If Congressman Jim Sensenbrenner (R-WI) and House Judiciary Chairman Bob Goolatte (R-VA) get their way, it will. On June 12, 2016, Sensenbrenner and Goolatte introduced the "No Regulation Without Representation Act of 2017" which would expand the "physical presence" requirement of a similar 2016 House Bill (H.R. 5893) to all taxes and to all regulations in general.
We experienced an original success this month, trying a new approach to a very old problem. Businesses that register with the California Office of the Secretary of State (SOS) must, among other things, file annual income tax returns with the California Franchise Tax Board (FTB) and pay either the appropriate amount of income tax due based on the business' California net income, or pay a minimum $800 franchise tax, whichever is larger. Frequently, a taxpayer may set up a business but ultimately abandon the idea before ever operating the business. Or, sometimes a business ceases to operate, but the requisite documents are not correctly filed with the SOS, leaving the FTB to believe the business is still active. Many years may pass before the would-be business owner realizes an annual $800 franchise fee has been assessed against the business, along with additional penalties and interest.
The last comprehensive revision of the Internal Revenue Code occurred in 1986, when Congress passed the Tax Reform Act of 1986. On April 26, 2017, with less than one page of writing, President Trump has summarized his Tax Reform Plan, which promises to reduce tax brackets, simplify the tax code, create millions of job, and protect a variety of deductions. Included in the plan are the following proposed changes:
Remember: The California Franchise Tax Board (FTB) changed the tax return due dates for returns filed by business entities. The original return date is now April 15 for calendar-year filers (one month later than it used to be), and the 15th day of the 4th month following the close of the taxable year for fiscal-year filers. The extended due dates remain unchanged.
The Franchise Tax Board announced it will be accepting applications for the California Competes Tax Credit from March 6 through March 27, 2017. The credit is available to businesses that relocate to California or stay and expand within the state. During Fiscal Year 2016/2017, credits totaling $243.3 million will be available for allocation during three application periods.
In December a three-judge California appellate panel affirmed a superior court ruling finding that Comcast lacked a unitary relationship with OVC, Inc., and was therefore entitled to a $3 million refund. However, the court also affirmed the trial court's holding that Comcast owed tax on a $1.5 billion termination fee.
Effective January 1, 2017, employers with 10 or more employees are required to electronically file and pay their EDD employment tax returns, wage reports, and payroll tax deposits. All other employers will be subject to this requirement effective at the start of 2018.
California Rev. and Tax Code section 23101 defines what it means to do business in California, including a sales threshold for taxpayers not physically located in the state. A taxpayer is considered to be doing business in California "if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit" where any one of a number of conditions are satisfied, including having $54,771 in real and tangible personal property (originally $50,000), $54,771 in payroll (originally $50,000), and $547,711 in sales (originally $500,000) in the state for taxable year 2016.
If your company contracts with the Department of Defense, General Services Administration, or the National Aeronautics and Space Administration (NASA), you have one more reason to be compliant with your federal tax obligations: Effective September 30, 2016, these agencies will no longer award contracts to corporations having delinquent Federal tax liabilities or a felony conviction under any law. This includes any assessed liabilities such as unpaid income tax, employment tax, payroll withholdings, and social security and Medicare taxes that are not contested or paid on time.
Next year, the due dates for various federal tax returns will change based upon the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41). California Assembly Bill 1775 was passed to conform the due dates of related state tax returns to the federal dates. In 2017, the following changes will take place: