Today, the House of Representatives passed the One Big, Beautiful Bill Act (OBBBA; H.R. 1) and sent the bill to President Trump for his signature by his July 4th deadline.

The House agreed to the 870-page Senate bill, which would not only make the TCJA individual provisions permanent (with some modifications), but would also make permanent 100% bonus depreciation, IRC §174 domestic research expensing, and the easing of the business interest limitations . The SALT limitation is increased to $40,000 without any restrictions for passthrough entity elective taxes or other SALT limitation workarounds.

Also included are the President’s campaign pledges of “no tax” on tips, “no tax” on overtime, a personal interest deduction for loans on domestic vehicle purchases, and an early end to many of the energy credits and incentives enacted by the Inflation Reduction Act.

The bill also provides expanded disaster relief for victims of federal disasters that occurred this year and prior to 60 days of OBBBA’s enactment (if the disaster incident period ends within 30 days of OBBBA’s enactment). This will allow Los Angeles and Kentucky wildfire victims and storm victims in various states where federal disasters occurred in 2025 to claim personal casualty losses even if they don’t itemize deductions and would eliminate the 10% AGI limit and increase the $100 limit per casualty to $500.

Spidell is offering a two-hour webinar on July 15 to cover key highlights and planning opportunities from the bill. Register here.

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This morning the Senate passed their version of the One Big, Beautiful Bill Act that mirrors much of the House’s bill (H.R. 1) in terms of the tax provisions. However, there are differences in some of the provisions that will have to be resolved. Some of the key differences include:

• Although both versions would increase the SALT limitation to $40,000, the House version, but not the Senate version, would place restrictions on the SALT limitation for passthrough entity owners;
• The House version would increase the IRC §199A deduction to 23%, while the Senate version would keep it at 20%;
• The House version provides for a temporary senior bonus deduction of $4,000, while in the Senate version the deduction is $6,000; and
• The House version would only temporarily reinstate 100% bonus depreciation, full expensing of IRC §174 research expenses, and easing of the business interest limitation, whereas the Senate version would make these changes permanent.

The fastest path for the House to take to meet President Trump’s self-imposed July 4 deadline is for the House to pass the Senate version of the bill. It is unclear whether this is the course of action the House will take or if they will seek a compromise bill that will require an additional vote before both the House and Senate. We will continue to provide updates with the latest developments.

The latest version of the bill is available at:

www.caltax.com/files/2025/taxbilldraft4.pdf

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SB 132 (Ch. 25-17) was signed by the Governor on June 27, 2025, as part of the larger budget deal negotiated between California legislators and the Governor. As we reported earlier, key items included in the bill are provisions that:

• Extend the passthrough entity elective tax and Passthrough Entity Elective Tax Credit for an additional five years if the federal SALT limitation is extended. During this extended period, entities that do not make the required June 15 prepayment would still be able to make the election, but the amount of credit that can be claimed by the owners would be reduced by 12.5%. Note: Under both the House and Senate versions of the One Big, Beautiful Bill Act under consideration, the SALT limitation would be extended, but at higher amounts;
• Enact a new $20,000 military retirement pay exclusion for taxpayers with AGI of $125,000 or less ($250,000 MFJ and surviving spouses) for the 2025 through 2029 tax years;
• Exclude wildfire settlements received from a class action settlement administrator during the 2021 through 2030 taxable years; and
• More than double the allocation available for the Motion Picture and Television Credits.

We will provide further details in an upcoming issue of Spidell’s California Taxletter.^®

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Today the Senate is debating a revised One Big, Beautiful Bill Act (H.R. 1) that contains significant changes from some of the provisions contained in the draft bill released Friday. The changes that will have the most impact on our clients include:

• An increase in the SALT limitation of up to $40,000 for the 2025 through 2029 tax years (adjusted annually for inflation). The proposals that would have limited the deduction for passthrough entity owners and other SALT limitation workaround strategies have been removed from the bill;
• Retention of the current treatment of excess business loss carryovers. This means the carryovers would continue to be treated as a net operating loss;
• An acceleration of the repeal of various energy credits as follows:
  • The New Clean Vehicle Credit, the Previously-Owned Vehicle Credit, and the Qualified Commercial Clean Vehicle Credit would all be repealed for vehicles acquired after September 30, 2025;
  • The Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit would be repealed for property placed in service after 2025; and
  • The Clean Electricity Investment Credit and the Clean Electricity Production Credits would be repealed for solar and wind energy technology facilities placed in service after 2027. In addition, restrictions on supply sourcing for foreign countries of concern may make many of these investments ineligible once OBBBA is enacted.

The bill must be passed by the Senate and then sent back to the House for approval. It is unclear what, if any, additional changes will be made by the House. If changes are made by the House, they will have to be sent back to the Senate once again for approval.

We will send additional updates as the bill moves through this process.

