The chair of the California Senate’s Revenue and Taxation Committee, Senator Steve Glazer, has introduced California 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.
If enacted, SB 1501 would, retroactive to 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, but only if the taxpayer pays a penalty equal to 5% of the elective tax due plus interest. The penalty would have to be paid by the due date of the original return without regard to any extensions.
This bill, if enacted, would provide welcome relief to many taxpayers who may have inadvertently failed to satisfy the June 15 prepayment requirement.
Taxpayers and tax professionals who would like to see this bill passed should contact their legislators.
The text of the bill is available at:
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