The Los Angeles City Council approved a business tax relief program for taxpayers with a business location that was destroyed by the wildfires, including home-based businesses. Under the program, a business destroyed by the wildfires is deemed to have terminated the business as of December 31, 2024. This means the taxpayer will not be required to renew their business license or pay the business license tax for the 2025 tax year. When the taxpayer reopens, they will need to reregister as if they were a newly established business.

Businesses whose property was not physically destroyed but that experienced severe economic disruption for at least 45 days can also qualify.

All eligible taxpayers must apply for relief by April 14, 2025, at:

http://finance.lacity.gov

Additional information is available at:

http://finance.lacity.gov/blog/business-tax-relief-people-and-businesses-directly-impacted-wildfires-faq

In addition, all business locations within ZIP codes 90049, 90272, and 90402 will automatically be granted an extension of the annual business tax renewal filing deadline to April 14, 2025. A taxpayer with a business located outside of these ZIP codes, but whose business was interrupted as a direct result of the fires, may be granted an extension as well. To qualify, the taxpayer must submit a written request, including reasonable proof of the interruption, to the Office of Finance before the February 28, 2025, renewal deadline at:

http://finance.lacity.gov/blog/wildfire-business-tax-filing-extension

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We have heard from numerous tax professionals that the Forms 1099-G being sent by the FTB contain incorrect amounts. We reached out to the FTB, and they confirmed that there are some Forms 1099-G that need to be corrected. They are working on making these corrections and hope to release additional information shortly. In the interim, tax professionals should verify that the amounts reported on Form 1099-G are correct and, if not, should hold off preparing those returns until we receive guidance from the FTB.

We will send a follow-up Flash E-mail once we have additional information from the FTB.

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FinCEN announced that the beneficial ownership information (BOI) filing mandate is now back on, with a new filing due date of March 21, 2025. (FinCEN Notice FIN-2025-CTA1 (February 18, 2025)) The reinstatement was triggered by the U.S. District Court for the Eastern District of Texas’s February 18, 2025, decision to lift the preliminary injunction that it had issued in the Smith case. (Smith, et al. v. U.S. Department of the Treasury, et al.(February 18, 2025) U.S. Dist. Ct., E.D. Tex., Case No. 6:24-cv-00336)

The new March 21, 2025, due date applies to the vast majority of reporting companies to file an initial, updated, or corrected BOI report, including those entities formed prior to January 1, 2024. Entities formed in 2025 must file by the later of March 21, 2025, or 30 days from the date of formation.

FinCEN indicated that during the next 30 days it will “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce the burden for lower-risk entities, including many U.S. small businesses.”

Additional information is available at:

www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf

Spidell is offering a one-hour webinar to provide all the information you will need to meet this new March 21, 2025, deadline. To register, go to:

www.caltax.com/shop/webinars/live-upcoming-webinars/boi-reporting-update-webinar

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The House has unanimously passed the Protect Small Businesses From Excessive Paperwork Act of 2025 (H.R. 736), which would delay the beneficial ownership information (BOI) mandatory reporting requirement due date to January 1, 2026, for entities formed prior to January 1, 2024. The bill has now been sent to the Senate.

The bill would not impact the reporting requirement for entities formed after 2023, which means that if the preliminary injunction issued in the Smith case is stayed, entities formed after 2023 would still be required to file their initial reports and any updates or corrections to these reports. (Smith vs. U.S. Treasury (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036) However, it is important to note that FinCEN has indicated that if the injunction is lifted, it will postpone the filing deadline for 30 days, during which time period it will revise which entities may be required to file the reports. See our Flash E-mail from February 6, 2025, “Mandatory beneficial ownership reporting may soon be back in play,” for more details.

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On February 5, 2026, the Department of Justice (DOJ) filed an appeal with the Fifth Circuit Court of Appeals of the U.S. district court’s preliminary injunction in Smith v. U.S. Department of the Treasury, which blocked the enforcement of the beneficial ownership information (BOI) reporting requirement. (Smith et. al. v. U.S. Department of Treasury, et al. (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036)

The DOJ asked that the injunction be put on hold while the appeal proceeds. Although it is not guaranteed, given that the U.S. Supreme Court reversed the Fifth Circuit’s reinstatement of the preliminary injunction in the Texas Top Cop Shop decision (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653), it is likely that the Fifth Circuit will grant the DOJ’s request for a stay of the injunction. This means the beneficial ownership reporting mandate may be reinstated shortly.

In an alert posted today, FinCEN stated that if the injunction is lifted by the Fifth Circuit, it will extend the filing deadlines for all reporting companies by 30 days. FinCEN also stated that during this 30-day period it “will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.”

However, while the Smith court’s injunction remains in place, businesses are not currently required to file any initial reports or any updates or corrections, although they may do so voluntarily.