The latest version of the bill, released on Friday, June 27, 2025, is available at:

www.caltax.com/files/2025/taxbilldraft3.pdf

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AB 132 and SB 132 were introduced on June 24, 2025, as part of the larger budget deal being negotiated in Sacramento between California legislators and the Governor. Key items included in the bills are provisions that would:

• Extend the passthrough entity elective tax and Passthrough Entity Elective Tax Credit for an additional five years if the federal SALT limitation is extended. During this extended period, entities that do not make the required June 15 prepayment would still be able to make the election, but the amount of credit that could be claimed by the owners would be reduced by 12.5%;
• Enact a new $20,000 military retirement pay exclusion for taxpayers with AGI of $125,000 or less ($250,000 MFJ and surviving spouses);
• Exclude wildfire settlements received from a class action settlement administrator during the 2021 through 2030 taxable years; and
• More than double the allocation available for the Motion Picture and Television Credits.

We will provide updates concerning these bills as they move through the legislative process.

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The IRS confirmed that, due to delays in processing electronic payments, it has been sending out erroneous balance due notices even though taxpayers timely made their payments. Taxpayers who paid tax reported due on their tax return electronically may see payments on their accounts as pending, although the IRS has received payment through the taxpayer’s banking institution.

According to the IRS, taxpayers who receive a notice but electronically paid the tax they owed in full and on time do not need to respond to the notice at this time. Taxpayers may monitor the status of their payments by viewing the payment activity page in their IRS online account. If the online account does not show the payment as processed by July 15, 2025, they may call the number on the notice.

The IRS has stated that any associated penalties and interest will be automatically adjusted when the payment(s) are applied correctly by the IRS.

Additional information is available at:

www.irs.gov/newsroom/irs-statement-on-delay-in-processing-some-electronic-payments

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Yesterday the Senate Finance Committee released their proposed tax changes to include in the reconciliation bill (aka the One Big, Beautiful Bill Act). Many of these provisions are similar to those that were passed by the House. However, there are some substantial differences, as outlined below.

At this stage it is unclear which version may make it across the finish line or when (if at all). We will continue to provide updates as these developments unfold.

Key differences from the House bill that are contained in the Senate version that would have the greatest impact on our clients include:

• An additional $1,000 ($1,500 HOH and $2,000 MFJ) increase in the standard deduction and a $6,000 deduction for seniors (rather than the $4,000 senior bonus deduction in the House bill);
• The SALT limitation would remain at $10,000 and be made permanent (rather than the $40,000 limitation contained in the House bill), although similar to the House bill there would be limitations on how passthrough entity elective taxes are treated;
• The Child Tax Credit would be increased to $2,200 beginning with 2025 tax year (increased from the $2,000 CTC adopted by the TCJA) and increased for inflation thereafter. The House version would make the TCJA inflation-adjusted $2,000 credit permanent, but would also increase the credit further to $2,500 for the 2025 through 2028 tax years;
• The IRC §199A qualified business income deduction would be made permanent, but would retain the current 20% deduction cap rather than increase it to 23%, and a minimum deduction would apply to small businesses;
• The No Tax on Tips deduction would be capped at $25,000 per individual, No Tax on Overtime would be capped at $12,500 ($25,000 MFJ), and both would begin to phase out at $150,000 ($300,000, MFJ);
• The 100% bonus depreciation deduction, IRC §174 current expensing for domestic research activities, and decreased business interest limitations would be made permanent, rather than temporary as in the House bill, but retroactive provisions would apply for the IRC §174 current expense deduction for certain taxpayers;
• The dependent care assistance exclusion would increase from $5,000 to $7,500 beginning with the 2026 tax year and the Child and Dependent Care Tax Credit would increase from a maximum 35% to 50%;
• Nonitemizers would be able to claim charitable deductions of up to $1,000 ($2,000 MFJ) rather than the $300/$600 cap in the House bill, but the deduction would be subject to additional limits for both individuals and corporations;
• The Senate bill does not contain many of the health savings account expansion provisions contained in the House bill;
• The qualified small business stock gain exclusion would be revised; and
• Different repeal dates would apply to the various clean vehicle and clean energy credits and deductions.

The draft language from the Senate Finance Committee is available at:

www.finance.senate.gov/imo/media/doc/finance_committee_legislative_text_title_vii.pdf

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In Notice 2025-33, the IRS extended some transitional relief for digital asset brokers by one additional year, meaning no penalties will be imposed for an additional year related to the backup withholding requirements.

Under the final regulations adopted in 2024 (89 FR 56480), digital asset brokers are not only required to report digital asset sales on Form 1099-DA but also perform backup withholding.

The relief in Notice 2025-33 extends certain relief provided last year in Notice 2024-56, including:

• Extending through the 2026 tax year an exemption from backup withholding requirements generally; and
• Extending through 2027:
  • The relief from backup withholding if the broker utilizes the IRS TIN Matching Program alternative procedure for obtaining taxpayer identification numbers (TINs) from preexisting customers who opened accounts prior to 2026;
  • The ability to treat certain preexisting customers as exempt foreign persons based solely on non-U.S. addresses; and
  • The ability to limit the amount of backup withholding in situations involving sales of digital assets for other digital assets.

The relief provided only applies to the backup withholding requirements. The broker reporting requirements remain unchanged. Brokers were required to file Form 1099-DA to report gross proceeds received from post-2024 sales of digital assets and will continue to be required to report the adjusted basis on certain digital assets after 2025 unless the sales are undertaken for a customer that is an exempt foreign person.

