Legislative Update 2021November 2021 Tax News
The following bills impacting Franchise Tax Board (FTB) were chaptered in the first year of the 2021-2022 session of the California State Legislature.
AB 80 (Chapter 17, Statutes of 2021), Forgiven Loan Exclusion Expansion & Modified Conformity to Paycheck Protection Program Business Expense Deductions
- Expanded the exclusion from gross income for covered loan amounts forgiven pursuant to California conformity to certain federal provisions.
- Conformed to the exclusion from gross income for Economic Injury Disaster Loan advance grant amounts pursuant to certain federal provisions.
- Conformed to the allowance of deductions and treatment of tax basis and other tax attributes relating to business expenses paid with forgiven covered loan amounts under the Paycheck Protection Program (PPP), except for ineligible entities, as specified.
AB 81(Chapter 5, Statutes of 2021), Income Exclusion for Tenant Grants and for Forgiveness of Tenant Rent Liability
- Made several amendments and technical changes to existing state law to allow the state to assist individuals impacted by the COVID-19 pandemic and to align with federal provisions.
AB 88 (Chapter 12, Statutes of 2021), Golden State Stimulus Payment/Golden State Grant Program
- Excluded from gross income the one-time Golden State Grant (GSG) payments and made clarifying changes to the one-time Golden State Stimulus (GSS) payment. This bill excluded one-time GSS and GSG payments from garnishment orders, with some exceptions, and added requirements for financial institutions to identify these payments.
AB 137 (Chapter 77, Statutes of 2021), Budget Trailer Bill - Real Estate Fraud Fee & Lien Release Fee
- Under the Government Code (GC), specified that the fee for recording certain full lien releases would be twice the fee charged to record the first page of a lien, encumbrance, or notice. It also applied the same modification to certain releases of documents relating to an agreement to reimburse a county for public aid and releases of judgments.
- Clarified that certain fees applicable to recording or filing an instrument, paper, or notice do not apply to the state or any county, municipality, or other political subdivision of the state.
- Added language to expressly state that the real estate fraud fee does not apply to any real estate instrument, paper, or notice presented for recording for the benefit of the state or any county, municipality, or other political subdivision of the state.
AB 150 (Chapter 82, Statutes of 2021), Budget Trailer Bill – Various Tax Credits and Data Sharing
- Sections 1 and 24: Extended the collaboration period related to the effectiveness of the Rehabilitation of Certified Historic Structures Credit (RCHSC) between the specified parties to January 1, 2027, and added intended goals and performance metrics for the credit provisions to accomplish.
- Sections 11 and 20: Extended the operative date of the RCHSC under the Personal Income Tax Law (PITL) and the Corporation Tax Law (CTL) to taxable years beginning before January 1, 2027.
- Sections 5, 6, 8, 16, and 23: For the taxable year beginning on or after January 1, 2021, and before January 1, 2022, under the Sales and Use Tax Law, the PITL, and the CTL, allowed a qualified small business employer a small business hiring credit (Main Street Small Business Tax Credit, Part II), subject to receiving a tentative credit reservation. The amount of the credit is reduced by the credit reservation amount under RTC section 6902.8. The California Department of Tax and Fee Administration (CDTFA) will administer the tentative credit reservation process and allocate the credit, not to exceed a cumulative total of $70,000,000. It also established a reporting requirement for the CDTFA and the FTB.
- Section 15: Created the Small Business Relief Act (SBRA) for taxable years beginning on or after January 1, 2021, and before January 1, 2026, and allows qualified entities taxed as a partnership or an S corporation to pay an additional elective tax at the entity level.
- Sections 7 and 12: Under the PITL, allows a qualified taxpayer, who is an owner of a qualified entity that makes an annual election to pay an additional elective tax authorized by the SBRA, a tax credit for the entity-paid elective tax in an amount equal to 9.3% of the qualified taxpayer’s pro rata or distributive share, as applicable, of the qualified net income subject to the election made by an electing qualified entity for taxable years beginning on or after January 1, 2021, and before January 1, 2026.
- Sections 9, 17, and 26: Under the PITL and the CTL allows a qualified taxpayer that employs an eligible individual to receive a tax credit for hiring homeless individuals. Also refer to AB 176.
- Sections 10 and 18: Under the PITL and the CTL, modified the credit for agriculture product donations to food banks by extending the operative date by 5 years. It also extended FTB’s existing reporting requirement for this credit another 5 years.
- Sections 13, 19, and 25: Under the PITL and the CTL, increased the amount of the California Competes Tax Credit allocated for the 2021-22 fiscal year by $110 million.
- Section 14: Upon FTB request, requires the California Department of Health Care Services to share data with the FTB for specified purposes related to the eligibility for the California Earned Income Tax Credit.
AB 176 (Chapter 256, Statutes of 2021), Budget Trailer Bill – Clean-up Language
- Sections 1, 18, 19, 20, and 21: Under the Administration of Franchise and Income Tax Laws (AFITL), renumbered the code sections related to FTB collections of recaptured California Competes Grants (CCGs) and made various technical changes to update the new numbers where applicable.
