MyFTB accountTax News January 2025
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Overview
Tax News is a monthly online publication to inform tax professionals, taxpayers, and business owners about state income tax laws; Franchise Tax Board (FTB) regulations, policies, and procedures; and events that may impact or provide valuable information for the tax professional community.
We also periodically release Tax News Flashes to quickly notify subscribers of urgent time-sensitive information.
In this edition January 2025
- Senate Bill (SB) 167
- New Employment Credit - Updated Designated Geographic Area
- Filing a Power of Attorney or Tax Information Authorization with a New California Corporation Number
- California Competes Tax Credit (CCTC)
- Assistance for Suspended or Forfeited Business Entities
- Conformity Stakeholder Meeting Update
- Summary of Annual Legislative Proposal Stakeholder Meeting
- Internal Revenue Service (IRS) Updates and More
- Ask the Advocate – Happy New Year!
Senate Bill (SB) 167
For contributions made on or after January 1, 2024, Sections 21, 22, 29, 30, and 35 of SB 167 (Ch. 34, Stats. 2024), under the Personal Income Tax Law, the Corporate Tax Law, and the Administration of Franchise and Income Tax Law, conform, with modifications, to the federal charitable contribution deduction rules for qualified conservation easement contributions made by partnerships and other pass-through entities.
SB 167 conforms to the imposition of a 40 percent Accuracy Related Penalty on the underpayment resulting from the disallowed deduction d, provides that the extended statute of limitations for assessments applicable to abusive tax avoidance transactions applies to a disallowed qualified conservation contribution deduction, and conforms to reporting requirements related to certified historic structures.
For more information about SB 167 review provision 6 of SB 167 Bill Analysis and the SB 167 Bill Text.
New Employment Credit - Updated Designated Geographic Area
The New Employment Credit (NEC) is a California tax credit intended to encourage hiring in specific areas of the state. To claim the credit, businesses must have employees working in an eligible area, known as a Designated Geographic Area (DGA). The DGA includes census tracts in the state with higher unemployment and poverty rates and excludes tracts with lower rates. The Department of Finance (DOF) identified the census tracts when the NEC began in 2014.
Recently, the DOF re-designated the census tracts which altered the DGA. Some census tracts previously eligible are no longer in the DGA. Other census tracts previously not within the DGA have been added and are now eligible. This new designation will be effective January 1, 2025.
Taxpayers planning to claim the credit should check the DGA map tool to determine if the area where their employees are working is within the newly defined DGA. The map enables users to view the new DGA, as well as the previous DGA. Users can enter an address to determine if it's within the DGA during a particular time period.
Please note DGA requirements do not apply to certain taxpayers known as Semiconductor, Electric Airplane, Lithium Production, and Lithium Battery Manufacturing (SEAL) employers.
For questions regarding the NEC, including other requirements for the credit, review our NEC webpage.
Email NEC questions to GEDI@ftb.ca.gov.
Filing a Power of Attorney or Tax Information Authorization with a New California Corporation Number
In January 2025, the California Business Connect project of the Secretary of State (SOS) will implement several changes. One of these changes may impact the power of attorney and tax information authorization (TIA) submission process for corporation taxpayers. Corporations that register with the SOS prior to January 2025, are issued a 7-digit corporation identification (ID) number. Beginning January 2025, the SOS will issue registering corporations a 12-digit corporation number beginning with a letter "B" followed by 11 numeric digits.
The 2023 and prior versions of the FTB Power of Attorney (POA) and TIA forms allow only 7-digits to be entered in the corporation ID number field. If a 12-digit corporation ID is entered into one of these older forms, then the ID number will be cut off and may result in a rejection of the form.
We updated the 2024 version of the POA and TIA forms to allow for the expanded corporation ID numbers. We continue to encourage taxpayers and tax professionals to always use the latest version of these forms.
FTB 3520 PIT Individual or Fiduciary Power of Attorney Declaration
FTB 3520 BE Business Entity or Group Nonresident Power of Attorney Declaration
California Competes Tax Credit (CCTC)
For the second application period of Fiscal Year 2024/2025, the Governor's Office of Business and Economic Development (GO-Biz) will accept applications for the California Competes Tax Credit beginning January 6, 2025, through January 27, 2025.
