California Tax Changes - October 2024

Week Of 10.14.2024

California Cigarette, Alcohol & Miscellaneous Taxes—Cannabis, transactions, sales, or use taxes prohibited in California local gross receipts.

L. 2024, S1059 (c. 874), effective 01/01/2025, prohibits a city or county from including in the definition of gross receipts, for purposes of any local tax or fee imposed by the city or county on a licensed cannabis retailer, the amount of any California cannabis excise tax, transactions and use taxes, or sales and use taxes.

California Property Tax—California amends restrictions on land valuation that assessors consider in land assessments.

L. 2024, A2897 (c. 580), effective 01/01/2025, amends the enforceable restrictions that effect land valuation that assessors consider in land assessments. Specifically, the amendment relates to a contract with an IRC § 501(c)(3) nonprofit corporation that has received a welfare exemption under Cal. Rev. & Tax. Cd. § 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program. For real property subject to such a contract, there is a rebuttable presumption that, at the time of purchase, an assessor cannot include the value of the deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale. Also, the amendment relates to a renewable 99-year ground lease between a community land trust, or a wholly owned subsidiary of a community land trust that is solely directed and managed by the trust, and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling. “Community land trust” is clarified regarding land and dwelling ownership and leasing requirements.

California Property Tax—California amends restrictions on land valuation that assessors consider in assessments.

L. 2024, A1868 (c. 553), effective 01/01/2025, amends the enforceable restrictions that effect land valuation that assessors consider in land assessments. Specifically, the amendment relates to a contract with an IRC § 501(c)(3) nonprofit corporation that has received a welfare exemption under Cal. Rev. & Tax. Cd. § 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program. For real property subject to such a contract, there is a rebuttable presumption that, at the time of purchase, an assessor cannot include the value of the deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.

California Property Tax—California welfare exemption property collection action prohibited.

L. 2024, A2353 (c. 566), effective 01/01/2025, and applicable to property tax installments that are due and payable from 12/10/2025, to 04/10/2031, prohibits a welfare exemption property collection action for delinquent payments. A property owner is not liable for interest or penalties nor subject to collection action if all of the following requirements are satisfied annually while receiving the benefit: (1) the owner supplies evidence to the tax collector of submission to the county assessor of an exemption application; (2) the owner supplies evidence to the tax collector of receipt of a reservation of tax credits from the California Tax Credit Allocation Committee or an award of funds from the Department of Housing and Community Development, including a copy of the reservation letter or notice of award; and (3) the facilities are in the course of construction. However, this treatment does not apply to improvements or property ineligible for the exemption due to specified reasons.

California Property Tax—California localities authorized to establish capital investment incentive programs.

L. 2024, A2922 (c. 581), effective 09/25/2024, authorizes localities to establish capital investment incentive programs. The programs were in effect until January 1, 2024, but authorization is reestablished until January 1, 2035. Also, the program is expanded for proponents of a qualified manufacturing facility with an assessed value that exceeds $25 million and that enter into a community services agreement with the county, city and county, or city, which includes detailed provisions setting forth a job creation plan relevant to the facility that would be located in the locality.

California Property Tax—California property tax refund processing provisions amended.

L. 2024, A3134 (c. 922), effective 01/01/2025, amends the property tax refund processing provisions. If tax cancellation results in a refund, the auditor must either process the refund to the taxpayer or notify the taxpayer in writing of the requirements for obtaining a refund stating entitlement and that it must be filed within 60 days of the notice. The refund threshold amount to be paid to the latest recorded owner with a reduction in value due to correction to the roll or cancellation after tax payment, is increased to less than $10,000 (previously, $5,000). An authorized tax refund or assessment order can be paid to a property assessee, without a filed refund claim, if the following conditions are met: (1) the refund results from a specifically listed exemption, except for the disabled veterans’ exemption; (2) the refund would not exist but for the property assessee or qualifying occupant meeting the requirements for an exemption; and (3) the amount of the refund is less than $10,000. A tax refund or assessment order can be paid to a disabled veteran or veteran’s surviving spouse, without a filed refund claim, if the refund is due to the disabled veterans’ exemption.

California Sales & Use Taxes—Cannabis, transactions, sales, or use taxes prohibited in California local gross receipts.

L. 2024, S1059 (c. 874), effective 01/01/2025, prohibits a city or county from including in the definition of gross receipts, for purposes of any local tax or fee imposed by the city or county on a licensed cannabis retailer, the amount of any California cannabis excise tax, transactions and use taxes, or sales and use taxes.

