Ask the Advocate
On September 24, 2010, we held our annual liaison meeting with the California Society of Enrolled Agents (CSEA). This year, like every year, they had some really great questions for FTB staff. I decided to share a few questions I thought our Tax News readers would find most interesting in this month.
Some of the FTBs formal responses to items submitted for the December 2009 Taxpayer Bill of Rights hearings (TBR) were included in the March 2010 Tax News. In particular, the Tax News stated that FTB would consider a legislative proposal (LP) for California to automatically provide statutory disaster tax relief, whenever the governor declares a disaster in the state, rather than to require legislation each time in response to the Governor’s disaster declaration. What is the status of this LP?
On May 3, 2010, AB 1782 (Harkey) was introduced that would have, among other things, provided automatic disaster loss treatment—similar to the TBR proposal. That bill failed passage in the Assembly Revenue and Taxation Committee (the policy committee of the first house). FTB staff made the decision to let the issue “cool off” for a year but will ask one of the revenue and taxation chairs to author the TBR proposal in 2011.
Beginning January 1, 2011, California conforms to 2006 federal law that requires small tax-exempt organizations with gross receipts of $ 25,000 or less, other than churches and church-related organizations, to e-file an annual informational notice, similar to IRS Form 990‑N, known as the e-postcard [SB 401(CH 10‑14)]. The due date for calendar year organizations is May 15th each year. The IRS is reporting noncompliance with the e-postcard filing requirement, which can cause an organization to lose its exempt status. What are FTB plans for rollout of the state version of e-postcard?
FTB understands the importance of outreach. Therefore, we are taking various measures to get the word out on the new filing requirements for the smaller tax-exempt organizations as follows.
We are creating a Web application for the small tax-exempt organizations to file with FTB. The application will be ready for use by January 3, 2011. Our Charities and Nonprofit (Exempt Organizations) webpage provides information regarding the filing requirements for the small tax-exempt organizations. Within the next few months the full instructions for filing the California e-Postcard will be on the FTB website.
This fall, we will mail letters to California tax-exempt organizations to inform them of the new filing requirement.
In July, we published a Tax News article, New Reporting Requirements for Small Tax-Exempt Organizations Begins 2011, to explain the impacts of SB401 on the smaller tax-exempt organizations. The Tax News article was also picked up and published by Research Institute of America (RIA) and California CPA Educational Foundation.
We send updates through social media (Facebook and Twitter) on the new filing requirements for these tax-exempt organizations.
Our exempt organizations staff conducts presentations throughout California to share exempt organization information, which includes the new filing requirements of the smaller tax-exempt organizations. Most of these presentations are sponsored by the Board of Equalization.
Our exempt organizations phone center continuously reminds tax-exempt organizations of the new filing requirements.
Beginning January 1, 2011, California now has a bright-line test for establishing when a taxpayer is considered to be “doing business” in California. Additionally, California also adopts the option for businesses apportioning income to elect to apportion income using the single sales factor rather than the three-factor, double-weighted sales apportionment method. Since these are significant changes, does FTB have plans for any taxpayer outreach other than updating the instructions for Schedule R, Apportionment and Allocation of Income?
Yes. In December 2009, we published an article in Tax News announcing the corporate law changes applicable for tax years beginning January 1, 2011, and providing the public with an email address (email@example.com) to send in their inquiries. In March of 2010, we covered these 2011 corporation tax law changes on our public website (see website link or instructions below). We plan to use the website to keep the public informed of the latest developments, FAQs, interested parties meetings, etc. Concerning the single sales factor election, we held two interested parties meetings for comments on the proposed regulation in January and June of this year. We have also added information in the “What’s New/Tax Law Changes” portion of our 2009 and 2010 tax forms’ instructions. Currently, we are working on an FAQ for the new definition of doing business in California. We will be working closely with our Education and Outreach and Public Affairs Office to keep the public informed. Finally, in the very near future, there are plans for more public announcements via Tax News and our website.
Steve Sims, EA
Taxpayers’ Rights Advocate
Follow our Taxpayers' Rights Advocate on Twitter at twitter.com/FTBAdvocate.