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According to an alert posted on FinCEN’s beneficial ownership information (BOI) reporting webpage, BOI reporting is still voluntary for now despite the U.S. Supreme Court’s stay of the preliminary injunction issued by a federal district court in Texas Top Cop Shop Inc. v. McHenry. ((January 23, 2025) U.S. Supreme Court, Case No. 24A653)

This is because another judge in a separate case has also issued a nationwide injunction against the BOI reporting requirements. (Smith v. U.S. Department of Treasury (January 7, 2025) U.S. Dist. Court, Eastern Dist. of Texas, Case No. 6:24-CV-336)) To date, the Department of Justice has not filed an appeal in Smith. It is not known whether the new administration will appeal the case.

This means that, for now, businesses are not required to file BOI reports and cannot be penalized for failing to do so.

It is also important to note that two bills (HR 425 and S 100) have been introduced in Congress to repeal the Corporate Transparency Act, which created the BOI reporting mandate.

We will keep you apprised of any further developments as they occur.

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Today, the U.S. Supreme Court stayed the order from the Fifth Circuit Court of Appeals that reinstated the lower court’s nationwide injunction against the beneficial ownership information (BOI) reporting requirement. (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653)

FinCEN has yet to issue any additional guidance after the U.S. Supreme Court’s ruling, so it is unclear at this point whether businesses will be required to comply with the BOI reporting mandate. We anticipate we will hear more from FinCEN and/or Congress shortly and will keep you apprised of any further developments.

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As a result of an executive order issued by Governor Newsom today, taxpayers in the following zip codes may postpone their property tax payments until April 10, 2026, and business personal property tax statement filings until April 1, 2026, without being subject to penalties and interest:

However, the postponement relief does not apply to payments made through an impound account nor to any taxes on the property that were delinquent as of January 6, 2025.

In addition to the relief provided in the executive order, taxpayers may also seek relief from the Los Angeles County Assessor’s office to have damaged or destroyed property reassessed. Taxpayers may also seek further suspension of penalties and interest for up to four years by submitting a penalty cancellation request form with the Los Angeles County Treasurer and Tax Collector.

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To assist tax professionals working with disaster victims, including those assisting Los Angeles County wildfire victims and the hurricane and storm victims on the east coast, Spidell is offering two free disaster tax relief webinars. These webinars are:

• Tax Relief for Disaster Victims, which will address federal income tax relief generally; and
• Tax Relief for California Disaster Victims, which will cover both federal income and California income and property tax relief.

In the interim, tax professionals can also access additional resources for Los Angeles County wildfire victims from the FTB and the Los Angeles County Assessor’s Office.

The FTB has posted the following resources:

• Los Angeles County wildfire FAQs; and
• A chart outlining how disaster victims should make tax payments to ensure payments are processed accurately and timely.

In addition, the Los Angeles County Assessor has a disaster relief webpage.

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For taxpayers affected by the Los Angeles wildfires, the Governor’s office announced that California will provide postponed income and franchise tax filing and payment deadlines in alignment with the filing postponement provided by the IRS. This means taxpayers in Los Angeles County will be granted a postponement to October 15, 2025, to file California tax returns on 2024 income and make any tax payments that would have been due January 7, 2025, through October 15, 2025. This applies to all taxpayers located in Los Angeles County, even if they were not directly impacted by the fires.

According to the Governor’s announcement, this includes relief from the following deadlines:

• Quarterly estimated tax payments normally due on January 15, April 15, June 15, and September 15, 2025;
• Passthrough entity elective tax payments normally due on March 15 and June 15, 2025;
• Business entity corporate or passthrough entity tax returns normally due on March 15 and April 15, 2025;
• Individual tax returns and payments normally due on April 15, 2025; and
• Tax-exempt organization returns normally due on May 15, 2025.

We confirmed that similar to the relief granted by the IRS, this relief will also apply to taxpayers outside Los Angeles County whose tax professionals are located in Los Angeles County.

In addition, the Governor’s office has announced that the CDTFA will provide an automatic three-month extension for tax filing deadlines for taxpayers within Los Angeles County for those Los Angeles County taxpayers whose 2024 third quarter return was for less than $1 million in tax. This means that the January 30 returns are now due April 30, 2025. The CDTFA will also provide Los Angeles County taxpayers relief from interest and penalties and create flexible payment plans for businesses.

The Governor’s announcements are available here and here.

