As professionals we serve our clients in both direct and indirect methods. We believe that both are important.
We directly serve our clients when we assist them with their specific needs. In the area of taxes that generally means assisting them with the preparation of a tax return, providing advice on what the tax ramifications will be on decisions they must make, or handling a representation issue following their receipt of a letter from a tax authority of the government.
We indirectly serve our clients when we work to change the tax environment that our clients and community must live and work in. To aid in this process, we co-labor with colleagues through professional organizations. In California that organization is the California Society of Enrolled Agents (CSEA). We are involved in supporting and lobbying on legislation that we believe is in the best interest of our clients.
Advocacy Day 2017
In 2017 our advocacy day in the Capitol was Monday, January 9. The issues we raised related to the Power of Attorney process (see below), public Awareness of Tax Help Day (first Saturday of February), and sales or use tax on personal services. We personally met in the offices of:
Current Legislation & Efforts
In 2016 one of the items of major focus with the Legislature was educating them on issues related to the MyFTB website established by the Franchise Tax Board (FTB). This site was created in response to legislation requiring state agencies to provide online access and services to California residents. The FTB has a great site, but in attempting to balance that with taxpayer privacy created a roadblock in the system. The Taxpayer Bill of Rights requires that taxpayers have access to representation in all matters before the government. A taxpayer establishes this representation relationship by signing a Power of Attorney (POA) which the practitioner submits to the FTB.
We are happy that during 2017 our efforts have led to reducing the required time to process a POA to 30 days. For 2016 the processing of POAs was 4-6 weeks when submitted electronically through MyFTB, and 90 days when submitted via FAX. Letters received by taxpayers normally require action within 30 days. With those timing conflicts, taxpayers are not being afforded their rights for representation. Clearly a 30-day processing time is not compatible with 30-day notice letters, and we therefore continue to work with the FTB to address this. Numerous Legislators are stepping in to help drive us to a solution.
Recent California tax-related news (June 2017) includes an audit of the Board of Equalization (BOE) and some adverse findings. In response to that two bills were introduced - Senate Bill 86 and Assembly Bill 102. CSEA (along with numerous other organizations) opposed this legislation as inherent in the proposed changes are serious degradation of taxpayer rights. These bills were passed in 72 hours after drafting (which is unheard of). We are continuing to work to resolve and (assuming these bills are signed by our Governor).
CSEA supports conformity between federal and California tax law. For that reason, CSEA worked in opposition to Senate Bill 567 as it would reduce our tax-law conformity.
Additional Bill Involvement
There are a number of bills that CSEA opposed and those bills at this point are effectively dead for the current legislative session. The following bills are still active and CSEA is engaged in each.
AB 525 - BOE Offer in Compromise - currently taxpayers are allowed to file or submit an offer in compromise relative to certain tax liabilities. Under current law this right is due to expire December 31, 2017. This bill would extend this taxpayer right to December 31, 2022. CSEA is working to ensure this bill is enacted into law. It is significant that the Legislature is considering extending this pro-taxpayer program indefinitely. AB 525 is in the Senate and expected to pass the Senate Floor in the coming weeks.
SB 11 - Interest and Penalties on BOE Tax Liability - prohibits the assessment of interest and penalties for failure to make timely payments if such failure is attributed to a failure of the BOE website, providing that payment is made within a reasonable time after the website outage is resolved. (It may be hard to believe, but taxpayers were being saddled with penalties and interest for no fault of their own when the BOE website or systems failed.) CSEA is working to ensure this bill is enacted into law. We expect the Assembly to vote on SB 11 the week of August 21, and then go to the Governor in the coming weeks.
SB 434 - Personal Income Tax for Mortgage Forgiveness - with the mortgage crisis around 2008 both the federal and California governments enacted provisions to allow individuals to exclude from taxable income certain cancellation of debt income related to the mortgage of a personal residence provided it is based on acquisition indebtedness. On multiple cases the federal government has extended that provision, currently expired at the end of 2016. The California provision expired at the end of 2013. This bill would extend this forgiveness retroactive through the end of 2016 in conformity to federal tax law. This bill would also limit the provision to a mortgage balance of $250,000 (or $125,000 if married-filing-separately). As part of conformity to federal tax law, CSEA is working to get this bill enacted into law, but the concept seems to have an uphill battle in the Governor's office.
We sponsored AB 871 – Statement of Information (SOI) Filing Date Proposal – This bill would change the Statement of Information filing date from the date an entity was formed to a date based on the entity’s type (i.e., the due date for the tax return - easily remembered). Due to anticipated costs in the Secretary of State office, they are moving toward an administrative solution in lieu of this bill.
We supported 2015-2016 SB 35 – Income and corporation taxes: deductions: disaster relief: Counties of Napa, Solano, and Sonoma – This bill extended the provisions relating to disaster losses to any that are proclaimed by the Governor to be in a state of emergency and extended the time during which a taxpayer may claim the deduction. This conformed California treatment of disasters to federal treatment and accelerates aid. It removed the current requirement for the State Legislature to create and pass a specific aid bill each time there is a disaster (e.g., earthquake).
We sponsored 2013-1014 SB 1131 – Income tax: withholding: limited liability company – This bill expanded SB 1244 (see below) to include personal income tax (PIT) withholding. This bill was a technical correction to SB 1244 that inadvertently only changed the law for unemployment insurance and disability insurance withholding.
We sponsored 2009-2010 SB 1244 – Employment: taxes and contributions: limited liability company – This bill amended the payroll tax laws so that while "employee" does include owners of an LLC taxed as a corporation (where owners are paid as employees), the term does not include owners of an LLC taxed as a partnership (where owners receive guaranteed payments and not a salary or wages). This clarification resolved payroll withholding problems in the State of California for LLCs.