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The FTB has just announced that all of their online services are now back up and running. This includes MyFTB. FTB staff should now also be able to provide taxpayer information over the phone again.

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The FTB has announced that they are experiencing technical difficulties with some of their online services, such as MyFTB and the Minimum Essential Coverage information reporting. The biggest issues for tax professionals as the June 16 deadline approaches for passthrough entity elective tax prepayments and LLC fee estimated payments are:

• They cannot access MyFTB and will not be able to make payments on behalf of their clients through MyFTB, although they can continue to make payments through WebPay and electronic fund withdrawals (EFW) through their software; and
• FTB phone staff may not be able to access needed information to provide to tax professionals.

According to the FTB, these technical difficulties should not impact the ability to e-file returns or to accept payments through Web Pay and EFW.

The FTB is working diligently to get these systems back up as soon as possible.

In addition, FTB’s Santa Ana and Los Angeles field offices are temporarily closed, and as such, walk-in payment services in these offices may not be available.

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On June 12, 2025, California will begin offering grants of up to $20,000 to qualifying homeowners whose homes were destroyed or left uninhabitable in various fires, floods, and other disasters that have occurred from January 1, 2023, to January 8, 2025 (click here for a list of eligible disasters).

Under the CalAssist Mortgage Fund program, qualified homeowners can receive grants for three months of mortgage payments, up to a $20,000 maximum, that would be paid directly to participating mortgage servicers. These grants do not have to be repaid, and we believe they would qualify for the IRC §139 disaster relief exclusion on both the federal and California returns.

To qualify, a taxpayer’s primary residence must have been destroyed by a qualifying disaster and the taxpayer’s household income (essentially gross income for all persons on the mortgage or deed) must not exceed the program income limits, which are based on the county’s median income level.

The program is capped at $105 million and will be awarded on a first-come, first-served basis.

Additional information concerning the program is available at:

www.calassistmortgagefund.org/program-details#faq

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Over the last two weeks we’ve heard from numerous tax practitioners that their clients have been receiving erroneous notices from the IRS and the FTB. These agencies have confirmed that some notices were sent in error.

According to the FTB, in late April, they were alerted to an issue impacting entities filing their first-year return receiving erroneous notices related to the $800 minimum franchise tax. The FTB corrected the problem on April 30, 2025. As of May 1, 2025, all first-year corporation returns are being processed correctly. The FTB is identifying those entities impacted and correcting the accounts. If an entity or their representative receives a bill related to this issue, they should call the telephone number listed on the notice or check MyFTB to see if the issue has been resolved.

Additionally, the IRS has confirmed that CP161, Request for Payment or Notice of Unpaid Balance, is being erroneously sent to trust taxpayers for underpayment of estimated taxes. The IRS stated that this is a programmer error that the IRS is working to correct and that adjustments to impacted taxpayers should be resolved within a month. Taxpayers and/or tax practitioners can proactively call the IRS to request penalty abatement.

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The tax provisions of the One Big, Beautiful Bill Act (OBBBA; H.R. 1), which passed the House of Representatives on May 22, 2025, are largely the same as the version of the bill that was released on Monday, May 12, 2025. See Spidell’s Flash E-mail from May 12 for a summary of the bill’s major provisions.

Two significant changes that were made in the last-minute tax amendments to the OBBBA version that was passed by the House include:​​​​​

• An increase in the SALT itemized deduction limitation to $40,000 ($20,000 for married taxpayers filing separately) and an increase in the modified adjusted gross income phaseout threshold to $500,000 ($250,000 MFS); and
• Modifications to the excess business loss rules under IRC §461(l) that create a separate category of carryovers for excess business losses instead of treating them as net operating losses.

The bill passed by the House did not delete the modifications to the SALT limitation that effectively remove the benefits of state passthrough entity elective tax laws.

The final version of the bill, without the last-minute amendments, is available at:

www.congress.gov/bill/119th-congress/house-bill/1/text

And the supplemental amendments that were a part of the final bill are available at:

http://rules.house.gov/sites/evo-subsites/rules.house.gov/files/documents/rulesreport05212025_.pdf

This is just the next step in the evolution of this legislation, and we will continue to keep you posted as news develops on these pending provisions.

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A unanimous Senate passed the No Tax on Tips Act (S. 129), which, if enacted, would allow taxpayers to claim an above-the-line deduction of up to $25,000 in qualified tips beginning with the 2025 taxable year for those tips reported to their employer for payroll tax purposes. Qualified tips would be defined as cash tips received by an individual in the course of their employment in an occupation that traditionally and customarily received tips prior to 2024. These occupations would be determined by the Secretary of the Treasury.

Taxpayers who were considered highly compensated employees in the prior year ($155,000 for 2024, $160,000 for 2025) would be ineligible to claim the deduction.​​​​​

The bill would also expand the Employer Tax Credit for FICA paid on tip income to apply to tips provided to beauty service workers. Beauty services would be defined as barbering and hair care, nail care, esthetics, and body and spa treatments.

The No Tax on Tips Act is similar to the no tax on tips provision contained in the House’s The One, Big, Beautiful Bill Act (OBBBA). However, unlike the OBBBA provision, there is a cap on the amount of the deduction and there is no Social Security number requirement or sunset clause contained in the Senate’s bill.

