October 2019 Archives

California Establishes Individual Healthcare Mandate Penalty Beginning January 1, 2020

While the federal penalty for failure by individuals to access health insurance under the Patient Protection and Affordable Care Act (also known as Obamacare) was eliminated by the Tax Cuts and Jobs Act of 2017, several states, including California, have instituted similar penalties. In California, Assembly Bill 414 (AB 414) (Bonta, Chaptered October 12, 2019) which takes effect on January 1, 2020, requires Californians to have qualifying health insurance coverage throughout the year.

Cannabis Businesses Can Now Deduct Expenses on California Tax Returns

California Governor Gavin Newsom recently signed AB 37 into law, which legalizes licensed state cannabis businesses including marijuana growers, processors, and sellers to take deductions for their business expenses on state income tax returns. It exempts these businesses from federal law section 280E, which categorizes cannabis sales under the "illegal sale of drugs" and therefore prohibits these businesses from writing off expenses as any other business would. To read AB 37 in full, click here.

Californian Sentenced to Nearly 2 Years in Prison for Failing to Report Offshore Accounts on Federal Tax Returns

Teymour Khoubian, a businessman based in Southern California, was recently sentenced to 21 months in prison for filing false tax returns that failed to report his offshore accounts in Germany and Israel from 2005 through 2011, representing a total tax loss to the U.S. of about $1.2 million. In addition to the prison sentence, Khoubian was ordered to pay over $600,000 in restitution to the Internal Revenue Service (IRS) and penalties of over $7 million.

IRS Issues Guidance on Taxation of Virtual Currency Blockchain Transactions

The Internal Revenue Service (IRS) recently issued guidance for taxpayers who transact in virtual currency. Revenue Ruling 2019-24 (available here) addresses when distributions of new currency following a soft or hard fork will be a taxable event to the holder of the currency. The IRS also expanded its FAQ page on virtual currency transactions (here).

CDTFA to Hold Interested Parties Meeting on the Marketplace Facilitator Act

The California Department of Tax and Fee Administration (CDTFA) recently released its Initial Discussion Paper for the Interested Parties Meeting it is hosting on October 15, 2019, in Sacramento to discuss and clarify the Marketplace Facilitator Act established in April by Assembly Bill 147. The main goal of the meeting is to determine what, if any, regulations may be adopted to make new registration requirements clear for business owners.

CDTFA Releases Its First Annual Report on California Sales and Use Tax

The California Department of Tax and Fee Administration (CDTFA) recently released its first annual report on the administration and enforcement of the state's sales and use tax programs. During FY 2017-18, the CDTFA managed nearly 1 million sales and use tax permits and processed over 2.2 million sales and use tax returns, resulting in the collection of more than $70 billion, including over $1 billion in delinquent taxes.

New California Bill Clarifies Worker Classification Test for Professions Excluded from AB 5

On October 2, 2019, the Governor of California approved Assembly Bill 170, which details the alternative test for workers to be classified as Independent Contractors within professions that are specifically excluded from the provisions of Assembly Bill 5, which was approved last month. Workers under AB 5 are presumed to be employees unless the hiring entity demonstrates that their workers pass the 3-part "ABC" test from Dynamex Operations W. Inc. v. Superior Court, (2018) 4 Cal.5th 903, as discussed previously here. Certain professions, however, such as licensed insurance agents, direct sales salespersons, and real estate licensees, are excluded from the ABC test, and instead worker classification in those professions will be determined by conditions set forth in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, (1989) 48 Cal.3d 341, namely:

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For more information about our tax law services, or to discuss your tax matter, call our Sacramento office at (916) 488-8501 or toll free at (800) 684-7147. You may also send us an inquiry via email.

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