Archive for California

California Digital Financial Assets Law

California Digital Financial Assets Law

On October 13, 2023, Governor Newsom signed into law Assembly Bill 39 and Senate Bill 401, together called the Digital Financial Assets Law (DFAL).

The DFAL provides the DFPI with rulemaking authority and an operative date of July 1, 2025 to ensure the regulatory framework is thoughtfully tailored to provide investor and consumer protections and address the crypto asset industry.

Invitation for Comments by January 12, 2024

The DFPI seeks public comments on topics related to the DFAL license application, licensure requirements, and stablecoin approval. The Commissioner invites interested parties to submit comments by January 12, 2024.

Prior to the comment deadline, the DFPI will host a virtual informal listening session with stakeholders to discuss feedback on this informal invitation for comments on January 8, 2024. Interested parties should email regulations@dfpi.ca.gov with the subject line “DFAL Listening Session RSVP” for an invitation to attend. The DFPI anticipates invitations for comment on additional topics in the future.

Licensing

Beginning July 1, 2025, companies must be licensed by the DFPI or have applied for a license with the DFPI to operate in California. The DFAL prohibits an entity from engaging in digital financial asset business activity unless the entity holds a license from the DFPI. Digital financial business activity includes activities such as exchanging, storing, or transferring a digital financial asset, such as a crypto asset. The new law promotes consumer and investor protection by creating a robust regulatory framework, including supervision and enforcement authority, for certain crypto activities.

Prospective Licensees

If you are a prospective DFAL licensee, or have a question about how the law affects your business, join our email list to receive future updates or email crypto@dfpi.ca.gov.

Kiosks

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Written by | Posted in California • Digital Asset Reporting

More On California Middle Class Tax Refund

More On California Middle Class Tax Refund

Here is my 3rd post on the payments California issued to probably over 90% of Californians per AB 192 (2022) (1/29/23 + 7/10/22). And others have blogged on it as well. On February 3, Procedurally Taxing had a post from Bob Kammen asking why the IRS hasn’t issued guidance. Bob also makes a comment about the high income range of Californians getting AB 192 “relief” payments, with what I think is sarcasm – that $250,000 of income for single or $500,000 if married is “middle class.”

My first post last July raised the issue that some very low income individuals without a filing obligation get no payment if they had not filed a 2020 return by 10/15/21 as required by AB 192 which was enacted in June 2022!

Why would the state provide “relief” to people with income high enough to not need relief while leaving out those who do?

The IRS stated last week that it will try to get guidance out on the taxability of various state payments issued recently. If they can address the California so-called Middle Class Tax Refund (a term used by the FTB), as AB 192 uses the term Better for Families Tax Refund (although AB 192 includes a specific statement that the payments are not income tax refunds). The IRS can clarify to ensure consistent treatment by recipients, although only those who received $600 or more received a 1099-MISC from the FTB.

Some additional observations from me:

AB 192 Has Some Oddities, Such As:

1. It adds section 8161(d) to the Welfare & Institutions Code to say: “The payment authorized by this section shall not be a refund of overpayment of income taxes”. This is likely why FTB is issuing 1099-MISC for payments issued in excess of $600 rather than 1099-G for income tax refunds of $10 or more.
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Written by | Posted in California • Middle Class Tax Refund

Update To The California Partial Manufacturing Sales And Use Tax Exemption

Update To The California Partial Manufacturing Sales And Use Tax Exemption

Since 2014, qualified companies have been eligible for a partial exemption from sales tax for purchases of machinery and equipment used in qualified manufacturing and research and development activities. California was late to the table, as most states have long had exemptions for such purchases. The exemption has also been unique in that it has been a partial exemption, and allowable only on the first $200 million of qualified purchases.

Now, Assembly Bill 1951 would expand the exemption to a full exemption (rather than partial). According to the legislative language, “This bill would on and after January 1, 2023, and before January 1, 2028 make this a full exemption for purchases not exceeding $200,000,000. The bill would repeal these provisions on January 1, 2028 and would revert to the above-described partial exemption on that date.”

So, why make these changes now? As the bill points out:

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Written by | Posted in California • Sales And Use Tax • Sales And Use Tax Manufacturing Exemption

Beer Brewing And Sales Tax In California

Beer Brewing And Sales Tax In California

Craft brewing is a highly competitive industry – California leads the U.S. with almost a thousand craft beer breweries; New York, Pennsylvania, Colorado, Washington and Michigan have about 400 craft brewers per state – that’s a lot of competition. So, with all that competition, craft brewers need to look for edges to stay in business by increasing profits and reducing operating costs. Craft brewers can minimize their operating costs by reducing their sales and use tax burden, or “beer-den.” In this blog we are going to focus on the state with the most craft beer brewers – like the color of a crisp lager we will direct this blog to the Golden State – California.

Reducing Your Sales and Use Tax “Beer-den”

The business model for all craft brewers includes two departments – sales and production. Beer sales are either at retail or for resale, and the production happens behind the wall in the brewery. Let’s start with sales:

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Written by | Posted in California • Craft Brewing • Sales And Use Tax Manufacturing Exemption

California: Pass -Through Entity Elective Tax

California: Pass Through Entity Elective Tax

Governor Newsom signed California Assembly Bill 150 into law on July 16, 2021. This new law allows certain pass-through entities to annually elect to pay an elective tax in the amount of 9.3% of the pro rata share or distributive share of the entity’s partners, shareholders, or members. The partners, shareholders and members then receive a tax credit equal to that amount. The law is effective for taxable years beginning on or after January 1, 2021, and before January 1, 2026.

