Spidell's Tax Season Tribune

Let's get QuizziCAL: California Motion Picture and Television Production Credit

By Lynn Freer, EA, and Diane Fuller
Tax Season Tribune Staff

Here's a stumper for you … click below to reveal the answer.

You're looking forward to your new role as technical advisor to your client who has just qualified for a New California Motion Picture and Television Production Credit for her independent film "Blame the Accountant" — a riveting drama inside the mind of a tax professional who scrambles the winning envelopes during the Academy Awards (rated R for pervasive language).

Your client needs your help in determining as many of the following expenditures as possible that will qualify for a tax credit allocation:

Psychologist's bills to keep the OCD accountant relatively normal
Equipment rental
Promotional expenses so the CPA who writes the screenplay can increase his accounting practice
Operation costs, such as food
Tuxedo and diamond studded cufflinks for the writer to wear at the Academy Awards presentation
CPA expenses for champagne while working on the books

How'd you do? Click here to find out.

Answer:

b and d

Expenditures that qualify for a tax credit allocation must be incurred within California and can include:

Crew and staff salaries, wages and fringe benefits (including payments to qualified entities such as Loan Out Corporations);
Cost of rental of facilities and equipment; and
Production operation costs such as construction, wardrobe, food, lodging, lab processing, and post-production work.

See ¶25-134 (California Motion Picture and Television Production Credit) of Spidell's Analysis & Explanation of California Taxes^® for more information and a list of expenditures that don't qualify.

back to top

"The Shawshank Redemption" made it look so easy...

By Kathryn Zdan, EA
Editorial Director

Two California men were recently convicted for a tax return identity theft scheme they ran from prison in 2010–2012.¹ The men, one of whom is an attorney who was disbarred for his grand theft conviction, convinced fellow inmates to give them their full names, dates of birth, and Social Security numbers under the guise of taking advantage of government stimulus programs and secret tax loopholes. Instead, they used the information to file fraudulent tax returns with fictitious wages and inflated credits.

To supposedly lend credibility to the scheme, the men formed an LLC named Inmate Assets Recovery and Liquidation Services LLC. They also opened a P.O. Box which they used as the mailing address for refund checks. They opened several bank accounts and directed other refunds to be direct deposited in those accounts. They split a portion of the refund between them and forwarded the rest to the inmate on the return.

The pair filed 700 false returns and collected more than $600,000 in fraudulent refunds before being caught (maybe they should have hidden the operation behind a Rita Hayworth poster). They're facing 20 years in prison for mail fraud and wire fraud. The disbarred attorney argued that he couldn't be tried for aggravated identity theft because the inmates had willingly given him their information, but a panel of judges wasn't buying it.

Looks like these two won't be retiring to Zihuatanejo anytime soon.

¹ http://sanfrancisco.cbslocal.com/2017/01/24/former-marin-county-man-convicted-of-tax-fraud-using-inmates-identities/

back to top

Getting to life's essentials

By Sandy Weiner, J.D.
California Editor

The 21st century is bringing us almost daily revolutions in technology, communications, and space travel. But that doesn't mean that we don't need to stay grounded and connected to those aspects of our lives over which we have no control, such as nature, our own mortality, and those other species with whom we share the planet. And of course, with recognition of these other cosmic forces, comes legislation to help incentivize and/or regulate these areas. Three bills that have been introduced in our California legislature of, uh… importance are:

Spring equinox: AB 88 would require the Governor to annually proclaim the day of the astronomical Northward Equinox, which usually occurs on March 20 or 21, as Nowrūz Day.

Jurisdiction over the deceased: AB 356 would authorize human remains to be transported from California to an adjacent state for disposition in that state without legal papers if the remains are found within 50 miles of the California border and a licensed funeral establishment is within 50 miles (previously 20 miles) of the border in the adjacent state. Who knew this was an issue?

Pet credits: AB 942 would allow an income tax credit for 50% of qualified veterinarian bills for our beloved dogs or cats (I guess snakes, birds, and horses are not quite as worthy).

back to top

In real news: Wait times for FTB's tax practitioner hotline, secure chat, and more

The FTB is providing practitioners and taxpayers with "real time" wait times for various services. As of 4 p.m. on March 3, 2017, the wait times for the following services were:

Tax practitioner hotline: 18 minutes
MyFTB secure chat: 4 minutes
Customer service line: 114 minutes

To view the wait times in "real time" and for wait times for additional services, see: www.ftb.ca.gov/aboutFTB/Average-Processing-Times.shtml

back to top

FTB will apply Swart narrowly

The FTB formally announced they will not appeal Swart Enterprises, Inc. v. Franchise Tax Board (January 12, 2017) 7 Cal.App.5th 497. They will follow the Court of Appeal decision in Swart in situations with the same facts.¹

The Notice briefly states: "To the extent taxpayers believe their situation has the same facts as in Swart, they should take that into consideration in determining if they have a return filing obligation and/or file a claim for refund, as appropriate. In any claim for refund, taxpayers should cite the holding in Swart and explain how their factual situation is the same as the facts in Swart."

We have requested further guidance and information on how the FTB will handle protective claims filed in light of the Swart decision.

¹ FTB Notice 2017-01

back to top

A few fun facts about this week's writers:

Lynn Freer, EA, is a French literature major, so of course her favorite vacation destination is France. Here she is dining on mussels and fish stew near Nice.

Kathryn Zdan, EA, is not only director of the editorial department, she also "rocks the house" as a regular in curling bonspiels around the country. She also enjoys foreign and avant-garde film, baking, and the Investigation Discovery channel.

Diane Fuller is a woman of many talents which include writing children's poetry, taking unwitting challengers to town in poker, and whipping up Michelin-worthy dishes from scratch. Find her laughing with her two grandkids.

Sandy Weiner, J.D., as California editor, loves all things California. Whether it's hiking at Big Sur or playing at the beach in San Diego where she lives, Sandy takes full advantage of all that California has to offer as a way to clear her head after trying to comprehend and explain California's Revenue & Taxation Code.

Never miss an issue

Did a friend forward this to you? To get on the Tax Season Tribune mailing list, contact anthonya@spidell.com. Past issues of the Tax Season Tribune can be accessed through the Tribune Archives.