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Changes to California Real Estate Withholding Laws

PURPOSE OF BULLETIN

Advising staff of withholding provisions beginning January 1, 2009.

BACKGROUND

Passage of AB 3078 amended R&TC §18662 and 18668 as follows:

Withholding Rates: Non-California partnerships are subject to withholding requirements on a sale of California real property at a rate of 3⅓% of sales price or 9.3% of gain. The alternative withholding rates for the sale of California real property increased to 10.8% for S corporations and 12.8% for financial S corporations.

Installment Sales: Buyers are required to withhold on the principal portion of each installment payment if the sale of California real property is structured as an installment sale.

Withholding amounts will be collected from a withholding agent if they fail to withhold or remit to us the withheld amounts.

FORMS

Changes were made to these forms:

  • Form 593-I, Real Estate Withholding Installment Sale Acknowledgement
  • Form 593-E, Real Estate Withholding – Computation of Estimated Gain or Loss
  • Form 593, Real Estate Withholding Tax Statement

ONLINE CALCULATOR

The online calculator computes the estimated gain or loss on the sale of California real property and the alternative withholding amount. The following maximum tax rates can be selected:

  • Individuals—9.3%
  • Non-California partnerships—9.3% (new rate)
  • Corporations—8.84%
  • Bank and financial corporations—10.84%
  • S corporations—10.8% (new rate)
  • Financial S corporations—12.8% (new rate)

The online calculator also computes the withholding amount based on 3⅓% of the total sales price for comparison.

TAXPAYER INQUIRIES

Taxpayers can visit our website, ftb.ca.gov, beginning January 1, 2009, and search for “real estate withholding.” They may also call us at 888.792.4900 or 916.845.4900 (not toll-free), Monday through Friday, 8:00am – 5:00pm.

 

Back to Public Service Bulletins - 2009