Tax News November 2024

Tax News Flash

October 14, 2024 – Emergency tax relief website update

FTB Secure Email Process Change

One of FTB’s foundational principles is to protect the privacy and security of data entrusted to us. FTB Secure Email is one of the acceptable methods to securely receive and send encrypted messages. FTB Secure Email will soon be updated to offer users a simpler, faster, and more convenient way to receive and open encrypted emails from FTB.

Effective November 23, 2024, FTB Secure Email users will no longer be required to register with FTB or login with a password to open an encrypted email. Instead, the user will have two options to view an encrypted message received from FTB:

1. Sign in to the email account r (e.g. Gmail or Yahoo account) to view the message,
   or
2. Open the message with a one-time passcode.

Please note that any existing email messages received from, and replied to, FTB through FTB Secure Email before the November 23, 2024, update will only be retrievable through December 8, 2024. After December 8, 2024, email messages received and sent to FTB before the update will expire and will not be retrievable.

Any encrypted email messages received from, and replied to, FTB on or after the November 23, 2024, update will be subject to a 90-day retention period unless deleted earlier by the user.

Since this new process will not require registration or a password to open an encrypted email from FTB, account or registration assistance for FTB secure email will no longer be offered.

The 15-day Rule

As we approach the end of the year, it’s a good time to discuss the 15-day rule with your clients. Understanding the 15-day rule and realizing the rule only applies to short taxable years that are 15 days or less, is very important for your client to know when deciding on when to register their business entity with the California Secretary of State.

The 15-day rule states that business entities (limited partnerships, limited liability partnerships, limited liability companies, and corporations) with a taxable year of 15 days or less are not required to file a tax return or pay the $800 annual/minimum tax, if they meet both of the following:

• They did no business in California during the taxable year
• Their taxable year is 15 days or less

For example, if a business entity who files on a calendar year basis is formed on or after December 17, and does no business for the remainder of the year, then it may not have to file a tax return and/or pay the $800 annual/minimum tax for that short taxable year.

Additionally, if the business entity meets the 15-day rule and is not required to file a tax return, this short period is not considered the first taxable year. The first taxable year will be the following year.

For example, if a corporation filing on a calendar year basis incorporates on December 20, 2024, and does not conduct business from December 20, 2024, through December 31, 2024, then it meets the 15-day rule and is not required to file a 2024 tax return. The corporation's first taxable year will start on January 1, 2025.

For more information on the 15-day rule for Limited Liability Company Filing Information Publication and Guide for Corporations Starting Business in California.

New Voluntary Disclosure Program Video

Check out the new Voluntary Disclosure Program video.

The video reviews the following:

• Requirements to qualify for the program
• Guides users through the application process
• Franchise Tax Board's review process
• Explains agreement violation
• Contact information

Attend a Virtual Presentation

We are currently offering two virtual presentations. Each presentation will typically run 20-25 minutes followed by a Question-and-Answer session conducted through Microsoft Teams or Zoom.

California Nonresident Withholding

Held the second Wednesday of each month beginning at 10 AM.

We cover the following information:

• California nonresident withholding requirements
• Income subject to withholding
• Withholding agent requirements
• Withholding exceptions, waivers, and reductions
• Withholding liability and penalties
• Resources

To attend a presentation, email us at FTBCANonResidentWithholdingEducation@ftb.ca.gov.

California Real Estate Withholding

Held the third Tuesday of each month at 10 AM.

We cover the following information:

• Real estate withholding requirements
• Common mistakes made on Form 593, Real Estate Withholding Statement
• Withholding responsibilities
• Installment sales
• Trusts
• Foreign sellers
• LLCs
• Resources
• Questions

To attend a presentation, email us at FTBRealEstateEducation@ftb.ca.gov.

For the latest information, subscribe to nonresident withholding and real estate withholding.

Franchise Tax Board Legislative Stakeholder Meetings

The time for FTB's Conformity and Legislative Proposal (LP) meetings is fast approaching. This year, the meetings will be held virtually through Microsoft Teams in December on the same day.

LP Stakeholder Meeting

Each year, we identify ideas to ease tax administration for submission to our three-member Board for approval. Before we do that, we like to gain feedback on our ideas during an LP stakeholder meeting.

During the LP meeting, stakeholders will hear about the Department's LP and be given the opportunity to provide input or comments.

• Date: 12/03/2024
• Time: 11 AM to 12 PM

Conformity Stakeholder Meeting

During the conformity meeting, the panel will gather input and feedback on conformity topics.

• Date: 12/03/2024
• Time: 1 PM to 3 PM

Get More Information

Instructions for logging into the meetings will be available on FTB Meetings in mid to late November.

In the meantime, if you have questions or would like additional information, please send your inquiries to FTBLegislativeServices@ftb.ca.gov.

Taxpayers’ Bill of Rights Hearing

The Taxpayers' Bill of Rights (TBOR) Hearing will be held Tuesday, December 10, as part of our regularly scheduled quarterly board meeting. If you are interested in attending, go to Meetings for more information.

If you have a Bill of Rights issue or concern, submit your proposal details by November 26 either by email or regular mail. You may submit your issue or concern whether you plan to attend the meeting or not.

