On Tuesday, June 27, 2017, California Governor Jerry Brown signed into law the Taxpayer Transparency and Fairness Act of 2017. Sweeping changes to the administration of taxes and fees formerly administered by the Board of Equalization take effect on July 1, 2017. A new Office of Tax Appeals will begin hearing tax appeals of California income tax, sales tax, use tax, hazardous waste fees, and other taxes and fees effective January 1, 2018. The rules and regulations that will govern the two newly created state agencies remain a work in progress. For more information, click here.
The Board of Equalization is attempting to respond to the California Legislature's mandate to turn over most of its authority to two newly created agencies, the California Department of Tax and Fee Administration, and a Department of Administrative Tax Appeals. It's obvious that the short time frame and political climate have the Board of Equalization members and management scrambling to meet the July 1, 2017 deadline for most of the changes to occur. The Governor is expected to sign the Taxpayer Transparency and Fairness Act of 2017 into law any day now.
For employers, the new year brings many new laws regarding worker benefits, hiring practices, and workplace protections. In addition to ensuring workers are properly classified, employers should also be aware of the increase to California's Minimum Wage, the identification of restroom facilities, smoking prohibition, and rights to refuse to travel.
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.
On November 2, 2015, the Bipartisan Budget Act of 2015 was signed into law, the text of which can be found here. Among the provisions related to tax compliance, the Act imposes significant changes to the manner in which the IRS will determine audit adjustments related to partnerships.
The IRS now recognizes same-sex marriage for income tax purposes as well as estate, gift, generation-skipping and employment tax, following the recent Supreme Court holding that state bans on same-sex marriage are unconstitutional, Obergefell v. Hodges, 576 US ___ (2015). The terms "husband" and "wife" will now be defined as an individual lawfully married to another individual. The term "husband and wife" will mean two individuals lawfully married to each other. The new definitions will not apply to domestic partnerships, civil unions or other regulations in which the couple deliberately choose to remain unmarried. If a couple marries in a forien jurisdiciton, so long as the marriage is recognized in at least one U.S. state, possession or territory, then the marriage will be recognized for federal tax purposes as well.
The Law Office of Williams & Associates, PC has been informed that the California Employment Development Department has recently won at least two administrative decisions against Uber in appeals of Obstructed Claims for Unemployment Insurance Benefits, before the California Unemployment Insurance Appeals Board. In plain English, this means that the state of California determined that Uber drivers are misclassified as independent contractors, that Uber should have paid state employment taxes and withholding on the payments rendered to those drivers.
On Friday, October 2, 2015, the Internal Revenue Service ("IRS") announced the exchange of financial account information with certain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA, the Foreign Account Tax Compliance Act.
Effective April 13, 2015, the Franchise Tax Board ("FTB") will enforce an updated privacy and security policy. It is necessary for the FTB to lawfully collect relevant personal information in order to enforce and administer the California Revenue and Taxation Code and the FTB is committed to protecting taxpayers' privacy and security. Among other changes, the new policy incorporates the Information Practices Act (California Civil Code Sections 1798-1798.78) and adopts Information Privacy Principals for Individuals. To see a version of the new policy with the additions highlighted, please click here.
For decedents dying in 2015, the applicable exclusion amount (or the value of assets a decedent may own without incurring an estate tax liability) is $5,430,000.