Governor Budget Proposal - AB150 & SMLLCs. What is being fixed? - Spidell

Governor Budget Proposal – AB150 & SMLLCs. What is being fixed?

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Message Board Governor Budget Proposal – AB150 & SMLLCs. What is being fixed?

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    • #331609
      Anonymous
      Participant

      It is unclear what the Governor’s proposal is meant to fix with regards to SMLLCs.  There are 2 current problems with SMLLCs:

      1. A SMLLC taxed as an individual (not a partnership nor an S-Corp) is not a <span style=”text-decoration: underline;”>disqualifying entity</span>.
      2. A SMLLC that is a partner in a partnership or an S-Corp is not a <span style=”text-decoration: underline;”>qualifying taxpayer</span>. If the entity elects to participate, the SMLLC-partner is prohibited from consenting.

      I believe the Governor is only trying to fix #2.

      Here is the text from the Budget Summary:

      Second, taxpayers who own their share of a business through a disregarded entity, such as a single-member Limited Liability Company, cannot participate in this tax and credit program. To remedy this, the Budget proposes statutory changes to … allow businesses owned by individuals using a disregarded entity to participate in the program.

      It’s the words “their <u>share</u> of a business” that makes me think they are only fixing #2

    • #331610
      Anonymous

      Reposting without the illegal underlines

      It is unclear what the Governor’s proposal is meant to fix with regards to SMLLCs.  There are 2 current problems with SMLLCs:

      1. A SMLLC taxed as an individual (not a partnership nor an S-Corp) is not a disqualifying entity.
      2. A SMLLC that is a partner in a partnership or an S-Corp is not a qualifying taxpayer. If the entity elects to participate, the SMLLC-partner is prohibited from consenting.

      I believe the Governor is only trying to fix #2.

      Here is the text from the Budget Summary:

      Second, taxpayers who own their share of a business through a disregarded entity, such as a single-member Limited Liability Company, cannot participate in this tax and credit program. To remedy this, the Budget proposes statutory changes to … allow businesses owned by individuals using a disregarded entity to participate in the program.

      It’s the words “their share of a business” that makes me think they are only fixing #2

    • #331779
      Celia Lau
      Participant

      My understanding is in line with yours – that they’re addressing #2 and would allow SMLLCs to consent.

    • #331799
      Anonymous

      Edit to #1, above:

      1. A SMLLC taxed as an individual (not a partnership nor an S-Corp) is not a qualifying entity.

      I could be wrong, but in the Spidell update class last week, it sure seems like the presenter indicated that the Governor’s proposal would allow a SMLLC (taxed as an individual) to pay the PTE tax.  I don’t think that is what the Governor is doing.  However, that would be a smart move as there would be an explosion of new CA LLCs.

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