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2024-17: Passthrough entity elective tax prepayment fix may be coming

April 25, 2024

Today the California Senate passed SB 1501, which would allow entities to qualify to make the passthrough entity tax election even if they do not satisfy the June 15 prepayment requirement. This is the first step toward the bill’s enactment. Next it will be sent to the Assembly and, if passed by the Assembly, it still must be signed by the Governor.

If enacted, SB 1501 would, effective for taxable years beginning on or after January 1, 2024, authorize a qualified passthrough entity (partnership, S corporation, or LLC taxed as a partnership or S corporation) to make a passthrough entity tax election without making the requisite June 15 prepayment. To qualify, the taxpayer would have to pay a penalty equal to 5% of the elective tax due plus interest by the due date of the original return without regard to any extensions.

Taxpayers and tax professionals who would like to see this bill passed should contact their state assembly members as well as the Governor’s office.

The text of the bill is available at:

https://go.spidell.com/e/837113/-xhtml-bill-id-202320240SB1501/5x67dk/2007029044/h/6HY5L-Mj5YNjlRmMewkJyoleR6N057bF-KQniC9niSU

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