Tag Archives: CA taxes

State Tax Deduction Limit? California Fights Back.

What’s good for the goose….

By now many of us in California have contemplated our fate regarding how the tax reform act passed by Congress last month will likely hurt Californians as a result of the federal limit on the state and local tax deduction for individual taxpayers.

In an effort to mitigate the limit of this deduction for Californians, state lawmakers have quickly looked to alternatives.

New Tax Plan – limited deduction

For residents of California and other high tax states, a major item of concern in the tax act is the cutback of deductions for state and local taxes (SALT). Taxpayers will now be able to deduct only up to $10,000 in SALT, including property taxes.   According to this recent LA Times article, limiting the SALT deduction could affect as many as 6 million Californians. California taxpayers accounts for almost 20% of all SALT deductions, which is the highest state in the nation.  Other states with large amounts of SALT deductions include New York, New Jersey and Connecticut, perhaps not coincidentally – all “blue” states.

How to mitigate the problem?

One option proposed last week by Senate President pro Tempore Kevin de Leon (D – Los Angeles), would be to recast state and local taxes as charitable contributions, which remain fully deductible under the GOP tax act.   SB227 (known as the “Protect California Taxpayers Act”) would allow California taxpayers to make a charitable donation to a government entity, the California Excellence Fund, in the amount of their state taxes.  They would then receive a dollar for dollar tax credit on their CA tax return in the amount of the donation.  (For example, a taxpayer owing $15,000 in property taxes, might pay this amount to the Excellence Fund. The taxpayer then gets a tax credit for the entire $15,000 on their CA return. On the federal tax return, the taxpayer correctly classifies this amount as a charitable contribution, which is not limited to the $10,000 SALT rule.  So, by essentially reclassifying the property tax as a contribution, the taxpayer still gets the full deduction for the entire $15,000, rather than just $10,000 on their federal return.)

Playing Devil’s Advocate?

So, that all sounds good. But will the IRS allow it?  Will Congress?

What constitutes a charity? The Internal Revenue Service (IRS) and federal courts have ruled that government entities can qualify as charities for the purpose of the charitable deduction, even when the donor receives a full state or local tax credit in return.  California and other states already have similar programs in place. For example, CA has a College Access Fund, which grants a 50% tax credit for contributions to the Cal Grants Program, which aids low-income college students.  17 additional states use a similar model to fund private education.

While the proposal is certainly creative, and has some defendable history behind it, we recommend to be cautiously optimistic about its ultimate passage in the state and then whether Congress will find a way to shut it down by passing further clarifying legislation.

For more information regarding this act published by the San Joe Mercury News, click here.

Stay tuned for further updates!

If you have any questions, please don’t hesitate to contact us at info@milesconsultinggroup.com. We are happy to help with all of your tax needs.


Is Moving the Answer to High CA Taxes? Beware!

This is a picture of the sky with a California sign.

Are taxes in CA making you consider relocating?

As any business owner knows, taxes in California can be high. But should you relocate your company to another state? We get this question a lot, and there’s a two-part answer: It depends, and make sure you do it correctly.

Whether or not you move is dependent on your business’ specifics: credits and incentives you’re eligible for, if you can run your company effectively somewhere else, etc. Relocating your organization is a big ordeal; it takes much more than opening a PO Box in the neighboring state. It means picking up and moving your entire life. Continue reading

California’s New Tax Incentive? Jury Still Out.

California recently enacted a three pronged tax incentive program which benefits companies beginning in 2014. The newly established California Competes Tax Credit reached its first milestone, as the State accepted applications through the April 14, 2014 deadline. According to the California Governor’s Office of Business and Economic Development (“GO-Biz”), over 100 applications were received for the $30 Million in allocated credits for the fiscal year ending 6/30/14. The companies that applied on-line for the tax incentive will now be vetted by representatives from Go-Biz to see if they make it to Phase II and then ultimately receive tax credits. A hearing of the California Competes Tax Credit Committee is scheduled for June 19th in Sacramento to decide the final recipients.

So, what is the California Competes Tax Credit?

The California Competes Tax Credit  is a recently enacted income tax credit available to businesses that plan to relocate to the Golden State OR for companies already in the state planning to expand California operations.  Continue reading

Marketplace Fairness Act – Ebay, Overstock and Amazon, Oh My!

The proposed Marketplace Fairness Act has pros and cons for CA businesses.

The proposed Marketplace Fairness Act has pros and cons for CA businesses.

The Marketplace Fairness Act is a proposed  piece of legislation recently being considered by Congress that has the heads of many spinning in confusion. In today’s blog post, we introduce the basic details of the Marketplace Fairness Act and how it could affect you and your business if ultimately enacted.



3 Marketplace Fairness Act Questions:

1.      What is it? The Marketplace Fairness Act is proposed legislation being considered by the US Congress that would  allow individual states to encourage the collection of sales tax from remote vendors. Remote vendors include large online and catalog focused sellers like Amazon and Ebay, as well as smaller “Mom & Pop” internet retailers., which is the reason the proposed Act is controversial. It’s difficult to find a “one size fits all” solution.  Continue reading