Tax News July 2023

Electronic Signature Option For SOL Waivers No Longer Temporary

Effective July 1, 2023, taxpayers have the option to submit statute of limitations (SOL) waivers with electronic signatures using FTB's approved signing process, indefinitely. Upon request, FTB will send by Secure Email to a taxpayer (or their authorized signer) an SOL waiver form that can be electornically signed and returned to FTB. This approved electronic signature process is available only for SOL waiver forms at this time. 

Beginning July, taxpayers and their representatives may submit SOL waivers to FTB by any of the following options:

• Fax the SOL waiver with a handwritten signature.
• Email a scanned copy of the SOL waiver with a handwritten signature from a verified email address.
• Upload a scanned copy of the SOL waiver with a handwritten signature to the taxpayer's MyFTB account.
• Upload a scanned copy of the SOL waiver with a handwritten signature to cloud storge and provide FTB with a link to download the waiver.
• Submit the SOL waiver with electronic signature using FTB's approved signing process.

For more information, visit our recent Public Service Bulletin.

Extended Temporary Signature Options For Paper Returns and Other Documents

FTB extended the temporary signature options for taxpayers or their representatives to submit paper returns and other documents from June 30, 2023, to October 31, 2023. 

For paper returns and other documents that normally must be signed with an original signature, FTB will not require an original signature, except for Power of Attorneys (POAs)

We will accept two signature alternative methods for paper returns:

• Method 1: An attached document must be included with the filed return that provides a copy of the original signature. The attached document should:
  • Identify what the document signature is for (Example: Corp XX, 2022 Form 100)
  • State "Refer to the attachment for a copy of the original signature" on the signature line.
• Method 2: A paper return with a faxed signature on the signature page.

For all other documents, except POAs, filed with us that normally require an original signature, we will accept with photographed or digital copies of required signatures.

You can also upload a document with a signature into MyFTB, go to ftb.ca.gov and search for myftb. Please note, only PDF and Excel documents are currently accepted.

These temporary procedures are available through October 31, 2023, but do not apply to filing a POA. If you need to submit a POA, go to ftb.ca.gov, search for submit a poa, and follow the procedures on the webpage.

For more information, visit our recent Public Service Bulletin.

Income Exclusion For Qualified Wildfire Settlement Payments

Legislation enacted pursuant to Assembly Bill 1249 and Senate Bill 1246 provides an income exclusion for settlement proceeds paid out to qualifying wildfire victims. 

For taxable years beginning before January 1, 2028, R&TC Section 17138.5 allows a qualified taxpayer to exclude from gross any amount received from the Fire Victims Trust for claims relating to the 2015 Butte Fire, the 2017 North Bay Fires and/or the 2018 Camp Fire.

For taxable years beginning before January 1, 2027, R&TC Section 17138.6 allow a qualified taxpayer to exclude from gross any amount received in a settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire.

This legislation is retroactive; therefore, taxpayers may file amended returns if any amount received pursuant to a qualifying settlement was included for a prior taxable year. If the statute of limitations for filing prior year claims has otherwise expired, qualified taxpayers can still file claims for these tax years provided they do so by September 29, 2023.

For more information, see Schedule CA(540) specific line instructions for Part 1, Section B, line 8z.

Review of Veterans Auto and Education Act of 2022 

FTB is currently in the process of reviewing the federal Veterans Auto and Education Improvement Act of 2022. This act eliminates, for purposes of taxation, the requirement that the residence or domicile be the same for the servicemember and the spouse in order for the spouse of a servicemember not to lose or acquire a residence or domicile with respect to the spouse being absent or present in any U.S. tax jurisdiction when the spouse has joined the servicemember in compliance with the servicemember’s military orders. For any taxable year of the marriage of a servicemember and a spouse, the servicemember and their spouse, may elect to use for purposes of taxation, regardless of the date on which the marriage occurred, any of the following:

• The residence or domicile of the servicemember.
• The residence or domicile of the spouse.
• The permanent duty station of the servicemember.

These provisions automatically apply for California purposes.

Taxpayers may want to contact the Military OneSource Resources, which includes tax consultants available by phone to answer tax questions related to multi-state filing. The IRS's website provides the following contact information: Military OneSource is available 24/7 at 800-342-9647 and online at MilitaryOneSource.mil.

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 statement on the mailing of balance due notices to California taxpayers

June 7, 2023 - The IRS reassures California taxpayers that they continue to have an automatic extension until later this year to file and pay their taxes for those covered by disaster declarations in the state.

IRS releases guidance on elective payments and transfers of certain credits under the Inflation Reduction Act

IR-2023-116, June 14, 2023 - The Internal Revenue Service issued proposed regulations on frequently asked questions today describing rules for applicable entities that earn certain clean energy credits and choose to make an elective payment election and rules for eligible taxpayers that elect to transfer certain credits to unrelated parties.

Ask the Advocate

Angela Jones, Taxpayers' Rights Advocate

Thank you, California taxpayers and tax professionals! As your new Taxpayers’ Rights Advocate, I sincerely appreciate the warm welcome I received from all of you.

I take my appointment seriously to ensure California’s taxpayers are treated fairly, and their rights are respected. One of my duties is to investigate systemic issues. A systemic issue affects multiple taxpayers and may involve Franchise Tax Board (FTB) systems, policies, or procedures.

Recently, a tax practitioner reported what was initially believed to be a systemic issue regarding Form 541 California Fiduciary Income Return processing for Special Needs Trusts also known as Qualified Disability Trusts. The practitioner indicated a Special Needs Trust client received unnecessary and inaccurate notices. I collaborated with FTB business areas and was able to quickly determine the practitioner’s tax preparation software incorrectly populated Line 22 with last years’ exemption credit amount instead of the current years’ exemption credit amount.

When filing as a Qualified Disability Trust, the Complex Trust option box in the entity section of Form 541 should be checked and the associated exemption credit amount per the Form 541 instructions for the appropriate tax year entered on Line 22.

If an incorrect exemption credit amount is claimed for a Qualified Disability Trust, it can result in inaccurate math calculations and the return adjusted. When a return is adjusted, a notice is issued. This results in the taxpayer contacting FTB for resolution and possibly submitting documentation to substantiate their return filing, which can be time consuming and burdensome for the taxpayer and/or tax practitioner.

Due to this discovery, I worked closely with our e-file team to issue a broadcast to our tax software partners to ensure they updated their tax software with the correct exemption credit amount for Qualified Disability Trusts, as provided in the Form 541 California Fiduciary Income Return Instructions.

Although this was not a systemic issue, working together with the tax practitioner, FTB business areas, and our tax software partners, we were able to proactively prevent further unnecessary notices from being issued to our Special Needs Trust taxpayers.

Thank you for bringing this issue to the Advocate’s attention. It was my pleasure to collaborate with all of you.

If you know of a systemic issue that affects multiple taxpayers and may involve FTB systems, policies, or procedures you may report here: Systemic Issue Management System.

Tax News Flash Links

There were no Tax News Flashes sent for June 2023.

FTB Career Opportunities

If you are a student, recent graduate, or experienced professional, we encourage you to apply. Find Careers with the State of California at Franchise Tax Board.

Event Calendar

As part of our education and outreach to the tax professional community, we participate in many different presentations and fairs. We provide a calendar that shows the events we attend, as well as other events happening with us, such as interested party and Board meetings.