California SALT Developments: PTE Election Eligibility, Interpretation of P.L. 86-272, Sales Tax Compliance

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

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Thursday, March 2, 2023

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will cover critical state tax developments in California for tax advisers working with companies who may be liable for California income/franchise, sales and use, and/or other state and local taxes. Our presenters will explore the following topics: the California’s current response to the Multistate Tax Commission’s (MTC) most recent revision to its Statement of Information on P.L. 86-272 and how it impacts taxpayers; the California Pass-Through Entity Tax (CA PTET) election and key issues to consider; California’s new tax basis capital account reporting requirement; recent case law involving the California tax implications to the sale of a partnership and/or S-corporation interest; and other current issues. These topics should be of interest to tax advisers with clients that do business in California.

Description

Not only are state taxes in California high, but the state’s tax system and enforcement is among the most complicated and aggressive in the nation, respectively. California’s personal income tax rate tops out at 13.3%, inclusive of the 1% millionaires’ tax, and its corporate income tax rate is 8.84% except for financial institutions which are taxed at 10.84%. California’s combined state and local sales tax rates are over 10% in most parts of the state. These extreme tax rates make tax planning and risk mitigation critical for clients that engage in business in California.

In February 2022, California responded to the MTC’s revision of its Statement of Information on P.L. 86-272 by adopting its narrower interpretation of P.L. 86-272. The MTC’s revision focuses primarily on P.L. 86-272’s application to internet activities and provides a list of protected and unprotected activities that businesses operating a website may perform via the internet. In July 2021, California enacted a CA PTET election. Even after amending the CA PTET law twice following its enactment, there are still a number of issues to consider and potential traps for the unwary. California’s new tax basis capital reporting requirement starts for the 2022 tax year. Lastly, California has several cases, some quite recent, discussing the proper tax treatment of the gain recognized on the sale of an interest in a partnership or S-corporation. Yet despite these cases, the law on this issue is far from clear, creating uncertainty for taxpayers and tax advisors alike.

Listen as our state and local tax experts review current developments in the state of California. Tax advisors working with businesses or individuals with a taxable presence in California will want to understand these latest developments.

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Outline

  1. California SALT: introduction
  2. Nexus developments
  3. The pass-through entity election
  4. California's interpretation of P.L. 86-272
  5. Sales tax enforcement
  6. Other issues

Benefits

The panel will cover these and other critical issues:

  • California's narrow interpretation of P.L. 86-272
  • Eligibility for the PTE election
  • Specific activities that create nexus in California for income and sales and use tax
  • Latest nexus challenges in California

Faculty

Le Clair, Heather
Heather M. Le Clair, JD, LLM

Managing Director, Tax
Armanino

Ms. Le Clair is a managing director in the Armanino National State and Local Tax practice and co-Lead of the National...  |  Read More

Tilman, Brandee
Brandee A. Tilman, JD, LLM

Partner, State & Local Tax
Armanino

Ms. Tilman is Armanino’s National State & Local Income Tax practice leader. She brings over 20 years of...  |  Read More

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