The pass-through entities that can elect to pay this tax are S corporations, general partnerships, limited liability companies taxed as partnerships, limited liability partnerships or limited partnerships. To qualify to make this election, the pass-through entity’s owners must consist solely of individuals, fiduciaries, trusts, estates or entities taxable as corporations. The pass-through entity cannot have a partnership as an owner, cannot be a publicly traded partnership, and the pass-through entity cannot be permitted or required to be in a combined reporting group.

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Written by | Posted in California • Pass Through Entity Elective Tax

Tax Manager – Investments (San Francisco, CA)

Tax Manager - Research And Planning (San Francisco, CA)

The top driver that keeps tax professionals in an organization longer is how they are treated by management. Our client has an extraordinary retention rate due to the fact they treat their tax team with a high degree of respect and support you in ways you rarely experience in companies.

TaxConnections has been retained by an investment group to locate a Tax Manager in San Francisco, CA. It is an opportunity of a lifetime for a tax professional with the requisite skills.

The Tax Manger will be responsible for assisting senior tax management with tax research and planning and all aspects of the tax compliance and forecasting for a very significant investment partnership and the related investment management entity. Individual must have a solid understanding of current tax laws including knowledge of investment partnership structures. Researching and communicating the tax consequences of current and proposed investments will be a part of the responsibilities of the successful candidate.

In addition, the position will require both the preparation and review of highly detailed complex Federal, California and multi-state income tax returns, foreign investment reporting implications, preparation of tax forecasts and researching complex tax issues.
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Written by | Posted in California • San Francisco • Tax Planning

How To Navigate The California Manufacturing Partial Sales And Use Tax Exemption

MONIKA MILES

The California Manufacturing Partial Sales and Use Tax Exemption, which went into effect July 1, 2014, allows certain manufacturers and biotech companies to exempt a portion of sales and use tax on purchases of qualified equipment used in manufacturing and R&D (research and development). While it’s been around for a few years, it’s still a viable benefit for companies purchasing equipment.

How To Take Advantage Of The California Manufacturing Partial Sales And Use Tax Exemption
Qualifications

To qualify, you need to meet the following criteria:

  • Be engaged in certain types of business primarily engaged (50 percent or more of the time) in those lines of business described in the NAICS Codes for:
    • Manufacturing (311100-339999)
    • R&D in biotechnology (541711)
    • R&D in the physical, engineering and life sciences (541712)
    • Generation and production, or storage and distribution of electric power (22111-221118, 221122)

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Written by | Posted in California • Manufacturing Sales And Use Tax Exemption

Sleeping Giants Awaken: California, Texas And Wayfair

Monika Miles - What Is Nexus.

In the United States, the sales tax landscape has changed drastically due to the recent U.S. Supreme Court Case of South Dakota v. Wayfair (June 2018). Following this landmark decision which made it easier for companies to create nexus in states, many states have enacted legislation which establishes guidelines, thresholds for economic nexus. In a previous blog, we talked about this epic decision.

What is Economic Nexus?

In the past, companies needed to have physical presence, or “boots on the ground,” in a state in order to have nexus (or taxable presence) in a state. This meant that a company needed to have offices, inventory, employees, or contractors in a state for a certain amount of time. Companies now don’t necessarily need to have physical presence in a state for them to create nexus; they now can have nexus in a state by virtue of economic nexus. Economic nexus essentially means that companies with sales of a certain dollar amount or a certain number of transactions with a state are required to register, collect and remit sales tax. Some states require both criterion. Additionally, note that some states base their economic threshold on taxable sales, while other states mention gross sales.

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Written by | Posted in California • Texas Tax • Wayfair Decision

What You Need To Know About California’s SB 993

Sales tax is a major revenue source for many states, including California, which is why its legislature has been looking for additional ways to collect fees under the ‘sales tax’ umbrella.

For years, State Senator Bob Hertzberg has been trying to extend the state’s reach by imposing sales tax on services. Although 2015’s Senate Bill 8 didn’t pass, there’s another bill recently heard in the Senate Governance and Finance Committee: Senate Bill 993 (SB 993).

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Written by | Posted in California • Sales Tax • Senate Bill 993 • Tax Burden

California’s Border Wall And Participation With State Tax Credits

The Federal Government’s proposed border wall with Mexico has been getting a lot of attention lately, particularly since the president recently visited the Golden State. One California legislator has an interesting take on the ongoing disagreement between California and the White House. Assemblyman Phil Ting, of CA, recently announced his bill, A.B. 2355, as a way to incentivize companies not to participate in the building of the wall.

The Logistics

As recently reported by Bloomberg BNA, companies that participate in the building of the Federal government’s proposed wall with Mexico, on the California border, would not be able to participate in several state tax credits. Read More

Written by | Posted in California • State Tax

California College Access Tax Credit Reminders

California’s College Access Tax Credit Program started in 2014. For individuals, it allows a large credit for donations made to this fund. Before claiming any credit though, the donor must first apply for the credit with the State Treasurer. This is because a fixed amount of credits is available so people claim it on a first-come-first-serve basis. In the first few years, little was claimed relative to the amount allocated.

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Written by | Posted in California • State Tax • State Treasury • Tax Credit • United States