to review and modify peace officer job description to emphasize community-based, collaborative policing.

AB 1577 (Chapter 39, Statutes of 2020), Treatment of Loans Forgiven Under the Paycheck Protection Program

Under the PITL and CTL, excluded from gross income covered loan amounts forgiven pursuant to the federal CARES Act (Public Law 116-136), Paycheck Protection Program and Health Care Enhancement Act (Public LAW 116-139), or the Paycheck Program Flexibility Act of 2020 (Public Law 116-142) for taxable years beginning on and after January 1, 2020.

AB 2068 (Chapter 173, Statutes of 2020), California Firefighters’ Memorial Fund and California Peace Officer Memorial Foundation Fund

Renamed and extended the repeal dates for the California Firefighters’ Memorial Voluntary Tax Contribution Fund and the California Peace Officer Memorial Foundation Voluntary Tax Contribution Fund.

AB 2247 (Chapter 99, Statutes of 2020), Dependent Exemption Credit/Alternate Identifying Information

Under the PITL, allowed a taxpayer with a nonresident alien dependent who is ineligible to receive a federal ITIN the option of providing other identifying information, as prescribed by the FTB, for purposes of the dependent exemption credit.

AB 2257 (Chapter 38, Statutes of 2020), Employee Classification–Employees and Independent Contractors

• Exempted additional occupations and business relationships from the presumption that a worker is an employee unless certain conditions are met.
• Repealed section 2750.3 of the Labor Code related to determining if a worker is an employee or independent contractor under the “ABC” test and added Article 1.5 (commencing with section 2775) to Chapter 2 of Division 3 of the Labor Code to revise these provisions.
• Amended the R&TC to add definitions of “employee” to specific parts of the R&TC by reference to the Labor Code.

AB 2660 (Chapter 102, Statutes of 2020), Nonresident Group Return with Nonresident Aliens

Allowed a nonresident group return to be filed on behalf of electing nonresident aliens receiving California source income.

AB 2699 (Chapter 289, Statutes of 2020), Allow Additional Specified State Agencies to Obtain for Use by the Agency’s Sworn Officers Handguns Otherwise Barred from Sale, Possession, or Use within the State

Under the Penal Code, modified the exception to the prohibition on the sale and purchase of certain handguns to allow additional state agencies to obtain such handguns for use by the agency’s sworn members.

AB 3362 (Chapter 360, Statutes of 2020), State Bar Nontax Debt Collection – Client Security Fund

Among other provisions, allowed the FTB to collect monetary sanctions and costs related to the State Bar of California’s Client Security Fund reimbursement provisions, as specified.

AB 3372 (Chapter 297, Statutes of 2020), Electronic Withholding Orders/Water’s-Edge Election and Doing Business

• Provision No. 1: Electronic Withholding Orders
  Allowed electronic delivery of withholding orders and related notices or documents.
• Provision No. 2: Water’s-Edge Election and Doing Business
  Amended the water's-edge election law to maintain an otherwise-valid water’s-edge election if a unitary foreign affiliate becomes a taxpayer solely due to California’s “doing business” statute.

SB 587 (Chapter 229, Statutes of 2020), California Sea Otter Voluntary Tax Contribution Fund

Renamed and extended the repeal date for the California Sea Otter Voluntary Tax Contribution Fund.

SB 592 (Chapter 230, Statutes of 2020), Code of Civil Procedure – Jury Selection

• Under the Code of Civil Procedure, provided that a list of resident state tax filers will be an additional appropriate source list used for jury selection.
• The FTB should revise the California resident income tax return to include a space for the taxpayer’s address of their principal residence and their county of principal residence.

SB 934 (Chapter 59, Statutes of 2020), Eliminate the Tax-Exempt Application Fee and the Form 199 Filing Fee

Eliminated the fee for submission of a tax-exempt application and the annual information return filing fee applicable to exempt organizations.

SB 1371 (Chapter 370, Statutes of 2020), Code Maintenance

Made numerous technical, non-substantive changes as a matter of code maintenance to various California codes, including to the R&TC.

SB 1409 (Chapter 114, Statutes of 2020), CalEITC Non-filer Report

Required the FTB to analyze and develop a plan to increase the number of claims of the CalEITC and the federal Earned Income Tax Credit.

SB 1447 (Chapter 41, Statutes of 2020), Small Business Hiring Credit (aka Main Street Credit)

• Created a small business hiring credit for qualified small business employers subject to receiving a tentative credit reservation. In lieu of the credit under the PITL or CTL, an irrevocable election could be made to apply the credit amount against qualified sales or use taxes, as specified.
• Specified the California Department of Tax and Fee Administration will administer the tentative credit reservation process and allocate the credit, not to exceed a cumulative total of one hundred million dollars ($100,000,000).
• Established a reporting requirement for the CDTFA and the FTB.