This application period has $215 million available for allocation. Applications for the credit will be accepted at Calcompetes.ca.gov.
In addition, GO-Biz is hosting online webinars on how to apply for the credit on the following dates.
- January 8, 2025, from 9:30 AM – 10:30 AM PST
- January 16, 2025, from 3:00 PM – 4:00 PM PST
For more information, go to California Competes Tax Credit.
Assistance for Suspended or Forfeited Business Entities
Last month, we shared the resumption of the business entity pre-suspension and suspension processes. FTB delayed the business entity pre-suspension and suspension processes from February 1, 2022, through November 14, 2024. The business entity pre-suspension and suspension processes resumed starting with corporations on September 1, 2023, and limited liability companies on November 15, 2024.
Information is available online with the steps needed to revive a suspended or forfeited business entity. FTB suspended, or FTB forfeited, generally means the business entity was suspended or forfeited by FTB for failure to meet its tax requirements. For example, if there was a failure to:
- File a return
- Pay
- Taxes
- Penalties
- Fees
- Interest
If a business entity is suspended or forfeited, the Secretary of State (SOS) cannot accept termination documents. The business entity must complete all the following requirements before submitting termination documents to SOS:
- Pay all outstanding balances due.
- File any delinquent tax returns.
- File a revivor request form.
To revive an entity, use the Online Revivor Assistance Request Form.
For more information, go to My Business is Suspended.
For further assistance, contact the Revivor Unit at 916-845-7033.
Conformity Stakeholder Meeting Update
On Tuesday, December 3, 2024, FTB hosted the Conformity Stakeholder Meeting with guest speaker, Colin Grinnell, Chief Consultant with the Senate Revenue and Taxation (SRT) Committee.
Mr. Grinnell presented the Date Change Conformity Project, which will update the Revenue and Taxation Code to conform to specified provisions of the Internal Revenue Code (IRC) with a proposed date of January 1, 2025. The project identified all IRC changes since the last conformity date of January 1, 2015 (AB 154, Ch. 359, Stats. 2015). SRT staff made tentative decisions on whether to conform to those changes and is requesting stakeholder input to build consensus needed to advance any date change measure in the Legislature.
The documentation with the tentative SRT staff decisions is posted on the SRT website at Tax Conformity. Feedback on conformity items can be sent to colin.grinnell@sen.ca.gov and haley.summers@sen.ca.gov using the subject line of "Date Change Conformity Feedback" preferably by January 15, 2025.
We appreciate attendees for taking the time to participate and sharing their thoughts.
Summary of Annual Legislative Proposal Stakeholder Meeting
On Tuesday, December 3, 2024, FTB hosted its annual Legislative Proposal (LP) Stakeholder Meeting to gain input from the public. We appreciate attendee participation and feedback.
Federal Direct File Notification Legislative Proposal
Summary
Revenue and Taxation Code section 19853 requires California employers to notify their employees of possible eligibility for the Voluntary Income Tax Assistance (VITA) program, CalFile, and state and federal antipoverty tax credits, including the federal Earned Income Tax Credit (EITC) and CalEITC.
Beginning with the 2025 tax filing season, the Internal Revenue Services' Direct File program will be a permanent, free tax filing option. Currently, the state's requirement that employers notify employees about various tax programs does not include the federal Direct File program.
This LP would require employers to notify their employees about the federal Direct File program.
Next Steps for the Legislative Proposal
The three-member FTB Board approved the LP on December 10, 2024. Next, we will begin to look for a legislative author for the approved proposal.
Internal Revenue Service (IRS) Updates and More
We partnered with the IRS to provide monthly IRS articles to assist our tax professional and small business communities. We are excited to share this information; however, questions about the content, should be directed to the IRS.
IR-2024-310, Dec. 12, 2024 — The IRS provided the regular quarterly update to the Strategic Operating Plan, outlining key milestones in criminal investigations, improvements to taxpayer services and advancements in digital modernization that have transformed agency operations while protecting billions of taxpayer dollars.
IRS urges many retirees to make required withdrawals from retirement plans by year-end deadline
IR-2024-309, Dec. 10, 2024 — The IRS reminded those aged 73 and older of the deadline to take required minimum distributions from individual retirement arrangements (IRAs) and other retirement plans, and highlighted updates introduced by the SECURE 2.0 Act.
