One of the non-conformities between TCJA and Calif rules is the use of cash accounting methods for businesses with less than $25M in gross receipts. However, FTB Pub 1060 clearly states that the corporation’s accounting period and method must be the same as the federal, unless FTB initiates or approves a change. Is there any relief regarding this specific non-conformity? Can this pub. offer any protection for those that elect cash method while their gross receipts threshold is over $5M but less than $25M?
California does not currently conform to cash method of accounting. Pub. 1060 can only be viewed as general guidance and cannot be relied upon. (As an aside, the Form 100 Instructions specifically state that CA does not conform to the cash method of accounting.)
The Governor is proposing conformity to the cash method of accounting effective beginning with the 2019 tax year, with the option for taxpayers to elect to apply it to the 2018 tax year. However, we will not know until July whether this will actually become law. In the meantime we are advising folks to file an extension to see how this all plays out.