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The 28-page draft bill originally released by the House Ways and Means committee has been expanded to a 389-page version officially titled The One, Big, Beautiful Bill. This expanded version makes changes to some of the provisions we originally announced, including:

• Increasing the IRC §199A deduction from 20% to 23% (previous version was 22%);
• A modified $30,000 cap on state and local tax deductions ($15,000 for married filing separately), with a phasedown for higher-income taxpayers (over $400,000/$200,000);
• Extending 100% bonus depreciation for qualifying property acquired January 20, 2025, through December 31, 2029;
• Reinstating immediate expensing of domestic research and experimental expenditures for tax years 2025 through 2029; and
• Reinstating a modified version of the overall limitation on itemized deductions.

This draft also introduces some new provisions, which include:

• Terminating all three clean vehicle credits (two in 2026 and one in 2027);
• Creating new “Money Account for Growth and Advancement” (MAGA) accounts, which are tax-advantaged savings accounts for children under age 8;
• New above-the-line deductions for qualified tips, qualified overtime compensation, and interest on passenger vehicle loans, through 2028;
• Reinstating the above-the-line deduction for cash charitable contributions ($150 for single filers and $300 for joint);
• Additional standard deductions of up to $4,000 for aged and/or blind with an AGI phaseout on this addition; and
• Increasing the 1099-K threshold to $20,000 and greater than 200 transactions, and the 1099-NEC/1099-MISC filing requirement from $600 to $2,000.​​​​​

There is still no mention of an increased exclusion or deduction for Social Security benefits, though many of these new provisions will only apply to taxpayers with a valid Social Security number.

This is still not a final bill, and we will continue to keep you updated as news develops on these provisions.

The full draft bill is available at:

www.caltax.com/files/2025/taxbilldraft2.pdf

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Late in the evening on Friday, May 9, the House Ways and Means committee released a partial draft of the tax legislation we have all been waiting for. We expect the final bill to be much larger than this initial 28-page draft.

The three provisions containing the most important tax changes in the partial draft are:

1. Increasing the IRC §199A deduction from 20% to 22% of qualified business income and expanding the deduction to include certain investment income;
2. An increase in the Child Tax Credit from $2,000 per child to $2,500 per child for 2025 through 2028 (then reverting back to $2,000 with an annual inflation adjustment thereafter); and
3. Permanently increasing the uniform estate and gift tax exemption to $15 million per taxpayer, with annual inflation adjustments starting in 2026.

Other provisions contained in the partial draft legislation include permanent extensions of less controversial TCJA items scheduled to expire at the end of 2025, including:

• Tax rate schedules with the highest marginal rate remaining at 37%;
• The higher standard deduction (with an additional temporary bump for tax years 2025 through 2028 of $2,000 for married taxpayers filing jointly, $1,500 for head of household, and $1,000 for single filers);
• Elimination of the personal exemption deduction;
• Alternative minimum tax exemption and exemption phase-out thresholds;
• Limitation on the deduction for qualified residence interest;
• Limitation on casualty loss deductions;
• Elimination of 2% miscellaneous itemized deductions; and
• Elimination of the overall limitation on itemized deductions.​​​​​

This draft does not contain any provisions dealing with the state and local tax (SALT) provisions, which is expected to be a hotly contested issue, or any of the items promised by President Trump on the campaign trail, such as no tax on tips, overtime, or Social Security, among other provisions.

The 28-page partial draft bill is available at: www.caltax.com/files/2025/taxbilldraft.pdf

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The California Secretary of State’s (SOS) office is now issuing 12-character identification numbers to newly registered corporations, LLCs, and limited partnerships. These new identification numbers will all start with the letter “B”. (SOS Customer Service Update, February 25, 2025)

Entities that were previously issued an entity number will continue to use the same number and will not be reissued a new 12-character identification number.

According to the SOS’s office:

• Entity numbers for general partnerships and limited liability partnerships will not change; and
• Entities that file a continuing conversion (e.g., corporation to LLC or LP) will keep their original number as well.

The FTB has stated that they will be able to accept the new and existing numbering formats. This means for completing forms and most FTB website interfaces, the entity will put in the complete identification number, including the letter “B”, but as before, would not put in the letter “B” when entering the entity ID for WebPay. This is consistent with prior practice, wherein corporations would not enter the letter “C” when entering the entity ID on WebPay.

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We are saddened to announce the passing of Robert Spidell, founder of Spidell Publishing, Inc., who died on April 26 at the age of 91.

In 1975, Bob and his wife, Janet, founded Spidell Publishing in a vacant 7-Eleven store in Anaheim, California. From those humble beginnings, Bob became a pioneering force in California tax education and was affectionately known throughout the industry as “Mr. California Tax.” His work transformed how professionals across the state understood and applied complex tax laws.

Bob’s legacy includes:

• Making complex tax law understandable. Through his California Taxletter^®, forms books, tax guides, and client letters, Bob had a unique gift for making the most complicated aspects of California tax law accessible and clear.
• Creating a vital tax education community. Spidell’s tax update seminars became the gold standard across the state, drawing thousands of tax professionals each fall to prepare for the new season and reconnect with colleagues.
• Fighting for fairness in taxation. A tireless advocate, Bob frequently met with state agencies and lawmakers. Among his most notable accomplishments was helping stop the Franchise Tax Board from taxing nonresident military personnel.