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Taxpayers located in Los Angeles County have until October 15, 2025, to meet filing and payment deadlines that normally fall within the January 7, 2025, through October 15, 2025, time period. (IR-2025-10) This includes, but is not limited to:

• 2024 quarterly estimated income tax payments normally due on January 15, 2025, and estimated tax payments normally due on April 15, June 16, and September 15, 2025;
• Quarterly payroll and excise tax returns normally due on January 31, April 30, and July 31, 2025;
• Individual income tax returns and payments normally due on April 15, 2025;
• 2024 contributions to IRAs and health savings accounts for eligible taxpayers;
• Calendar-year partnership and S corporation returns normally due on March 17, 2025;
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025; and
• Calendar-year tax-exempt organization returns normally due on May 15, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after January 7, 2025, and before January 22, 2025, will be abated as long as the deposits are made by January 22, 2025.

Ventura County is not currently listed in the FEMA disaster declaration, so the IRS cannot currently grant automatic postponement relief to taxpayers located in Ventura County. The IRS has indicated that the same relief will be provided to any other counties added later to the disaster area.

Taxpayers who have an address of record in Los Angeles County will automatically qualify for relief. Taxpayers who live outside of Los Angeles County whose records are located in Los Angeles County, such as taxpayers with tax preparers in Los Angeles County or who own businesses located in Los Angeles County, also qualify for relief, but must contact the IRS disaster hotline at (866) 562-5227 to obtain relief.

Disaster area tax preparers with clients located outside the disaster area can choose to file bulk requests. Information about bulk requests is available at:

www.irs.gov/tax-professionals/bulk-requests-from-practitioners-for-disaster-relief

To date, the California Department of Finance has not announced whether they will be providing similar relief for California income and franchise tax returns. We will continue to update you as news develops on this issue.

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Taxpayers directly affected by the Los Angeles and Ventura county wildfires qualify for relief for the upcoming sales and use tax and payroll tax deadlines, as follows:

• A 60-day extension to file with the EDD state payroll reports or deposit payroll taxes without penalties and interest. To qualify, taxpayers must make a written request within two months of an original payment or return due date; and
• An extension of up to three months to file and pay sales and use taxes or fees with the CDTFA.

We have confirmed with the EDD and CDTFA that a taxpayer will be considered “directly affected” if their tax preparer is directly affected by the wildfires (e.g., due to power outages, evacuation orders, or worse).

This relief is not automatic. Taxpayers must submit requests for relief. Details about how to apply are available from the EDD here and the CDTFA here.

We anticipate that the IRS and FTB will also be granting filing and payment deadline postponements for income and franchise taxes. We will send another Flash E-mail once they have announced the available relief.

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Today President Biden signed a major disaster declaration for the wildfires impacting various communities in Los Angeles County. This will enable affected individuals and businesses to access individual program assistance from FEMA to cover expenses such as temporary accommodations and financial assistance for destroyed property.

The IRS has not issued any announcements yet, but we anticipate that with a disaster this size they will soon be providing tax filing and payment postponement relief. We will send another Flash E-mail when this occurs.

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The BOI reporting mandate roller coaster ride continues.

A new panel of the U.S. Fifth Circuit Court of Appeals is reviewing the lower court’s decision to enjoin the enforcement of the beneficial ownership information reporting requirement. (Texas Top Cop Shop, Inc. et al. v. Garland (December 26, 2024) U.S. Ct. of Appeals, Fifth Circuit, Case No. 24-40792) The review will be expedited, but in the interim the new panel reversed the previous panel’s decision to allow the BOI reporting mandate to continue pending the court of appeal’s review.

As the law stands today, penalties cannot be imposed against businesses who fail to file BOI reports with FinCEN.

However, as we have seen over this last month, this can change at any point. We recommend that you keep your clients informed of the latest developments, as the ultimate decision as to whether to file lies with them. FinCEN has not yet issued any updates on this latest development, but we assume that they will continue to allow businesses to voluntarily file.

Should your clients choose not to file until they are required to do so, we recommend that they continue to gather all necessary information to be ready to file should the reporting requirement be reinstated. As we saw this past week when the BOI reporting requirement was temporarily reinstated, FinCEN only gave businesses a short extension of the reporting deadlines.

The Court of Appeal’s latest order is available at:

www.ca5.uscourts.gov/opinions/unpub/24/24-40792..pdf

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On December 23, 2025, the Fifth Circuit Court of Appeals stayed the lower court’s preliminary injunction against the beneficial ownership information reporting mandate. (FinCEN Alert) This means that the BOI reporting mandate will remain in effect while the lower court trial proceeds. However, FinCEN has announced a short delay in the deadlines for most businesses. The extended reporting deadlines are now as follows:

• Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025);
• Reporting companies created or registered on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN; and
• Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.

The deadline for those businesses formed after 2024 remains 30 days from the time of formation.

Attendees of Spidell’s 2024/25 Federal and California Tax Update will receive an updated client letter regarding these changes. Click here for details.