California Sales & Use Taxes—California Cities of Campbell and Pinole and Solano County authorized to impose transactions and use taxes.

L. 2024, A3259 (c. 852), effective 09/28/2024, authorizes the Cities of Campbell and Pinole and Solano County, by ordinance or citizens’ initiative, to impose a transactions and use tax for general or specific purposes at a rate of no more than 1%. These localities are each permitted to exceed their 2% transactions and use tax cap if: (1) the locality adopts an ordinance proposing the transactions and use tax by the applicable voting approval requirement (i.e., however, this does not apply to a tax imposed by citizens’ initiative); (2) the ordinance proposing the transactions and use tax is submitted to the electorate and is approved by the voters voting on the ordinance by the applicable voting approval requirement in accordance with the California Constitution; and (3) the transactions and use tax conforms to the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), other than Section 7251.1. If an ordinance or citizens’ initiative proposing a transactions and use tax has not been approved as of January 1, 2029, then the authorization remains in effect only until January 1, 2029, and as of that date is repealed.

L. 2024, A2443 (c. 961), effective 09/29/2024, authorizes the Cities of Lancaster, Palmdale, and Victorville, by ordinance or citizens’ initiative, to impose a transactions and use tax for general or specific purposes at a rate of no more than 1%. These localities are each permitted to exceed their 2% transactions and use tax cap if: (1) the locality adopts an ordinance proposing the transactions and use tax by the applicable voting approval requirement; (2) the ordinance proposing the transactions and use tax is submitted to the electorate and is approved by the voters voting on the ordinance by the applicable voting approval requirement in accordance with the California Constitution; and (3) the transactions and use tax conforms to the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), other than Section 7251.1. If an ordinance or citizens’ initiative proposing a transactions and use tax has not been approved as of January 1, 2029, then the authorization is repealed as of that same date.

Week Of 10.07.2024

California Corporate Income Tax—Gross income exclusion provided for California qualified wildfire loss mitigation payments.

L. 2024, S946 (c. 987), effective 09/29/2024, and applicable to taxable years beginning on or after 01/01/2024, and before 01/01/2029, provides an exclusion from gross income for amounts received as California qualified wildfire loss mitigation payments. “California qualified wildfire loss mitigation payment” means any amount which is received through the California Wildfire Mitigation Financial Assistance Program for the benefit of a residential property owner or occupant with expenses paid, or obligations incurred, for wildfire loss mitigation. “Wildfire loss mitigation” means an activity that reduces wildfire risks to a residential structure or its contents, or both.

California Personal Income Tax—California HOPE program disclosure of tax information authorized.

L. 2024, S242 (c. 1010), effective 01/01/2025, authorizes the California State Treasurer to disclose to the California Franchise Tax Board (FTB) tax information for purposes of determining eligibility for the California Hope, Opportunity, Perseverance, and Empowerment (HOPE) for Children Trust Account Program. The information authorized to be disclosed is limited to information necessary to verify eligibility, including, but not limited to, name, individual taxpayer identification number (ITIN) or social security number, date of birth, and other needed information to verify the income of individuals. The FTB, after receipt of the information, must disclose to the Treasurer, through information-sharing agreements or data interfaces, the amounts of the federal adjusted gross income (AGI) as reported by the taxpayer to the FTB.

California Personal Income Tax—California Protect Our Coast and Oceans Voluntary Tax Contribution Fund checkoff amended.

L. 2024, A178 (c. 1000), effective 09/30/2024, amends the California Protect Our Coast and Oceans Voluntary Tax Contribution Fund checkoff on personal income tax returns. By September 1 of each calendar year that the checkoff appears on the tax return, the California Franchise Tax Board (FTB) must determine whether the amount of contributions estimated to be received during the calendar year will equal or exceed the minimum contribution amount for the calendar year, which is $200,000 (previously, $250,000). The FTB must estimate the amount of contributions to be received by using the actual amounts received and an estimate of the contributions that will be received by the end of that calendar year. If the FTB determines that the amount of the contributions estimated to be received during a calendar year will not at least equal the minimum contribution amount for the calendar year, this provision becomes inoperative with respect to taxable years beginning on or after January 1 of that calendar year, and repeals on December 1 of that year.

California Personal Income Tax—Gross income exclusion provided for California qualified wildfire loss mitigation payments.

L. 2024, S946 (c. 987), effective 09/29/2024, and applicable to taxable years beginning on or after 01/01/2024, and before 01/01/2029, provides an exclusion from gross income for amounts received as California qualified wildfire loss mitigation payments. “California qualified wildfire loss mitigation payment” means any amount which is received through the California Wildfire Mitigation Financial Assistance Program for the benefit of a residential property owner or occupant with expenses paid, or obligations incurred, for wildfire loss mitigation. “Wildfire loss mitigation” means an activity that reduces wildfire risks to a residential structure or its contents, or both.

