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Latest Advocacy Issues

March 4, 2016 – CSEA Advocacy Efforts Paying Off

CSEA has made progress on a number of regulatory and legislative priorities in the past few months. It’s important to note that these significant issues are being discussed and addressed as a direct result of CSEA’s ongoing advocacy efforts to promote fair and effective tax administration. This progress is made possible by your support as a Member of your professional society.

Streamlining business entity Statement of Information (SOI) filing

CSEA Members have long expressed concern that business entities often forget to file an updated Statement of Information (SOI) with the California Secretary of State (SOS) because the due date is obscurely tied to the entity’s anniversary date and the reminder issued by the SOS is a small postcard that easily gets lost in the mail shuffle. If an entity fails to file timely, a significant penalty is assessed and eventually the entity is suspended, which interferes with its ability to receive properly due tax refunds.

CSEA began working with Assembly Member Cheryl Brown (D-San Bernardino) on a solution to this issue early last year, sponsoring Assembly Bill 871, which sought to simplify filing due dates to ease taxpayer burden and increase compliance. As the bill moved through the legislative process, the SOS expressed concern that the approach proposed would present significant costs and may have other unintended consequences. In mid-January, Assembly Member Brown and Secretary of State Alex Padilla agreed to work on an administrative solution to the problem rather than the solution proposed in AB 871.

CSEA has been in conversation with lead staff at SOS to better understand the issue from the agency’s perspective and explore possible solutions. Staff has already made changes to the SOS website aimed at increasing awareness and compliance and has shared plans to revamp the reminder mailing to garner more serious attention. CSEA was also invited to be a part of the SOS Stakeholder Group that meets regularly to provide external feedback and assist the SOS in solving challenging issues.

CSEA is pleased that there is a desire by not only the Secretary of State, but also the Governor’s Office of Business and Economic Development (GO-Biz), which holds summits designed for small business owners, during which they could discuss the SOI filing requirement.

CSEA has received inquiries and interest from numerous legislators on both sides of the aisle in reaching some reasonable resolution on this issue on behalf of taxpayers.

Dissolution for never-launched businesses

CSEA has also been advocating to both the Legislature and Franchise Tax Board (FTB) for a legislative or regulatory way to administratively dissolve business entities that form but never actually conduct business. This becomes increasingly problematic as taxpayers who form entities often don’t realize that they have a filing obligation and incur an $800 annual minimum tax even if they conduct no business.

FTB recently announced that it assembled a team to study why entities continue to have challenges with dissolving and cancelling. The team will formalize a planned approach with anticipated deliverables by July 2016, including a complete analysis of the dissolution and cancellation process, identification of opportunities for improved education and outreach, and a review of administrative, regulatory, and/or legislative changes that might present opportunities to address this continuing issue. This effort will include seeking input and feedback from partner state agencies and stakeholders such as CSEA.

Inadvertent failure to file Form 568 by Single-Member LLCs

CSEA Members report encountering clients with individually-owned Single-Member Limited Liability Corporations (SMLLCs) that fail to recognize their disregarded entity has an entity state return filing requirement. Failure to recognize this filing requirement can be quite expensive, especially when penalties and possible suspensions are factored in. CSEA requested that the FTB increase efforts to assure filers recognize the need to file three tax returns: a federal Form 1040, a California Form 540 (individual) and a California Form 568 (LLC).

As a result, the FTB is conducting a feasibility study regarding the SMLLC filing requirements for personal income tax filers, including the filing requirements for corporations that have SMLLCs. The feasibility study will address potential form changes suggested by CSEA and Spidell Publishing as well as impacts to the FTB’s business processes. The FTB expects the study and recommendation to be completed soon.

Disaster treatment

CSEA’s efforts to obtain automatic disaster treatment were rewarded when SB 35 (CH 2015-230) became law on September 1, 2015. The bill allows victims of a Gubernatorial declared disaster to automatically claim a loss in either the year the disaster occurred or in the prior year (a “throwback” election), without waiting for legislation which can occur months after the event.