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Beneficial ownership information (BOI) reporting: The continuing resolution that was enacted this weekend did not defer the January 1, 2025, BOI reports for reporting companies formed prior to 2024. However, the temporary restraining order issued by the U.S. District Court in East Texas remains in place, meaning that all BOI reporting deadlines are currently on hold. (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

Social Security Fairness Act sent to the president: Congress passed H.R. 82, the Social Security Fairness Act, which will retroactively increase the Social Security benefits paid to millions of individuals by eliminating the windfall elimination provision and government pension offset. This means these individuals will qualify for increased Social Security benefits, retroactive to January 1, 2024. President Biden is expected to sign the bill.

2021 Recovery Rebate Credits being sent out: The IRS announced that it will be issuing over one million 2021 Recovery Rebate Credits to eligible taxpayers who failed to claim the credit on their 2021 tax returns. (IR-2024-314) Eligible taxpayers should begin receiving these payments of up to $1,400 by late January.

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Beginning January 1, 2025, the standard mileage rates for the use of a car, van, pickup truck, or panel truck will be:

• 70 cents per mile driven for business use, up three cents from 2024;
• 21 cents per mile driven for medical purposes, unchanged from 2024;
• 21 cents per mile for moving purposes for qualified active-duty members of the Armed Forces, unchanged from 2024; and
• 14 cents per mile driven in service of charitable organizations, unchanged from 2024.
  (IRS Notice 2025-5)

The rates apply to fully electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.

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Tucked away in the proposed 1,500-page continuing resolution (CR) that Congress is hoping to pass this week is a one-year delay in the January 1, 2025, beneficial ownership information (BOI) reporting deadline for those entities subject to the BOI reporting mandate that were in existence prior to January 1, 2024. (CR Title V, Subtitle C, §122) It is unclear at this stage whether the CR will pass in its current form.

If this provision is enacted as currently proposed, it would not impact the requirement that entities subject to the mandate that are formed in 2024 file their initial report within 90 days of formation and those entities formed after 2024 file their reports within 30 days of formation. However, the preliminary injunction put in place by the U.S. District Court in East Texas has put these requirements on hold, at least for now. (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

We will send another Flash E-mail with any further developments.

The text of the proposed continuing resolution is available at:

https://go.spidell.com/e/837113/billsthisweek-20241216-CR-pdf/5ywwz8/2361706954/h/NipYP-gAC36lbHc-j29GKOo-YzOsQkWr-0JzCz7kH2Q

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President Biden has signed the Federal Disaster Tax Relief Act (H.R. 5863; P.L. 118-148). As we previously reported, the bill:

• Retroactively excludes from gross income qualified wildfire relief payments paid to individuals as compensation (other than insurance payments) for losses, expenses, or damages for any wildfire declared a federal disaster after December 31, 2014 (§3, H.R. 5863);
• Treats disaster relief payments to victims of the East Palestine, Ohio, train derailment as excludable IRC §139(b) payments (§3, H.R. 5863); and
• Allows individual victims with a net disaster loss from any taxable year to claim an enhanced personal casualty loss under IRC §165(h) for certain federally declared disasters that occurred after February 24, 2021. (§2, H.R. 5863)

We anticipate that the IRS will issue additional guidance shortly, and we will keep you posted as updates become available.

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Each transferor and transferee that is a party to a sale or exchange of an interest in a partnership (or portion thereof) involving unrealized receivables and inventory (§751 property) must receive IRS Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, from the partnership by the later of:

• January 31 of the year following the calendar year in which the transaction occurred; or
• 30 days after the partnership has received notice of the exchange.

Partnerships that fail to timely furnish Form 8308 to parties involved in the sale are subject to penalties under IRC §6722 for failure to furnish correct payee statements (up to $250 per statement).

Recent changes made to Form 8308 have raised concerns that partnerships may not be able to acquire all information necessary to properly report Form 8308 by January 31, 2025, for transactions occurring in 2024.

Due to these concerns, the IRS has announced that it will not charge penalties under IRC §6722 to partnerships that are required to furnish Form 8308 for transactions occurring in 2024 as long as the partnerships:

• File Form 8308 with Parts I, II, and III completed by the later of:
  • January 31, 2025; or
  • 30 days after the partnership has received notice of the exchange; and
• File Form 8308 with Part IV completed by the later of:
  • The due date of the partnership’s 2024 Form 1065 (including extensions); or
  • 30 days after the partnership has received notice of the exchange.
    ​​​​(IRS Notice 2025-2)

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The Senate has passed the Federal Disaster Tax Relief Act of 2023 (H.R. 5863).

