As part of his proposed budget, Governor Newsom is advocating for significant tax relief, including, but not limited to:
- Expanding the Passthrough Entity Elective Tax Credit by eliminating the tentative minimum tax limitation and allowing disregarded entities, including single-member LLCs, to claim the credit. The Governor is requesting that this be enacted by March 15, 2022;
- Retroactively conforming to the American Rescue Plan Act’s exclusion of Restaurant Revitalization Grants and Shuttered Venue Operator Grants, but still allowing these grant recipients to deduct expenses paid with these grants. Again, the Governor is proposing this be enacted by March 15, 2022. However, there is no mention in the Governor’s proposal of conforming to the federal exclusion of Paycheck Protection Program loans for loans made after March 31, 2021;
- Eliminating the NOL suspension and $5 million business credit limitation for the 2022 taxable year; and
- Providing penalty and interest relief for families with $150,000 in adjusted gross income ($75,000 for individuals) unable to timely pay their 2019–2021 tax liabilities. These taxpayers would be given until September 30, 2023, to make their payments.
These are still only proposed changes, but tax professionals should identify which of their clients might benefit from these proposals and should consider holding off filing these returns to see if these items will actually be enacted.
The Governor’s proposed budget summary can be found at:
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