IR-2024-307, Dec. 5, 2024 — The IRS Criminal Investigation (IRS-CI) released its Fiscal Year 2024 (FY24) Annual Report that details significant cases involving crimes ranging from tax fraud to cybercrime, enhanced domestic and foreign partnerships and investigative statistics from FY24 that took place from Oct. 1, 2023, to Sept. 30, 2024.
IR-2024-305, Dec. 4, 2024 — The IRS is accepting applications for the Electronic Tax Administration Advisory Committee (ETAAC) through Jan. 31, 2025.
IR-2024-304, Dec. 4, 2024 — The IRS warned taxpayers to avoid promoters of fraudulent tax schemes involving donations of ownership interests in closely held businesses, sometimes marketed as “Charitable LLCs.”
IR-2024-301, Dec. 2, 2024 — The IRS announced the award of $53 million in Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grants to organizations that provide free federal tax return preparation.
IR-2024-299, Nov. 26, 2024 — The IRS issued Notice 2024-85 providing transition relief for third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces, regarding transactions during calendar years 2024 and 2025.
IRS encourages taxpayers to prepare for 2025 filing season with online tools and key reminders
IR-2024-297, Nov. 22, 2024 — As the nation's tax season approaches, the IRS is reminding people of simple steps they can take now to prepare to file their 2024 federal tax returns.
IR-2024-294, Nov. 21, 2024 — The IRS is making it easier for taxpayers to protect their information and avoid refund delays by accepting certain e-filed tax returns that claim dependents who have already been claimed on another taxpayer’s return.
IRS Advisory Council issues 2024 annual report
IR-2024-293, Nov. 20, 2024 — The IRS Advisory Council (IRSAC) issued its annual public report, including recommendations to the IRS on new and continuing issues in tax administration.
IR-2024-292, Nov. 19, 2024 — The Department of the Treasury and the IRS released final regulations that will help certain entities that co-own clean energy projects access clean energy tax credits through elective pay (also commonly referred to as direct pay).
IR-2024-291, Nov. 18, 2024 — As part of International Fraud Awareness Week, the IRS reminds taxpayers how to report tax-related fraud in their community to protect personal and financial information from scam artists and tax schemes.
Interest rates decrease for the first quarter of 2025
IR-2024-290, Nov. 18, 2024 — The IRS announced that interest rates will decrease for the calendar quarter beginning Jan. 1, 2025.
Give more, tax-free: Eligible IRA owners can donate up to $105,000 to charity in 2024
IR-2024-289, Nov. 14, 2024 — The IRS reminds individual retirement arrangement (IRA) owners age 70½ and older that they can make up to $105,000 in tax-free charitable donations during 2024 through qualified charitable distributions. That’s up from $100,000 in past years.
Ask the Advocate – Happy New Year!
Angela Jones, Taxpayers' Rights Advocate
I hope everyone had a joyous and festive holiday! On December 10, 2024, during the Franchise Tax Board (FTB) board meeting, FTB held one of their most important meetings of the year, the Taxpayers’ Bill of Rights (TBOR) hearing. I thank FTB for providing this forum each year to allow taxpayers and tax professionals an opportunity to present suggested changes to California's tax laws and ways to improve FTB services.
If you were unable to attend, or follow the meeting live online, you may access an archived video and other public meetings at Meetings.
Highlights of the board meeting include:
- Impactful presentations on the crisis of income inequality, unworked assets, and the safety net.
- Experts on the front lines fighting to decrease income inequality and increase opportunity for all Californians.
- State Controller, Malia M. Cohen, reminded attendees December 10 was the 75th anniversary of Human Rights Day.
TBOR hearing tax community concerns include:
- Regulations and other guidance
- Notice releases
- Disaster postponements
I thank previous TBOR hearing participants who raised issues to help improve FTB’s processes and services. As a result of past years’ TBOR hearing suggestions, FTB published FTB 1024: Penalty reference chart.
I will provide written replies to this year’s TBOR submissions by February 3, 2025. Responses will be posted to your taxpayer rights along with prior years’ responses currently available.
I appreciate your continued support throughout 2024. Rest assured, my team and I are here to help. We look forward to a new year and the opportunity to provide our assistance when needed.