- Sections 4, 9, and 17: Under the GC, allows for the recapture of grants, under Part 10.2 of the RTC, should the CalOSBA determine that the California Microbusiness COVID-19 grantee and the qualified California Venues grantee has failed to meet the grant requirements, as defined. FTB’s role would to collect any recaptured amounts.
- Sections 12 and 16: Limited FTB debt collections relating to Vehicle Registration Collections and Court-ordered debt to specified amounts for orders or levies issued on or after January 1, 2022. Section 16 specifically excluded restitution orders and restitution fines from these thresholds.
- Sections 13 and 22: Under the PITL and the CTL, clarified that an eligible homeless individual’s certification would be issued in form and manner determined by the FTB and made other technical corrections.
- Sections 14 and 23: Under the PITL and the CTL, added “ethnicity” to the diversity work plan and goals for the motion picture credit and changed the responsibility of the adoption of regulations from the Governor’s Office of Business and Economic Development (GO-Biz) to the California Film Commission (CFC).
- Sections 15 and 25: Under the PITL and the CTL, for taxable years beginning on or after September 1, 2020, and before January 1, 2030, added an exclusion from gross income of a grant allocation under the California Venues Grant Program.
- Section 24: Under the CTL, allowed for taxable years beginning on or after September 1, 2020, and before January 1, 2023, an exemption from gross income for grant allocations received from the California Microbusiness COVID-19 Relief Program that is administered by the CalOSBA, as defined. A similar exclusion was previously provided under the PITL.
- Section 30: Replaced FTB with GO-Biz for purposes of Section 41 reporting, changed the reporting of credits to the 2021-2022 fiscal year and modified the report elements.
AB 177 (Chapter 257, Statutes of 2021), FTB Collections: Restitution Fines and Restitution Orders
- Under the Penal Code, made technical changes and repeals and added sections related to collections of restitution fines and restitution orders as it relates to prisoners released from custody of the Department of Corrections and Rehabilitation or a county jail facility.
AB 340 (Chapter 557, Statutes of 2021), Conformity to Expanded Definition of Higher Education Expenses
- Partially conformed the existing Golden State Scholarshare Trust for college savings to the federal qualified tuition program (QTP) definition of qualified higher education expenses by adding apprenticeship program expenses, and principal and interest of qualified education loan expenses.
AB 466 (Chapter 92, Statutes of 2021), State Controller's Office (SCO) Unclaimed Property Data Sharing
- Under the RTC, allowed the FTB to provide additional information from Business Entity returns to SCO related to unclaimed property.
AB 447 (Chapter 344, Statutes of 2021), Low Income Housing Tax Credit
- Under the PITL and the CTL, expanded the eligibility criteria for buildings that are at risk of conversion for the allocation of Low Income Housing Tax Credit by the California Tax Credit Allocation Committee. This act also expanded allocations for eligible projects of new buildings to include retrofitting and repurposing of existing nonresidential structures.
AB 742 (Chapter 96, Statutes of 2021), School Supplies for Homeless Children Voluntary Tax Contribution Fund
- Under the AFITL, modified provisions of the School Supplies for Homeless Children Fund by renaming the fund as the School Supplies for Homeless Children Voluntary Tax Contribution Fund and extending the provisions of the fund to January 1, 2029, unless the specified minimum contribution amount is not met and specifying that amounts transferred to the fund would be continuously appropriated.
AB 938 (Chapter 124, Statutes of 2021), Code Maintenance
- Made numerous technical, nonsubstantive changes as a matter of code maintenance to various California codes, including to the RTC.
AB 1219 (Chapter 419, Statutes of 2021), Natural Heritage Preservation Tax Credit Act of 2000
- Under the PITL and the CTL, renewed the tax credit for qualified contributions made on or after January 1, 2021, and no later than June 30, 2026.
AB 1291 (Chapter 63, Statutes of 2021), Bagley-Keene Act Public Comment Period
- Under the GC, modified provisions of the Bagley-Keene Open Meeting Act to require a state body to allow at least twice the allotted time for public comment to a member of the public who utilizes translating technology; and made other nonsubstantive technical changes.
AB 1506 (Chapter 328, Statutes of 2021), Worker Status: Employees and Independent Contractors – Newspaper Distributors and Carriers
- Extended the worker classification exemption for newspaper distributors working under a contract and newspaper carriers to January 1, 2025, and requires newspaper publishers and distributors to report information about their workforce to the Labor and Workforce Development Agency (LWDA).
AB 1561 (Chapter 422, Statutes of 2021), Worker Classification: Employees and Independent Contractors
- Extended the worker classification exemption for licensed manicurists to January 1, 2025.
- Extended the exemption from the license requirement available to construction trucking service subcontractors for work performed before January 1, 2025, in order to qualify for the exemption from the “ABC” test in Dynamex that has been codified by statute.