If enacted, the bill would:

• Exclude from gross income qualified wildfire relief payments paid to individuals as compensation (other than insurance payments) for losses, expenses, or damages for any wildfire declared a federal disaster after December 31, 2014 (§3, H.R. 5863);
• Treat disaster relief payments to victims of the East Palestine, Ohio, train derailment as excludable IRC §139(b) payments (§3, H.R. 5863); and
• Allow individual victims with a net disaster loss from any taxable year to claim an enhanced personal casualty loss under IRC §165(h) for certain federally declared disasters that occurred after February 24, 2021. (§2, H.R. 5863)

The bill previously passed the House and will now be sent to the President. It is expected that President Biden will sign the bill.

The text of the bill is available at:

www.congress.gov/bill/118th-congress/house-bill/5863/text

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A federal district court in Texas issued a nationwide preliminary injunction against enforcing the beneficial ownership reporting requirements mandated by the Corporate Transparency Act (CTA). (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

The court ruled that Congress exceeded its authority in enacting the CTA, resulting in an unconstitutional infringement on states’ rights to regulate businesses. The court granted a nationwide injunction prohibiting FinCEN from enforcing the January 1, 2025, reporting deadline for all reporting companies.

The opinion was issued on December 3, 2024, and will likely be appealed. However, for now, businesses do not have to file beneficial ownership information reports with FinCEN.

We will continue to update you as news develops on this issue.

The opinion is available at:

www.caltax.com/files/2024/ttcsvgarland.pdf

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The IRS is extending the Research Credit claim transition period through January 10, 2026. (www.irs.gov/newsroom/irs-sets-forth-required-information-for-a-valid-research-credit-claim-for-refund) This means that for refund claims filed on or before January 10, 2026, taxpayers will be given a 45-day period to provide the required information for previously submitted claims.

In October 2021, the IRS initially set forth the additional information that taxpayers are now required to include for a Research Credit refund claim. (Chief Counsel Memorandum 2021401F) Taxpayers were given a transition period, during which taxpayers were given up to 45 days to perfect a previously submitted return. Since that time, the IRS has extended the transition period three times.

Pursuant to CCM 2021401F, as modified in subsequent guidance, taxpayers must provide the following information when claiming a Research Credit refund:

• Identify all the business components to which the IRC §41 Research Credit claim relates for that year;
• For each business component, identify all research activities performed; and
• Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year.

This may be done using Form 6765, Credit for Increasing Research Activities.

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The IRS is providing transition relief for third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces (e.g., Venmo, Amazon, etc.), regarding transactions during calendar years 2024 and 2025. (IRS Notice 2024-85) Although the American Rescue Plan Act required that TPSOs file 1099-Ks for all amounts paid to a payee if they exceed $600 in aggregate beginning with the 2022 calendar year, the IRS has previously delayed implementation.

According to the IRS’s latest guidance, TPSOs must file 1099-Ks to report transactions when the amount of total payments for those transactions is more than:

• $5,000 in 2024;
• $2,500 in 2025; and
• $600 in calendar year 2026 and after.

In addition, the IRS will not assert penalties under IRC §6651 or §6656 for a TPSO’s failure to withhold and pay backup withholding tax during the 2024 calendar year.

TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.

For calendar year 2025 and after, the IRS will assert penalties under §6651 or §6656 for a TPSO’s failure to withhold and pay backup withholding tax.

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The IRS announced that it is extending the deadline for third-party payers to file corrected ERC claims from November 22, 2024, to December 31, 2024. (e-News for Tax Professionals 2024-47) As we reported previously, this consolidated claim process allows third-party payers who filed ERC claims for multiple clients on a consolidated basis to withdraw the ERC claims for some, but not all, of the prior claims.

Details about who is eligible and how third-party payers can apply are available in our September 26, 2024, Flash E-mail.

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The FTB has stated that California will conform to additional federal disaster-related postponement relief related to disasters that occurred outside California (see our October 15 Flash E-mail for earlier announced relief). This additional relief includes, but is not limited to, relief provided to victims of Hurricanes Helene and Milton.

For taxpayers filing California returns, California conforms to the postponement relief provided to affected taxpayers related to the disasters listed below.

Taxpayers should write the name of the disaster (for example, “Florida Hurricane Milton relief per FL- 2024-10”) in blue or black ink at the top of their tax return to alert the FTB. If taxpayers are filing electronically, they should follow the software instructions to enter disaster information.

See the following FTB webpage for additional information:

www.ftb.ca.gov/file/when-to-file/disasters-outside-california.html

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In IRS Notice 2024-80, the IRS announced the inflation-adjusted retirement figures for 2025. Key adjustments contained in the notice include, but are not limited to:

• The IRA contribution limit and catch-up contribution limit will remain at $7,000 and $1,000, respectively. Also included in the Notice are the increased income phase-out ranges;
• The SIMPLE contribution limit for businesses with 25 or more employees is increased from $16,000 to $16,500, while the catch-up contribution amount for most employees age 50 and older remains at $3,500 ($5,250 for employees aged 60, 61, 62, or 63). For businesses with fewer than 26 employees, the contribution limit is $17,600 and the general catch-up contribution limit remains at $3,850;
• The annual contribution limit for IRC §§401(k), 403(b), 457 governmental plans, and the federal government’s Thrift Savings Plan is increased from $23,000 to $23,500, while the catch-up contribution for most employees 50 and older remains at $7,500. However, employees aged 60, 61, 62, and 63 can make a catch-up contribution of up to $11,250; and
• The qualified charitable distribution limit is increased from $105,000 to $108,000.

