How to make an election regarding Small Business Method of Accounting October 2019 Tax News

Assembly Bill 91 – Loophole Closure and Small Business and Working Families Tax Relief Act of 2019 (AB 91) provides some conformity to federal Tax Cuts and Jobs Act of 2017, including conformity to certain amendments to the federal Small Business Method of Accounting provisions. A summary of California's Small Business Method of Accounting provisions was provided in our September edition of Tax News.

California's conformity to these federal Small Business Method of Accounting provisions applies for taxable years beginning on or after January 1, 2019. However, taxpayers may elect to apply one or more of those provisions for taxable years beginning on or after January 1, 2018 and before January 1, 2019. In order to make the election(s), a taxpayer must complete all of the following:

1. Include a statement with their original or amended California tax return stating the taxpayer's intent to make one or more of the elections along with the specific election(s) being made.
2. On the top of the first page of the original or amended tax return, write or print “AB 91 – Small Business Method of Accounting Election” in blue or black ink.
3. Mail all “AB 91 – Small Business Method of Accounting Election” returns to:

   Franchise Tax Board

   P.O. Box 942857
   Sacramento, CA 94257-0500
   

If a taxpayer has an electronic filing requirement,[1] the taxpayer may file a paper return to make the election. In that case, the taxpayer must include a statement with the return stating they are filing a paper return in lieu of an electronic return according to FTB Notice 2019-03.