New Laws Archives

Gig Economy and Other Worker Classification May Differ for Federal and California Purposes

Nearly a year ago, the U.S. Department of Labor issued an opinion that most "gig economy" workers are properly classified as independent contractors.

Good News for the Cannabis Industry?

As recently discussed here, the current state of the law allows business owners in the cannabis industry to take certain deductions on their state income tax returns, but not on their federal tax returns. That may soon change. The House Judiciary Committee approved the MORE Act (Marijuana Opportunity Reinvestment and Expungement Act) yesterday; now the bill will be reviewed by the House. If passed, marijuana will be removed from the list of federally controlled substances allowing business deductions for California cannabis business owners at the federal level. The bill provides for a 5% tax on marijuana products to fund programs to help people impacted by the "war on drugs."

How Will California's AB 5 Affect My Business?

Following the California Supreme Court decision in Dynamex Operations v. Superior Court, 4 Cal. 5th 903 (2018), which identified the "ABC Test" for worker classification for the purposes of California's wage and hour determinations under the IWC Wage Orders, and now with the passage and signing into law of Assembly Bill 5 (Gonzales) (2019 Cal ALS 296, 2018 Cal AB 5, 2019 Cal Stats. ch. 296.), which extended the Dynamex ABC Test to apply in workers' compensation insurance and EDD payroll tax determinations of status, we have been inundated with questions and issues arising out of these significant changes to California worker classification law. I have also noticed that California businesses and some experienced California practitioners are misinformed, or simply mistaken, about some elements of AB 5 and its potential effects on California businesses, independent contractors, and employees.

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.

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:

California Worker Classification Changed Significantly By AB 5

With the California Governor's approval of Assembly Bill No. 5 on September 18, 2019, worker classification law in the state has changed significantly by codifying the "ABC" test established in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018). A person who provides labor or services for remuneration is now presumed to be an employee for purposes of claims for wages and benefits, unless the hiring entity can demonstrate that:

California Governor Passes Sales and Use Tax Exemption for Trucks Used Out of State

The California Legislature recently passed Assembly Bill No. 321, which adds an exemption until January 1, 2024, to existing state sales and use tax laws related to "the sale of, or the storage, use, or consumption of, a new, used, or remanufactured truck with an unladen weight of 6,000 pounds or more that is purchased for use without this state." To claim the exemption, the taxpayer must provide:

Dynamex to Apply Retroactively in California Wage and Hour Cases, Says Ninth Circuit

A Ninth Circuit Court of Appeals panel presided over by Frederic Block recently issued its opinion in Vasquez, et al. v. Jan-Pro Franchising International, Inc., finding that the "ABC test" for worker classification adopted last year in Dynamex Ops. W. Inc. v. Superior Court should apply retroactively to all wage-and-hour cases in California.

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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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