CA Tax Law Specialist flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

California standard deduction 2023

For 2023, California's standard deduction is $5,363 for single or married filing separately, and $10,726 for married filing jointly, qualifying surviving spouse, or head of household.

Mental Health Services Tax

An additional 1% tax on California taxable income exceeding $1,000,000 for single filers and $2,000,000 for married filing jointly, effective for tax years beginning on or after January 1, 2005.

California renter's credit

A credit of $60 for single or married filing separately and $120 for married filing jointly or head of household, available if California adjusted gross income is $50,000 or less and rent was paid for at least six months.

California community property

For married couples filing separate California returns, community property income is divided equally between spouses; separate property income is allocated to the spouse who earned or owned it.

California S corporation tax

S corporations doing business in California pay a 1.5% income tax on net income, with a minimum franchise tax of $800, and must file Form 100S.

California LLC annual fee

California LLCs pay an annual fee based on total California income, ranging from $900 for income under $250,000 to $11,790 for income of $5,000,000 or more, in addition to the $800 minimum tax.

Single sales factor apportionment

California uses a single sales factor formula to apportion business income to California for most taxpayers, giving equal weight to California sales relative to total sales.

Market-based sourcing

California assigns sales of services and intangibles to California if the customer receives the benefit of the service in California, rather than where the service is performed.

California sales tax rate

The statewide sales tax rate is 7.25%; local district taxes can add up to 2.25%, resulting in combined rates as high as 10.25% in some jurisdictions.

Use tax obligation

California use tax is due on purchases from out-of-state retailers where sales tax was not collected; individuals report use tax on their California income tax return.

Resale certificate

A document provided by a purchaser to a seller stating that the property is purchased for resale, allowing the sale to be exempt from California sales tax.

Marketplace Facilitator Act

California law requiring marketplace facilitators (e.g., Amazon) to collect and remit sales tax on sales made through their platforms on behalf of third-party sellers.

Proposition 13

A California constitutional amendment limiting property tax to 1% of assessed value and capping annual assessed value increases at 2% or inflation, whichever is lower, until a change in ownership.

Base year value

The assessed value of a property as of the most recent change in ownership or completion of new construction, which becomes the starting point for future annual adjustments under Proposition 13.

Proposition 19

A 2020 ballot measure allowing homeowners 55+, severely disabled, or wildfire victims to transfer their base year value up to three times, and restricting inheritance exclusions to principal residences or family farms.

Homeowners' exemption

A California property tax exemption that reduces the assessed value of an owner-occupied principal residence by $7,000, resulting in an annual tax savings of about $70.

California UI tax rate

The California unemployment insurance tax rate ranges from 1.5% to 6.2% on the first $7,000 of wages per employee; the employee pays 1.1% (2023) and the employer pays the remainder.

State Disability Insurance

California's SDI program provides paid family leave and disability benefits, funded by a 1.1% employee payroll deduction on wages up to $153,164 for 2023.

ABC test

A California legal test (from Dynamex) that classifies a worker as an employee unless the hiring entity proves the worker is free from control, performs work outside the usual business, and is independently established.

Employment Training Tax

A 0.1% employer-paid tax on the first $7,000 of wages per employee, used to fund California employment training programs.

FTB protest deadline

A taxpayer must file a protest with the California Franchise Tax Board within 30 days of the date of the Notice of Proposed Assessment to challenge an assessment.

Office of Tax Appeals

An independent California agency that hears appeals from FTB, CDTFA, and other tax agencies; its decisions are binding on the agencies and taxpayers.

Taxpayers' Bill of Rights

California legislation providing protections for taxpayers, including the right to appeal, the right to representation, and the right to claim a refund, and requiring tax agencies to notify taxpayers of these rights.

Statute of limitations FTB

The California Franchise Tax Board generally has four years from the due date of the return or the date filed to assess additional tax, extended to eight years for fraud or failure to file.

California conformity

California automatically conforms to federal tax law changes unless it enacts legislation to decouple; the FTB publishes an annual conformity report listing differences.

Bonus depreciation nonconformity

California does not conform to federal bonus depreciation; taxpayers must use the modified accelerated cost recovery system (MACRS) without bonus for California depreciation.

Section 199A nonconformity

California does not allow the federal 20% qualified business income deduction under IRC Section 199A; taxpayers must add back the deduction for California purposes.

Opportunity zone nonconformity

California does not conform to federal opportunity zone deferral and exclusion; capital gains invested in opportunity zones are taxable when realized for California purposes.

Circular 230

Federal regulations governing practice before the IRS, including standards for tax return positions, diligence, and conflicts of interest; California has its own ethical rules for preparers.

Substantial authority standard

A tax return position is permissible if it has substantial authority (about 40% likelihood of being upheld), meaning the weight of authorities supports the position.

Preparer due diligence

Tax preparers must exercise due diligence in preparing returns, including reviewing information, making reasonable inquiries, and not ignoring facts that would affect tax liability.

Confidentiality rule

Tax preparers may not disclose taxpayer information without consent, except as required by law or to comply with a court order or subpoena.