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Analysis

California FTB issues three of four anticipated reports on California’s conformity to 2017 federal income tax changes

Multistate Tax alert | April 13, 2018

The California Franchise Tax Board (FTB) has now issued three of the four anticipated reports addressing California’s conformity to P.L. 115-97, The 2017 Tax Reform Act (the Act).

Overview

FTB report number FTB title Short title
Link to report
First report Preliminary report on specific provisions of the act and Revised preliminary report on specific provisions of the act Initial report and Revised initial report Available here
Second report Preliminary summary of federal income tax changes 2017—First release First release preliminary summary Available here
Third report Preliminary summary of federal income tax changes 2017—First release Second release preliminary summary Available here
Final report Pending (FTB has indicated it anticipates issuing the last report on or before April 20, 2018)

Initial Report and Revised Initial Report

On February 12, 2018, the FTB issued its Initial report (see Deloitte’s prior tax alert for an overview). On March 20, 2018, the FTB issued a Revised initial report, noting that the primary revisions (relative to the initial version) pertain to the California tax implications of the new limit on the state and local tax (SALT) deduction, as well as non-substantive changes to other elements of the Initial Report including the FTB consideration of the federal repatriation provisions.

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First Release Preliminary Summary

On March 4, 2018, the FTB issued its second report, First release preliminary summary. The First release preliminary summary addresses California’s conformity to select provisions in the Act, including among others, the repeal of technical terminations of partnerships, the modification of certain business credits, insurance reform, modifications of limitations on executive compensation, certain provisions impacting exempt organizations, S corporations, banks and financial instruments, and alcoholic beverage production.

The First release preliminary summary also addresses provisions of P.L. 115-63, the Disaster Relief and Airport and Airway Extension Act of 2017 (Disaster Relief Act). The Disaster Relief Act was enacted to provide tax relief to taxpayers affected by Hurricanes Harvey, Irma, or Maria.

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Second Release Preliminary Summary

On March 26, 2018, the FTB issued its third report, Second release preliminary summary. The Second release preliminary summary addresses California’s tax conformity to various business-related provisions of the Act including the temporary 100 percent expensing for certain business assets, the limitation on the interest expense deduction, and modifications to the federal net operating loss deduction.

It should be noted that California specifically conforms to only certain provisions of the Internal Revenue Code. In addition, for both individual and corporate tax, California’s current IRC conformity date is January 1, 2015.

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Contacts

If you have any questions regarding any of the FTB’s reports or other California tax matters, please contact one of the following Deloitte Tax professionals:

Valerie C. Dickerson, partner, Deloitte Tax LLP, Washington, DC, +1 202 220 2693

Christopher Campbell, principal, Deloitte Tax LLP, Los Angeles, CA, +1 213 553 3072

Steve West, managing director, Deloitte Tax LLP, Los Angeles, CA, +1 213 688 5339

Shirley J. Wei, senior manager, Deloitte Tax LLP, Los Angeles, CA, +1 213 553 1715

Brian Toman, Tax specialist leader, Deloitte Tax LLP, San Francisco, +1 415 783 6137

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Multistate Tax alert archive

The Multistate Tax alert archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.

View the list of archived Multistate Tax alerts.

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