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Effective November 23, 2024, FTB Secure E-mail users will no longer be required to register with the FTB or log in with a password to open an encrypted e-mail. (FTB Tax News, November 2024) Instead, to view a Secure E-mail message from the FTB, users will be told to click on a button to view the e-mail and then will be given the option to either:

• Re-sign in to their e-mail account; or
• Sign in with a one-time passcode that will be sent to their e-mail account (the one-time passcode will expire after 15 minutes).

Any existing e-mail messages received from, and replied to, the FTB through FTB Secure E-mail before the November 23, 2024, update will only be retrievable through December 8, 2024. After December 8, 2024, e-mail messages received and sent to the FTB before the update will be purged and will not be retrievable.

Tax professionals should ensure they print out or otherwise memorialize these e-mails prior to December 9, 2024.

Any encrypted e-mail messages received from, and replied to, the FTB on or after the November 23, 2024, update will be subject to a 90-day retention period unless deleted earlier by the user.

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FinCEN has announced filing postponement relief of up to six months for victims of five recent hurricanes. However, as noted below, the deadlines postponed vary depending on which hurricane is involved. Only victims of Hurricane Milton qualify for relief from the original filing deadline of January 1, 2025, for businesses that formed prior to January 1, 2024.

For all hurricanes listed below, to qualify for the postponement relief the reporting company must have its principal place of business in an area designated both by:

• The Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance (see www.fema.gov/disaster/current); and
• The IRS as eligible for tax filing relief (see www.irs.gov/newsroom/tax-relief-in-disaster-situations).

In addition, FinCEN will work with any reporting company whose principal place of business is outside the disaster areas but that must consult records located in the affected areas to meet the deadline. Reporting companies with a principal place of business outside the affected areas and that are seeking assistance in meeting their filing obligations should contact FinCEN at www.fincen.gov/boi.

The six-month postponement relief only applies to reporting companies with an initial or updated BOI filing deadline that falls within the periods listed below based on the hurricane involved:

• Hurricane Milton: Between October 4, 2024, and January 2, 2025 (see FIN-2024-NTC11);
• Hurricane Helene: Between September 22, 2024, and December 21, 2024 (see FIN-2024-NTC10);
• Hurricane Francine: Between September 8, 2024, and December 7, 2024 (see FIN-2024-NTC9);
• Hurricane Debby: Between July 31, 2024, and October 29, 2024 (see FIN-2024-NTC8); and
• Hurricane Beryl: Between July 4, 2024, and October 2, 2024 (see FIN-2024-NTC7).

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The IRS has released inflation adjustment figures for over 60 tax provisions, including the 2025 tax rate tables. (Rev. Proc. 2024-40) Other key adjustment figures include:

• Standard deduction: Increased to $30,000 for married filing joint (MFJ); $22,500 HOH, and $15,000 for single and married filing separate taxpayers;
• Estate tax basic exclusion amount: Increased to $13,990,000;
• Annual gift tax exclusion: Increased to $19,000;
• IRC §179 current expense limitations: The dollar limit is increased to $1,250,000 ($31,300 for sports utility vehicles) and the investment limit is increased to $3,130,000;
• IRC §199A threshold and phase-in range amounts: The threshold is increased to $197,300 ($394,600 MFJ). The phase-in range amount is also increased to $247,300 ($494,600 MFJ); and
• Excess business loss threshold: The threshold is increased to $313,000 ($626,000 MFJ).

The retirement-related inflation adjustment figures are not included in Rev. Proc. 2024-40. These are announced separately, usually in November.

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The FTB has confirmed that California will conform to 29 instances of federal disaster-related postponement relief related to disasters that occurred outside California. However, to date, the California Department of Finance has not determined whether California will conform to relief granted to taxpayers affected by Hurricanes Helene and Milton; the Washington wildfires; the recent storms, tornadoes, and flooding in Illinois; or the September 25, 2025, deadline for the victims of the terrorist attacks in Israel.

As we’ve previously reported, due to legislative changes made by SB 167 (Ch. 24-34), the Department of Finance is now responsible for determining whether, and to what extent, California will conform to federal disaster postponements.

For taxpayers filing California returns, California is conforming to the postponement relief provided to affected taxpayers related to the disasters listed below.