Bob was also a champion for women in the workplace. Under his leadership, Spidell Publishing was a place where talent and merit determined success. He promoted women to key roles, hired Gina Rodriquez as Sacramento Editor, sold the company to Lynn Freer, and mentored Renee Rodda, JD, now Senior Vice President of Tax and Accounting Education at CeriFi.

Bob and Janet believed strongly in giving back. Their generosity and civic engagement included:

• Investing in education. They established an endowment that helped create a state-of-the-art classroom/lab in the CSULB University Library, supporting hundreds of students with access to computers and resources. In recognition of their contributions, Bob and Janet were awarded honorary Doctor of Humane Letters degrees by the CSU Board of Trustees and Cal State Long Beach, where Bob earned his economics degree in 1965.
• Supporting local heritage. Bob and Janet volunteered at Mission San Juan Capistrano, where Bob served as a tour guide for fourth-grade students studying California history, and Janet, who died in 2016, cared for the mission’s iconic gardens.

We will miss Bob deeply — his humor, his passion, and his unwavering ability to make things happen. His legacy will continue to impact the tax profession and the lives of so many he inspired.

Today, the House agreed to the Senate’s budget resolution parameters. This means Congress can now turn to passing tax legislation, including TCJA extensions and other tax reform measures promoted by President Trump and congressional members. This will be done through the budget reconciliation process, which will allow both chambers of Congress to pass significant tax legislation by simple majority vote.

There is no set time period by which Congress must pass the budget reconciliation bill, but we will keep you posted as news develops.

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In an executive order, President Trump directed the U.S. Treasury Secretary to develop a plan over the next 180 days to phase out the use of paper checks. This would apply to both the IRS’s payments of tax refunds as well as taxpayers’ tax payments to the IRS.

According to the White House fact sheet accompanying the executive order’s release, effective September 30, 2025, the IRS will cease issuing paper check tax refunds. However, it is unclear when the mandate that all tax payments be made to the IRS electronically would go into effect. We will have to await further guidance from the IRS and the U.S. Department of Treasury as to when and how the electronic tax payment mandate will be implemented.

The executive order does authorize exceptions from the mandate in certain circumstances, such as when individuals do not have access to banking services or electronic payment services, or for certain emergency payments where electronic disbursement would cause undue hardship. The order also authorizes the Treasury Secretary to identify other circumstances in which exceptions would be allowed.

We will provide updates when additional guidance is issued.

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Beginning with the 2024 tax year, to claim either a New Clean Vehicle Credit or the Previously-Owned Clean Vehicle Credit, registered dealers must submit an IRS Form 15400, Clean Vehicle Seller’s Report, to the IRS on its Energy Credits Online portal within 72 hours of the sale of a qualifying vehicle. Both the taxpayer and the dealer must have a copy of this report to:

• Claim either of these credits on the taxpayer’s tax return; or
• Transfer either of the credits to the dealer at the time of sale (referred to as an advance credit).

Unfortunately, many dealers were not submitting this report to the IRS in a timely fashion (if at all), which resulted in the taxpayer being denied the credit and/or the dealer being denied the advance credit.

According to an alert issued by the National Automobile Dealers Association, the IRS has now reopened the portal for dealers to submit the 2024 Form 15400 and is waiving the 72-hour submission deadline. To date, we are not aware of a specific timeline by which these reports must be submitted.

Taxpayers who were unable to claim the credit previously for the 2024 tax year due to the lack of a Form 15400 should contact their automobile dealer now to obtain the report while the portal remains open for dealers to submit their 2024 seller reports.

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In updated FAQs, the IRS has announced a new procedure for taxpayers who receive an ERC refund related to wages paid in prior tax years, but have not filed an amended return to reduce their wage expenses for the year the wages were paid (2020 and/or 2021). (www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit#incometax)

ERC refunds issued

For situations where the prior-year return is a closed year, taxpayers must include the overstated wage expense amount as gross income on their income tax return for the tax year the ERC refund was received. This means that if a taxpayer receives an ERC refund in 2024 related to 2021 wage expenses, they must include the 2021 overstated wage expenses as gross income on their 2024 tax return. The IRS also reiterates that taxpayers in this situation remain eligible for penalty relief. (IR-2022-89)

For open tax years, taxpayers may file an amended return, administrative adjustment request (AAR), or protective claim for refund to deduct their wage expense for the year in which the ERC was claimed. Alternatively, these taxpayers could elect to report the refund as income in the year it is received.

Many taxpayers were filing amended returns and paying associated taxes due for the closed tax year only to have the IRS return the tax payments because the tax year was closed. These taxpayers now know that they can cash these refund checks without repercussion and use these payments to pay the resultant taxes due when the wages are reported on the tax return for the year the ERC refund was received.

ERC credits disallowed

The IRS also provided guidance for taxpayers whose ERC was disallowed, who had previously reduced the wage expense on their return for the year the ERC was claimed. These taxpayers may, in the year the ERC claim disallowance is final, increase their wage expense on their income tax return by the same amount that it was reduced when they made their original ERC claim.

