The Legislature has passed two budget bills (AB/SB 107 and AB/SB 167) with significant tax changes. These bills will be sent to the Governor, and he is expected to sign them. These bills include, but are not limited to, provisions that:
- Extend the first-year exemption from the $800 annual tax for LLCs, LPs, and LLPs that organize or register with the Secretary of State’s office in 2024 during their first taxable year;
- Suspend the net operating loss deduction for the 2024 through 2026 tax years for taxpayers with net business income or modified adjusted gross income of $1 million or more;
- Limit businesses from claiming more than $5 million in business credits per year during the 2024 through 2026 tax years;
- Allow cannabis businesses to continue to claim business deductions under the Personal Income Tax law for an additional five years (this is already allowed under the Corporation Tax Law);
- Clarify that businesses are prohibited from including in their sales factor apportionment formula any income or losses that are not included in the calculation of net income, effectively overruling the Office of Tax Appeals’ recent decision in Appeal of Microsoft, 2024-OTA-130; and
- Eliminate California’s automatic conformity to IRS disaster-related filing and payment postponements.
To read the text of the bills, search by bill number at:
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