- Removed the minimum hourly wage requirement, added a definition, and made several technical changes to the existing Labor Code relating to the exemption from the “ABC” test for the relationship between a data aggregator and the individual providing feedback.
- Added additional services provided by persons in the insurance and financial service industries to the exemption from the “ABC” test in Dynamex that has been codified by statute.
AB 1582 (Chapter 66, Statutes of 2021), Real Estate Withholding/Internal Revenue Code (IRC) section 1031 Deferred Like-kind Exchange/Failure to Withhold by Qualified Intermediaries (QI)/ Cash-Poor Exchange Taxpayers’ Bill Of Rights Annual Report to the Legislature/Change Due Date
- Limited a QIs 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.
- Changed the Taxpayers’ Bill of Rights Annual Report statutory due date from December 1st to January 15th.
SB 87 (Chapter 7, Statutes of 2021), Collection of Small Business COVID-19 Relief Grants
- Established the Small Business COVID-19 Relief Grant Program under the Office of Small Business Advocate (“CalOSBA").
- Exempted grants from gross income under the PITL and CTL and provide authority to the FTB to collect any grants identified for recapture by the CalOSBA.
SB 88 (Chapter 8, Statutes of 2021), Budget Trailer Bill - Golden State Stimulus Payment/Golden State Grant Program
- Under the Welfare and Institutions Code (WIC), authorized the Controller to make a one-time GSS tax refund payment in the applicable amount to each qualified recipient, as defined. Individuals may qualify for this payment if they receive the California Earned Income Tax Credit (CalEITC) or file with an Individual Taxpayer Identification Number (ITIN). The one-time payment is either $600 or $1,200.
- Under the WIC, authorized the State Department of Social Services (DSS) to make one-time Golden State Grant payments to grant recipients. Also refer to AB 88.
SB 91 (Chapter 2, Statutes of 2021), COVID-19 Relief – Tenancy: Rental Assistance
- Provided a gross income exclusion for certain rental assistance received under the State Rental Assistance Program and the federal Consolidated Appropriations Act, 2021 (Public Law 116-260).
SB 139 (Chapter 71, Statutes of 2021), Golden State Stimulus II: Golden State Stimulus
- Under the WIC, authorized the Controller to make a one-time GSS II payment in a specified amount to each qualified recipient, as defined. Individuals may qualify for this payment based on certain criteria, such as filing a California individual tax return and adjusted gross income requirements. Additionally, this bill modified the filing time requirement and federal individual taxpayer identification number (ITIN) requirements under the one-time GSS I payment provisions.
SB 144 (Chapter 114, Statutes of 2021), California Motion Picture Credit/Increase Allocation for Recurring TV Series
- Under the PITL and the CTL, increased the funding for the existing motion picture and film tax credit for the 2021-2022 and 2022-2023 fiscal years exclusively for new television series that relocate to California and for recurring television series. In addition, this act allowed a new tax credit in an amount equal to 20 percent (20%) or 25 percent (25%), or as modified by up to 4 percent (4%), of qualified expenditures paid or incurred by a qualified motion picture (QMP) produced at a certified studio construction project (certified project) in the state. This credit would be certified and allocated by the CFC.
- Added new qualifications for the credit and provisions relating to the CFC application process. This bill also specifies new rules relating to the CFC's allocation of the credits and modifies the reporting requirements for the Legislative Analyst’s Office (LAO) and the CFC to provide annual reporting related to diversity to the Legislature.
SB 151 (Chapter 74, Statutes of 2021), Budget Trailer Bill – Collection and Income Exclusion
- Required, upon appropriation by the Legislature, the GO-Biz to create the California Competes Grant (CCG) Program to provide grants to qualified grantees, as defined, that meet specified criteria relating to the creation of jobs or investments in the state.
- Provided that, in the event of a recapture, GO-Biz is required to provide the FTB a list of qualified grantees and their recaptured CCG amount. This provision of the bill under the AFITL, requires the FTB to collect any recaptured CCG amounts.
- Under the GC, created the California Microbusiness COVID-19 Relief Grant Program within the CalOSBA. Additionally, provided that under the PITL for taxable years beginning on or after January 1, 2020, and before January 1, 2023, gross income does not include grant allocations received by a taxpayers pursuant to the program established by the bill.
SB 347 (Chapter 104, Statutes of 2021), California Community and Neighborhood Tree Voluntary Tax Contribution Fund
- This act, under the AFITL, created the California Community and Neighborhood Tree Voluntary Tax Contribution Fund, and allowed a taxpayer to make a voluntary contribution to the California Community and Neighborhood Tree Voluntary Tax Contribution Fund on their state personal income tax return.
SB 796 (Chapter 435, Statutes of 2021), Gross Income Exclusion for Sale or Transfer of Bruce’s Beach
- Under the PITL and the CTL, allowed for a gross income exclusion for a one-time sale, transfer, or encumbrance of a portion of land within Manhattan State Beach, known as “Peck’s Manhattan Beach Tract Block 5” and commonly referred to as “Bruce’s Beach.”