Email

Include "TBOR" in subject line of email.
FTBAdvocate@ftb.ca.gov

Mail:

Taxpayers' Rights Advocate MS-A-381
Franchise Tax Board
PO Box 157
Rancho Cordova, CA 95741-0157

The agenda will be available as we get closer to the meeting.

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, if you have questions about the content, you will need to contact the IRS directly.

IRS warns taxpayers of charity scams following recent hurricanes; provides tools to help people verify legitimate groups

IR-2024-269, Oct. 15, 2024 — In the aftermath of Hurricanes Milton and Helene, the IRS cautioned taxpayers of scammers who use fake charities to gather sensitive personal and financial data from unsuspecting donors.

IRS announces extension of time for certain applicable entities to make an elective payment election on Form 990-T

IR-2024-267, Oct. 11, 2024 — The IRS announced in Revenue Procedure 2024-39 that grants certain applicable entities that are making an elective payment election a six-month automatic extension of time to file an original or superseding Form 990-T, Exempt Organization Business Income Tax Return, with relevant schedules and forms.

IRS provides Hurricane Milton relief; May 1 deadline now applies to individuals and businesses in all of Florida; many businesses qualify for deposit penalty relief

IR-2024-263, Oct. 10, 2024 —The IRS announced continued progress on Employee Retention Credit claims, with processing underway on about 400,000 claims, representing about $10 billion of eligible claims.

IRS releases 2022 tax gap projections; voluntary compliance rate among taxpayers remains steady

IR-2024-262, Oct. 10, 2024 — The IRS released the tax gap projections for tax year 2022, a detailed analysis showing the nation's projected gross tax gap at $696 billion. This reflects the difference between projected "true" tax liability and the amount of tax that is actually paid on time.

Treasury and IRS issue proposed regulations providing clarity regarding the federal tax classification of entities entirely owned by Tribal governments

IR-2024-261, Oct. 7, 2024 — The Department of the Treasury and the IRS issued proposed regulations addressing the federal tax classification of corporations or LLCs that are owned entirely by Indian Tribal governments (Tribes) and formed under the laws of the Tribes that own them. Generally, entities formed under the laws of a Tribe are known as Tribal law entities.

Treasury and IRS issue final regulations identifying syndicated conservation easement transactions as abusive tax transactions

IR-2024-259, October 7, 2024 — The Department of the Treasury and the IRS issued final regulations identifying certain syndicated conservation easement transactions as "listed transactions" – abusive tax transactions that must be reported to the IRS.

IRS Direct File set to expand availability in a dozen new states and cover wider range of tax situations for the 2025 tax filing season

IR-2024-258, Oct. 3, 2024 — The IRS announced that Direct File will be available for the 2025 tax filing season in double the number of states than last year's pilot, and it will cover a wider range of tax situations, greatly expanding the number of taxpayers eligible to use the free e-filing service.

Treasury and IRS issue guidance on long-term, part-time employees in 403(b) retirement plans and announce delayed applicability date for related final 401(k) regulation

IR-2024-257, Oct. 3, 2024 — The Department of the Treasury and the IRS issued guidance addressing long-term, part-time employees in 403(b) retirement plans under the SECURE 2.0 Act, which applies to 403(b) plans beginning in 2025.

Ask the Advocate: FTB Website Navigation Tips

This past month leading up to the October 15, 2024, filing deadline, I received lots of inquiry emails. Most answers to your inquiries can be readily found on FTB’s website.

This month, I highlight strategies and tips to help you navigate to find your answers using FTB's website.  Whether you are assisting clients with tax filings, or troubleshooting an issue, understanding how to effectively use these online resources can save you time and avoid potential errors.

More than 2 million visitors access FTB's website each month. Our web team ensures the website is relevant and contains useful content on emerging California tax issues.

So, let me introduce you to the homepage, where there is valuable information. FTB updates the content frequently to align with the appropriate filing season events and hot topics. The homepage's top banner broadcasts important or urgent information such as delays, system outages, etc. Below the banner, are MyFTB Account, Tax Pros, Help, Translate, and Search. The Tax Pros tab will navigate to a page designed specifically for tax professionals.

A useful tip to keep in mind, is the website is task driven. It was designed with the most common taxpayer tasks in mind. The common tasks include File, Forms, Pay, and Refund.

My favorite way to navigate is to use the search feature. I find the search feature to be the most intuitive. If you can't find what you need on the homepage, use the search feature. Simply click the magnifying glass icon and a dropdown window will appear. Type your desired topic in the window and select the magnifying glass or hit enter. The search will provide you with the top results for your topic.

My last navigation tip is some useful website resources:

• Respond to a notice or letter
• Revive a business
• Help with liens
• Report a systemic issue
• Help with disasters outside California
• Report fraud
• Identity Theft
• Claim withholding
• Check your refund
• File a power of attorney (POA)
• Get forms
• Register for a MyFTB account
• File a protest
• File an amended return
• Find your answer online
• Understand contact center timeframes and wait times

FTB participates in a statewide uniformity effort to ensure all state agency websites behave and look similar. Stay tuned, as the web team plans to implement the new version of the state template in September 2025. Features include design improvements based on customer feedback. These improvements will help users navigate FTB's website to find information more easily. I hope you find the website tips and resources helpful, and they free up time to focus on your client needs. Thank you for all that you do to help California taxpayers.