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The FTB began sending out corrected 1099-Gs on March 19, 2025.

As we previously reported, due to a calculation oversight, some of the Forms 1099-G, Certain Government Payments, issued by the FTB for the 2024 tax year contained incorrect information. According to the FTB, this issue was limited to taxpayers who itemized their deductions and transferred estimates from the 2023 tax year to the 2024 tax year. The transferred amount may not have been included in the 1099-G amount.

The FTB estimates that this impacted about 3% of the 1099-Gs, which according to our calculations comes to about 100,000 forms.

Tax professionals should verify that the information reported on previously received 1099-Gs is correct. If not, they should hold off filing until they receive the corrected 1099-Gs. Tax professionals can also check their client’s MyFTB account to see if the corrected 1099-G has been posted.

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The Federal Emergency Management Agency (FEMA) has extended the deadline for survivors of the Los Angeles County fires to register for federal aid. (Governor’s Press Release (March 7, 2025), available at: www.gov.ca.gov/2025/03/07/governor-newsom-announces-deadline-extension-to-apply-for-federal-assistance-for-los-angeles-fires) The deadline to apply for Disaster Unemployment Insurance with the EDD has also been extended.

FEMA assistance

Homeowners and renters who have incurred damage or losses from the Los Angeles County wildfires now have until Monday, March 31, 2025, to apply for FEMA Individual Assistance and Small Business Administration assistance. The previous deadline for registration for disaster aid was March 10, 2025.

Affected taxpayers can apply at:

www.disasterassistance.gov

EDD Disaster Unemployment Insurance

The deadline to apply for Disaster Unemployment Assistance has also been extended until March 31, 2025. Taxpayers can apply at:

www.edd.ca.gov/en/unemployment/Disaster_Unemployment_Assistance

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On Sunday, March 2, 2025, FinCEN continued with its rollercoaster guidance by announcing that it will not enforce any penalties or fines associated with the beneficial ownership information (BOI) reporting rules under existing regulations. Additionally, FinCEN will not enforce any penalties or fines against U.S. citizens or domestic reporting companies, or their beneficial owners.

The reason for the relief is that the Department of the Treasury will propose new rulemaking that will narrow the scope of the beneficial owner reporting rules to apply to foreign reporting companies only. This means that domestic entities will not be required to file any BOI reports.

At this time there is no information on what, if anything, will need to be done for domestic entities that have already filed. We will continue to update you as information is released on this issue.

The full text of the Treasury press release is available at:

https://home.treasury.gov/news/press-releases/sb0038

As a result of this development, Spidell’s BOI Reporting Update webinar has been canceled. Customers who were registered for the March 25, 2025, webinar will receive an e-mail from us today with options to transfer to another webinar or request a refund.

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On February 27, 2025, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports until a new interim BOI reporting final rule becomes effective, and the new relevant due dates in the interim final rule have passed.

FinCEN stated that it intends to issue an interim final rule no later than March 21, 2025, which will extend the BOI reporting deadlines.

FinCEN’s announcement is available here.

In light of this latest development, to ensure that our customers have the most current information, Spidell will postpone our BOI Reporting Update webinar originally scheduled for March 4, 2024, until March 25, 2025. Sign up for the webinar here.

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The Los Angeles City Council approved a business tax relief program for taxpayers with a business location that was destroyed by the wildfires, including home-based businesses. Under the program, a business destroyed by the wildfires is deemed to have terminated the business as of December 31, 2024. This means the taxpayer will not be required to renew their business license or pay the business license tax for the 2025 tax year. When the taxpayer reopens, they will need to reregister as if they were a newly established business.

Businesses whose property was not physically destroyed but that experienced severe economic disruption for at least 45 days can also qualify.

All eligible taxpayers must apply for relief by April 14, 2025, at:

http://finance.lacity.gov

Additional information is available at:

http://finance.lacity.gov/blog/business-tax-relief-people-and-businesses-directly-impacted-wildfires-faq

In addition, all business locations within ZIP codes 90049, 90272, and 90402 will automatically be granted an extension of the annual business tax renewal filing deadline to April 14, 2025. A taxpayer with a business located outside of these ZIP codes, but whose business was interrupted as a direct result of the fires, may be granted an extension as well. To qualify, the taxpayer must submit a written request, including reasonable proof of the interruption, to the Office of Finance before the February 28, 2025, renewal deadline at:

http://finance.lacity.gov/blog/wildfire-business-tax-filing-extension

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We have heard from numerous tax professionals that the Forms 1099-G being sent by the FTB contain incorrect amounts. We reached out to the FTB, and they confirmed that there are some Forms 1099-G that need to be corrected. They are working on making these corrections and hope to release additional information shortly. In the interim, tax professionals should verify that the amounts reported on Form 1099-G are correct and, if not, should hold off preparing those returns until we receive guidance from the FTB.

We will send a follow-up Flash E-mail once we have additional information from the FTB.

