Tax-deferred exchanges, involuntary conversions and more conformity on the chopping block  

For taxable years beginning on or after January 1, 2010, AB 2640 (Arambula) would repeal California’s long time conformity to:

• IRC §1031, relating to like-kind exchanges;
• IRC §1033, relating to involuntary conversions;
• IRC §1035, relating to tax-sheltered annuities;
• IRC §1036, relating to stock for stock exchanges; and
• IRC §132(f), relating to employer-provided parking.

AB 2640 would also exempt from sales and use taxes the gross receipts from the sale of, and the storage, use, or other consumption of, certain manufacturing equipment.

After speaking with Assembly member Arambula’s office about this bill, it is Spidell’s understanding that the proposal to repeal long time conformity provisions is a “starting point” for the legislature to review and “effectiveness and appropriateness” of California’s revenue losers. (Telephone Conversation with Assembly member staff on March 3, 2010)

After pointing out the employment and income tax headaches that would result in repealing just one of the provisions on the list — employer-provided parking — Assembly member Aramubula’s staff said that they’d be interested in looking at California-only tax expenditures. However, enterprise zone credits would not be considered.

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