In the closely watched âPaula Trustâ case, the California Court of Appeal, First Appellate District held that all of a trustâs California source income is subject to California income tax even though one of the trustees was a nonresident. Steuer v. Franchise Tax Board, No. A154691 (Cal. Ct. App. 1st Dist. June 29, 2020). The trustâs non-California source income would be apportionable. California imposes income tax on 100% of a trustâs income if all trustees…
The California real estate transfer tax landscape experienced a seismic shift when the Supreme Court of California upheld the imposition of Los Angeles Countyâs Documentary Transfer Tax (âL.A. Transfer Taxâ) on the transfer of a controlling interest in a partnership that indirectly owned Los Angeles real estate through an LLC. 926 North Ardmore Avenue, LLC v. County of Los Angeles, 219 Cal. Rptr. 3d 695 (Cal. June 29, 2017). Specifically, the Court held âthat the tax may be imposed if the document reflects a sale: that is, an actual transfer of legal beneficial ownership made for consideration.â
Major reform is coming to the way California administers its tax laws. On June 27, 2017, the Taxpayer Transparency and Fairness Act of 2017 (A.B. 102 or the âActâ), was signed into law by Governor Jerry Brown after passing both the California Senate and Assembly with little resistance. The Act fundamentally alters the administration of Californiaâs tax laws by divesting the California State Board of Equalization (âBoardâ) of several of its key functions and assigning them to two new government agencies established by the Act: (1) the California Department of Tax and Fee Administration (âTax Departmentâ); and (2) the Office of Tax Appeals.
An out-of-state corporation, whose sole connection to California was a 0.2% interest in a manager-managed California limited liability company, was not âdoing businessâ in California for purposes of the California corporate franchise tax according to the California Court of Appeal for the Fifth Appellate District in its recently-issued decision, Swart Enterprises, Inc. v. Franchise Tax Board, Case No. F070922. The appellate courtâs decision affirmed the judgment of the California Superior Court and overturned the rationale articulated by the Franchise Tax Board (âFTBâ) in FTB Ruling 2014-01 (July 22, 2014), which was issued by the FTB while the Swart case was pending.