Taxpayers should write the name of the disaster (for example, Iowa storms per IA-2024-04) in blue or black ink at the top of their tax return to alert the FTB. If taxpayers are filing electronically, they should follow the software instructions to enter disaster information.

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With the January 1, 2025, beneficial ownership information (BOI) reporting deadline looming for those entities formed prior to January 1, 2024, FinCEN has released two dozen more FAQs.

Highlights of the FAQs address the following:

• Unauthorized practice of law: FinCEN confirms that state law generally governs whether a third-party service provider submitting a BOI report is engaged in the unauthorized practice of law. Spidell is unaware of any state taking the position that submitting a BOI report is the unauthorized practice of law. However, Spidell strongly encourages tax professionals to contact their malpractice insurance carriers to see if this service is included in professional liability coverage (FAQ B.9);
• Impact of community property laws: Businesses must look to each state’s community property law to determine whether a spouse of an owner with at least a 25% ownership interest in the reporting company is also a beneficial owner (Spidell note: Under California’s community property law, spouses each own an undivided interest in the whole of community property, so if one spouse owns a 25% interest in a company, both spouses are treated as if they own a 25% interest and should be reported as beneficial owners.) (FAQ D.18);
• Impact of entity conversions: An entity that undergoes a conversion must file a new BOI report if under the state law a conversion results in the creation of a “new” domestic reporting company. A new report is also required if an entity ceases to exist in one state and forms in another state. An updated report, and not a new initial report, must be filed if under state law a new entity is not created because of the conversion, but the entity’s name is changed (e.g. ABC, Corp. to ABC, LLC) (FAQ C.18); and
• Registration in other state(s): Once an entity files an initial BOI report in the jurisdiction in which it is formed or initially registers, it does not have to file another or updated report if it subsequently registers in another state(s) (FAQ C.19).

The updated FAQs are available at:

https://fincen.gov/boi-faqs

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The IRS is postponing various filing and payment deadlines to May 1, 2025, for affected taxpayers in the following states:

• Alabama (entire state): For deadlines that occurred beginning on September 22, 2024 (IRS AL-2024-05);
• Florida (41 counties): For deadlines that occurred beginning on September 23, 2024 (IRS FL-2024-08);
• Georgia (entire state):  For deadlines that occurred beginning on September 24, 2024 (IRS GA-2024-08;
• North Carolina (entire state): For deadlines that occurred beginning on September 25, 2024 (IRS NC-2024-08);
• South Carolina (entire state): For deadlines that occurred beginning on September 25, 2024 (IRS SC-2024-08);
• Tennessee (8 counties): For deadlines that occurred beginning on September 26, 2024 (IRS TN-2024-01); and
• Virginia (six counties and one city): For deadlines that occurred beginning on September 25, 2024 (IRS VA-2024-01).

The relief applies to, but is not limited to, the following deadlines:

• 2023 individual, business, and tax-exempt organization extended 2023 tax year filing deadlines;
• 2024 individual and business returns and payments normally due during March or April 2025;
• 2024 quarterly estimated income tax payments normally due on January 15, 2025, and 2025 estimated tax payments normally due on April 15, 2025; and
• Quarterly payroll and excise tax returns normally due on October 31, 2024, and January 31 and April 30, 2025.

In addition, businesses are also eligible for penalty relief related to payroll and excise tax deposits. This relief varies by state. Taxpayers can find additional information, organized by state, on the IRS Around the Nation webpage.

The IRS notes that many of the areas listed above had previously received relief following Tropical Storm Debby. These taxpayers’ filing and payment deadlines are now extended until May 1, 2025.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief. All other taxpayers who are not located in the disaster area but whose records or tax preparer is in the listed area should call the IRS Disaster Hotline at (866) 562-5227 for relief.

We have reached out to the California Franchise Tax Board to determine whether California will conform to this postponement relief for affected taxpayers who have California filing requirements.

The IRS announcement is available at:

www.irs.gov/newsroom/irs-provides-relief-for-helene-various-deadlines-postponed-to-may-1-2025-part-or-all-of-7-states-qualify

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SB 422, which clarifies the responsibilities of loan-out companies and motion picture payroll services companies for the purposes of remitting unemployment insurance taxes and related obligations, including income tax withholding, was signed by Governor Newsom today.

Under the legislation, the loan-out company, solely for the purpose of remitting employment taxes, is deemed to be the employer of the employee-owners or members who are engaged by the loan-out company to provide services to a motion picture production company or an allied motion picture services company. SB 422 does not alter or modify any other laws with regard to loan-out companies or their employees, meaning that the motion picture company would likely still be treated as the employer for items such as wage and hour laws, etc.