California Sales & Use Taxes—California sales on state-designated fairgrounds provisions amended.

L. 2024, A2143 (c. 559), effective 01/01/2025, amends the state-designated fairgrounds provisions. The related statutes are moved from the Business and Professions Code and other codes and consolidated into the Food and Agricultural Code. References to the “Division of Fairs and Expositions” are replaced with the “Department of Food and Agriculture.” For reporting of gross receipts for sales and use tax purposes, the term “state-designated fair” is replaced with the term “fair.”

California Sales & Use Taxes—California donated medicinal cannabis use tax exemption extended.

L. 2024, A2555 (c. 920), effective 09/29/2024, extends the use tax exemption for donated medicinal cannabis to January 1, 2030. The exemption applies to the donation by a licensed cannabis retailer of medicinal cannabis or medicinal cannabis product to a medicinal cannabis patient or to a cannabis retailer for subsequent donation to a medicinal cannabis patient.

Week Of 09.30.2024

California Personal Income Tax—California wildlife preservation and rehabilitation funds voluntary tax contribution checkoffs extended.

L. 2024, A1828 (c. 360), effective 01/01/2025, extends the California Rare and Endangered Species Preservation Voluntary Tax Contribution Program personal income tax return contribution checkoff to January 1, 2032 (previously, January 1, 2025), and Native California Wildlife Rehabilitation Voluntary Tax Contribution Fund checkoff to January 1, 2031 (previously, January 1, 2025), except as otherwise provided. For each checkoff, by September 1 of each calendar year that the checkoff appears on the tax return, the California Franchise Tax Board (FTB) must determine whether the amount of contributions estimated to be received during the calendar year will equal or exceed the minimum contribution amount for the calendar year (i.e., $250,000). The FTB must estimate the amount of contributions to be received by using the actual amounts received and an estimate of the contributions that will be received by the end of that calendar year. If the FTB determines that the amount of the contributions estimated to be received during a calendar year will not at least equal the minimum contribution amount for the calendar year, the provision becomes inoperative with respect to taxable years beginning on or after January 1 of that calendar year, and repeals on December 1 of that year.

California Property Tax—California low-value property and tribal housing exemptions amended.

L. 2024, S1527 (c. 498), effective 09/22/2024, amends the low-value property and tribal housing exemptions. Regarding the $10,000 value limitation on a county board’s authority to exempt low-value property, the applicable lien date for increasing the limitation to $50,000, for possessory interests, is extended to before January 1, 2030 (previously, January 1, 2025), and for possessory interests for temporary or transitory use in a publicly owned fairground, convention, or cultural facility, to on or after January 1, 2030 (previously, January 1, 2025). Tribal housing exemption property is clarified to mean property owned and operated by a federally recognized Indian tribe, its tribally designated housing entity, or, for a property that has received a reservation of low-income housing tax credits pursuant to IRC § 42, a limited partnership that includes a federally recognized Indian tribe or its tribally designated housing entity as the sole general partner (previously, a federally recognized Indian tribe or its tribally designated housing entity). Net earnings of the housing entity that inure to the benefit of a limited partner in a property that has received a reservation of the federal credit do not violate the state exemption requirements.

California Sales & Use Taxes—California Department of Tax and Fee Administration provisions amended.

L. 2024, S1528 (c. 499), effective 01/01/2025, amends several provisions relating to the California Department of Tax and Fee Administration (CDTFA). The CDTFA can relieve sales and use tax prepayment requirements if a dealer is required to pay tax to the Department of Motor Vehicles and more than 75% of the gross receipts during the prior calendar year are from retail sales of registered motor vehicles except for certain recreational vehicles. The CDTFA is authorized to deliver a notice of determination electronically if requested by the taxpayer in this manner or the CDTFA has evidence that the taxpayer no longer receives mail at the address of record and has previously provided an address for electronic mail. A 10% penalty of the determination amount is imposed if a deficiency is due to negligence or intentional disregard, or 25% if due to fraud or intent to evade, plus interest. The penalty of 40% of an amount not timely remitted does not apply if a taxpayer has unremitted sales tax reimbursement averaging $1,500 (previously, $1,000) or less per month or not exceeding 25% (previously, 5%) of the total measure of tax reimbursement collected for the period in which tax was due, if greater.

‍

‍