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FinCEN announced that the beneficial ownership information (BOI) filing mandate is now back on, with a new filing due date of March 21, 2025. (FinCEN Notice FIN-2025-CTA1 (February 18, 2025)) The reinstatement was triggered by the U.S. District Court for the Eastern District of Texas’s February 18, 2025, decision to lift the preliminary injunction that it had issued in the Smith case. (Smith, et al. v. U.S. Department of the Treasury, et al.(February 18, 2025) U.S. Dist. Ct., E.D. Tex., Case No. 6:24-cv-00336)

The new March 21, 2025, due date applies to the vast majority of reporting companies to file an initial, updated, or corrected BOI report, including those entities formed prior to January 1, 2024. Entities formed in 2025 must file by the later of March 21, 2025, or 30 days from the date of formation.

FinCEN indicated that during the next 30 days it will “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce the burden for lower-risk entities, including many U.S. small businesses.”

Additional information is available at:

www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf

Spidell is offering a one-hour webinar to provide all the information you will need to meet this new March 21, 2025, deadline. To register, go to:

www.caltax.com/shop/webinars/live-upcoming-webinars/boi-reporting-update-webinar

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The House has unanimously passed the Protect Small Businesses From Excessive Paperwork Act of 2025 (H.R. 736), which would delay the beneficial ownership information (BOI) mandatory reporting requirement due date to January 1, 2026, for entities formed prior to January 1, 2024. The bill has now been sent to the Senate.

The bill would not impact the reporting requirement for entities formed after 2023, which means that if the preliminary injunction issued in the Smith case is stayed, entities formed after 2023 would still be required to file their initial reports and any updates or corrections to these reports. (Smith vs. U.S. Treasury (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036) However, it is important to note that FinCEN has indicated that if the injunction is lifted, it will postpone the filing deadline for 30 days, during which time period it will revise which entities may be required to file the reports. See our Flash E-mail from February 6, 2025, “Mandatory beneficial ownership reporting may soon be back in play,” for more details.

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On February 5, 2026, the Department of Justice (DOJ) filed an appeal with the Fifth Circuit Court of Appeals of the U.S. district court’s preliminary injunction in Smith v. U.S. Department of the Treasury, which blocked the enforcement of the beneficial ownership information (BOI) reporting requirement. (Smith et. al. v. U.S. Department of Treasury, et al. (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036)

The DOJ asked that the injunction be put on hold while the appeal proceeds. Although it is not guaranteed, given that the U.S. Supreme Court reversed the Fifth Circuit’s reinstatement of the preliminary injunction in the Texas Top Cop Shop decision (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653), it is likely that the Fifth Circuit will grant the DOJ’s request for a stay of the injunction. This means the beneficial ownership reporting mandate may be reinstated shortly.

In an alert posted today, FinCEN stated that if the injunction is lifted by the Fifth Circuit, it will extend the filing deadlines for all reporting companies by 30 days. FinCEN also stated that during this 30-day period it “will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.”

However, while the Smith court’s injunction remains in place, businesses are not currently required to file any initial reports or any updates or corrections, although they may do so voluntarily.

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According to an alert posted on FinCEN’s beneficial ownership information (BOI) reporting webpage, BOI reporting is still voluntary for now despite the U.S. Supreme Court’s stay of the preliminary injunction issued by a federal district court in Texas Top Cop Shop Inc. v. McHenry. ((January 23, 2025) U.S. Supreme Court, Case No. 24A653)

This is because another judge in a separate case has also issued a nationwide injunction against the BOI reporting requirements. (Smith v. U.S. Department of Treasury (January 7, 2025) U.S. Dist. Court, Eastern Dist. of Texas, Case No. 6:24-CV-336)) To date, the Department of Justice has not filed an appeal in Smith. It is not known whether the new administration will appeal the case.

This means that, for now, businesses are not required to file BOI reports and cannot be penalized for failing to do so.

It is also important to note that two bills (HR 425 and S 100) have been introduced in Congress to repeal the Corporate Transparency Act, which created the BOI reporting mandate.

We will keep you apprised of any further developments as they occur.

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Today, the U.S. Supreme Court stayed the order from the Fifth Circuit Court of Appeals that reinstated the lower court’s nationwide injunction against the beneficial ownership information (BOI) reporting requirement. (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653)

FinCEN has yet to issue any additional guidance after the U.S. Supreme Court’s ruling, so it is unclear at this point whether businesses will be required to comply with the BOI reporting mandate. We anticipate we will hear more from FinCEN and/or Congress shortly and will keep you apprised of any further developments.

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As a result of an executive order issued by Governor Newsom today, taxpayers in the following zip codes may postpone their property tax payments until April 10, 2026, and business personal property tax statement filings until April 1, 2026, without being subject to penalties and interest:

However, the postponement relief does not apply to payments made through an impound account nor to any taxes on the property that were delinquent as of January 6, 2025.

In addition to the relief provided in the executive order, taxpayers may also seek relief from the Los Angeles County Assessor’s office to have damaged or destroyed property reassessed. Taxpayers may also seek further suspension of penalties and interest for up to four years by submitting a penalty cancellation request form with the Los Angeles County Treasurer and Tax Collector.

