Notice regarding Assembly Bill 150

Dear client,

 

On July 16 2021, CA Governor signed Assembly bill 150, and the bill allows some pass-through entities taxed as S corporations and partnerships that do business in California to elect to pay a 9.3% entity-level tax on income that California would normally tax as personal income when passed through to the owners. This new tax law will be effective for the tax years beginning on or after January 1, 2021, and end before January 1, 2026.

 

Please see the attached for more information on Pass through entity elective tax.

You are receiving this e-mail because you are qualified to elect this option.

If you don’t want to exercise this option, you don’t have to reply to this e-mail.

If you do want to exercise this option, you will need to reply us by Thursday (12/23/21) with below details.

1)      You have to express that you consent to Pass-through entity elective tax (This is elective tax, so consent needs to be received to elect)

2)      Amount calculation

• • • 9.3% of 2020 K-1, no. 1 ordinary income
    • 9.3% of 2021 estimated K-1 income (Clients who had loss in 2020 or had big net income increase in 2021 should use estimated income for 2021. You can give us your estimated net income or we will annualize one based on book done up to date.)

Even though FTB website says the Pass through entity elective tax for year 2021 is due by 3/15/2022, IRS note doesn’t mention or confirm about tax accrual. Until there is further detail or notice from IRS, we believe that it is the best to pay the tax before year-end to be treated as qualified deduction in Federal level. Please understand that this is very new and there is no technical guideline yet.

Please also be advised that this service is only provided to the qualified taxpayers, therefore additional service fee will be added on your entity tax return preparation fee.

 

Soh Yun Park