Earlier this year, we reported that the EDD had been auditing and assessing motion picture payroll services companies on the basis that the motion picture companies and not the loan-out corporations were the employers of the loan-out corporation shareholders/employees. After passage of AB 5 and its adoption of the ABC test for purposes of determining whether a worker is an independent contractor or an employee, it has been unclear who is the employer when a motion picture company hires a person to work on a production through a loan-out corporation.

The legislation states that the changes made by SB 422 regarding who is responsible for remitting the employment taxes “is declaratory of, and not a change in, existing law.”

The text of SB 422 is available at:

https://go.spidell.com/e/837113/t-xhtml-bill-id-202320240SB422/5ybq14/2235661320/h/LNOBHXfo3vt_R14tCe5LSBj4EGlHmwDDFKfn34TYqdM

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The IRS has announced a special process available only to third-party payers (TPPs) to resolve incorrect ERC claims. (IR-2024-246)

The new process allows TPPs that filed prior ERC claims with multiple clients to effectively withdraw ERC claims for only some clients while maintaining other ERC claims. One of the hurdles to other ERC relief announced by the IRS was that TPPs that wanted to withdraw claims had to do so for all clients included on a joint filing.

The supplemental claims process is only available for TPPs to which all of the following apply:

• The TPP has filed one or more ERC claims aggregating credits for itself and/or clients using the TPP’s EIN;
• The TPP made the claim on an amended payroll tax return; and
• The IRS has not processed any of the claims the TPP is including in the supplemental claim and is not auditing these claims.

When filed, the supplemental ERC claim replaces an outstanding (and unprocessed) ERC claim. The IRS will treat claims filed before the supplemental claim as if they were never filed. Supplemental claims can only be filed to replace claims filed on or before January 31, 2024.

TPPs who file supplemental claims must file a separate claim for each tax period (payroll quarter) and all supplemental claims must be filed by 11:59 p.m. on November 22, 2024, which is the same due date as the second ERC Voluntary Disclosure Program. TPPs file supplemental claims by filing another amended payroll tax return for the applicable quarter.

TPPs looking for more information about filing supplemental ERC claims should review the IRS’s dedicated webpage on the topic. Go to:

www.irs.gov/coronavirus/filing-a-supplemental-claim-for-the-employee-retention-credit

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Final regulations governing the requirement for estates and beneficiaries to consistently report basis were issued on September 17, 2024, by the IRS. (TD 9991)

The elimination of the zero-basis rule is great news for estate beneficiaries. It means those assets will no longer be inherited with zero basis, and instead will follow traditional inherited basis rules.​​​​​​

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FinCEN has released new and updated FAQs regarding the beneficial ownership information (BOI) reporting requirements for entities that dissolve prior to their initial BOI reporting due date. The FAQs clarify:

• Reporting companies formed after 2023 must file their BOI reports even if they dissolve before their initial filing due date (90 days from date of formation for those entities formed in 2024 and 30 days for entities that form after 2024);
• These entities must still file their initial report, but there is no reporting requirement to file an additional report to report that the company has ceased to exist; and
• A foreign company is not required to file a BOI report if it ceased to be registered to do business in the United States before January 1, 2024. However, like domestic entities, a foreign company must file a report if it withdraws its registration at any time after 2023.

The FAQs are available at:

www.fincen.gov/sites/default/files/shared/BOI-FAQs-QA-508C.pdf

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The FTB’s webpage concerning automatic filing extensions for single-member LLCs (SMLLCs) to file their FTB Form 568, LLC Return of Income, has caused some confusion for taxpayers and their tax professionals. (www.ftb.ca.gov/file/when-to-file/due-dates-business.html)

The FTB’s webpage states that SMLLCs owned by passthrough entities receive a six-month extension (e.g., September 15 for calendar-year taxpayers). However, the six-month extension only applies to SMLLCs owned by an S corporation. SMLLCs owned by a partnership receive a seven-month extension (October 15 for calendar year taxpayers).

We have confirmed with the FTB that the webpage does not make this distinction, but the instructions to Form 568 clearly state that the filing extension period for SMLLCs owned by a partnership is seven months and six months for all other SMLLCs.

Bottom line, the filing extension period for SMLLCs to file a Form 568 is based on their ownership as follows:

• SMLLC owned by an individual (six-month extension): October 15 for a calendar-year filer (R&TC §18567);
• SMLLC owned by a partnership (seven-month extension): October 15 for a calendar-year filer (R&TC §18567(2)(B));
• SMLLC owned by an S corporation (six-month extension): September 15, for a calendar-year filer; see FTB Notice 2019-07)
• SMLLC owned by a C corporation (six-month extension): October 15 for a calendar-year filer. Note: This is different than the seven-month extension for corporations filing Form 100 that was granted by FTB Notice 2019-07. This is because FTB Notice 2019-07 specifically limits the seven-month extension period to Forms 100 and 100W.

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