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To assist tax professionals working with disaster victims, including those assisting Los Angeles County wildfire victims and the hurricane and storm victims on the east coast, Spidell is offering two free disaster tax relief webinars. These webinars are:

• Tax Relief for Disaster Victims, which will address federal income tax relief generally; and
• Tax Relief for California Disaster Victims, which will cover both federal income and California income and property tax relief.

In the interim, tax professionals can also access additional resources for Los Angeles County wildfire victims from the FTB and the Los Angeles County Assessor’s Office.

The FTB has posted the following resources:

• Los Angeles County wildfire FAQs; and
• A chart outlining how disaster victims should make tax payments to ensure payments are processed accurately and timely.

In addition, the Los Angeles County Assessor has a disaster relief webpage.

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For taxpayers affected by the Los Angeles wildfires, the Governor’s office announced that California will provide postponed income and franchise tax filing and payment deadlines in alignment with the filing postponement provided by the IRS. This means taxpayers in Los Angeles County will be granted a postponement to October 15, 2025, to file California tax returns on 2024 income and make any tax payments that would have been due January 7, 2025, through October 15, 2025. This applies to all taxpayers located in Los Angeles County, even if they were not directly impacted by the fires.

According to the Governor’s announcement, this includes relief from the following deadlines:

• Quarterly estimated tax payments normally due on January 15, April 15, June 15, and September 15, 2025;
• Passthrough entity elective tax payments normally due on March 15 and June 15, 2025;
• Business entity corporate or passthrough entity tax returns normally due on March 15 and April 15, 2025;
• Individual tax returns and payments normally due on April 15, 2025; and
• Tax-exempt organization returns normally due on May 15, 2025.

We confirmed that similar to the relief granted by the IRS, this relief will also apply to taxpayers outside Los Angeles County whose tax professionals are located in Los Angeles County.

In addition, the Governor’s office has announced that the CDTFA will provide an automatic three-month extension for tax filing deadlines for taxpayers within Los Angeles County for those Los Angeles County taxpayers whose 2024 third quarter return was for less than $1 million in tax. This means that the January 30 returns are now due April 30, 2025. The CDTFA will also provide Los Angeles County taxpayers relief from interest and penalties and create flexible payment plans for businesses.

The Governor’s announcements are available here and here.

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Taxpayers located in Los Angeles County have until October 15, 2025, to meet filing and payment deadlines that normally fall within the January 7, 2025, through October 15, 2025, time period. (IR-2025-10) This includes, but is not limited to:

• 2024 quarterly estimated income tax payments normally due on January 15, 2025, and estimated tax payments normally due on April 15, June 16, and September 15, 2025;
• Quarterly payroll and excise tax returns normally due on January 31, April 30, and July 31, 2025;
• Individual income tax returns and payments normally due on April 15, 2025;
• 2024 contributions to IRAs and health savings accounts for eligible taxpayers;
• Calendar-year partnership and S corporation returns normally due on March 17, 2025;
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025; and
• Calendar-year tax-exempt organization returns normally due on May 15, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after January 7, 2025, and before January 22, 2025, will be abated as long as the deposits are made by January 22, 2025.

Ventura County is not currently listed in the FEMA disaster declaration, so the IRS cannot currently grant automatic postponement relief to taxpayers located in Ventura County. The IRS has indicated that the same relief will be provided to any other counties added later to the disaster area.

Taxpayers who have an address of record in Los Angeles County will automatically qualify for relief. Taxpayers who live outside of Los Angeles County whose records are located in Los Angeles County, such as taxpayers with tax preparers in Los Angeles County or who own businesses located in Los Angeles County, also qualify for relief, but must contact the IRS disaster hotline at (866) 562-5227 to obtain relief.

Disaster area tax preparers with clients located outside the disaster area can choose to file bulk requests. Information about bulk requests is available at:

www.irs.gov/tax-professionals/bulk-requests-from-practitioners-for-disaster-relief

To date, the California Department of Finance has not announced whether they will be providing similar relief for California income and franchise tax returns. We will continue to update you as news develops on this issue.

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Taxpayers directly affected by the Los Angeles and Ventura county wildfires qualify for relief for the upcoming sales and use tax and payroll tax deadlines, as follows:

• A 60-day extension to file with the EDD state payroll reports or deposit payroll taxes without penalties and interest. To qualify, taxpayers must make a written request within two months of an original payment or return due date; and
• An extension of up to three months to file and pay sales and use taxes or fees with the CDTFA.

We have confirmed with the EDD and CDTFA that a taxpayer will be considered “directly affected” if their tax preparer is directly affected by the wildfires (e.g., due to power outages, evacuation orders, or worse).

This relief is not automatic. Taxpayers must submit requests for relief. Details about how to apply are available from the EDD here and the CDTFA here.

We anticipate that the IRS and FTB will also be granting filing and payment deadline postponements for income and franchise taxes. We will send another Flash E-mail once they have announced the available relief.

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Today President Biden signed a major disaster declaration for the wildfires impacting various communities in Los Angeles County. This will enable affected individuals and businesses to access individual program assistance from FEMA to cover expenses such as temporary accommodations and financial assistance for destroyed property.

The IRS has not issued any announcements yet, but we anticipate that with a disaster this size they will soon be providing tax filing and payment postponement relief. We will send another Flash E-mail when this occurs.

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