However, in the aftermath of the 2015 Valley and Butte Fires, CSEA noted discrepancies between IRS and FTB websites – the state guidance only recognized the Butte Fire as Presidentially-declared, although both eventually were declared. CSEA asked the FTB for clarification, noting that conflicting information could be a problem in the upcoming filing season for fire victims and their tax practitioners to understand whether they have disaster tax relief throwback elections available for both their federal and California returns or their California returns only.

The FTB responded by updating its Publication 1034, Disaster Loss, How to Claim a State Tax Deduction to include both fires as Presidentially-declared disasters. In addition, FTB is updating its procedures so that it is aware of federal amendments to Presidentially-declared disasters.

Legislators Support CSEA’s Tax Help Day

While intended to support CSEA’s public information and awareness goals to promote Enrolled Agents as America’s Tax Experts, there was widespread interest across the California State Legislature in tapping into CSEA’s annual Tax Help Day this year. After hearing from Members during CSEA’s Jim Stern Legislative Day on January 11, legislators scrambled to co-sponsor and/or help the Society get the word out about the February 6 Tax Help Day, seeing the event as a community service where their constituents could get answers to their questions on a wide variety of tax topics. This year’s event truly transcended its original purpose of public awareness, becoming a valuable opportunity to partner with legislators in serving their constituents.

Jan. 11 2016 – CSEA Members Meet with Legislators at Jim Stern Legislative Day

More than 50 CSEA Members converged on the State Capitol on January 11, 2016 and met with Senators, Assembly Members and staffers during the annual Jim Stern Legislative Day.

After a continental breakfast and a presentation of the legislative process and current political environment, Members took part in mock legislative visit trainings. Then Members set off to attend meetings with their legislators and discuss this year’s advocacy issues. Discussion topics included the benefits of streamlining tax and Statement of Information (SOI) filing dates to eliminate confusion about when the SOI is due, as well as an administrative dissolution for never-launched business entities.

Many Members were very pleased to note that many legislators and staffers were familiar with the Enrolled Agent profession, and even remembered participants from previous visits! Once visits were completed, Members gathered together at the Holiday Inn Capitol Plaza for a debriefing with CSEA Legislative Affairs Committee Chair Vicki Mulak, EA, CFP® and CSEA lobbyist Jennifer Tannehill of Aaron Read & Associates. Robert Kerr, NAEA Senior Director of Governmental Relations, presented the Federal perspective.

CSEA thanks all Jim Stern Legislative Day participants for their advocacy efforts on behalf of CSEA and the Enrolled Agent profession. Participants overwhelmingly reported that they found the event very rewarding both personally and professionally. As one Member put it, “The opportunity to influence current and future legislation is both invaluable and exhilarating.” Alex Dunkel, EA was formally recognized by Assembly Member Scott Wilk (R-Santa Clarita). Several Members were also on hand to witness the selection of Anthony Rendon (D-Paramount) as Speaker-Elect of the California Assembly.

Nov. 2, 2015 – Legislative Session Wrap-Up

By Jennifer Tannehill and Scarlett Vanyi, CAE

Thanks to your support, CSEA is able to be a proactive force in the State Capitol. Over the last few months, there was a flurry of action on bills leading right up to the end of the Legislative Session on September 11th at midnight. Then the Governor had until October 11th to sign or veto the hundreds of bills on his desk – several of which impact EAs.

CSEA’s legislative program, led by the CSEA Legislative Affairs Committee and advocates at Aaron Read & Associates, ended the session with all four CSEA-supported bills passing the Legislature and three of four being signed by the Governor, thereby becoming law.

  • AB 557 (Irwin, D-Thousand Oaks) Nonprofit corporations: Dissolution
  • SB 35 (Wolk, D- Napa) Income and Corporation Taxes: Deductions: Disaster Relief
  • AB 154 (Ting, D- San Francisco) Federal Conformity

CSEA also supported AB 99 (Perea, D-Fresno) that provided an income tax exclusion for Mortgage Debt Forgiveness to conform with the federal exclusion. CSEA fought for this bill, and others like it in prior years. CSEA put its support behind AB 99, helping it pass the Legislature by lobbying staff, committee consultants, and legislators and providing testimony in support of the bill in legislative committees. We successfully communicated the need for the bill to the Legislature, and the legislators agreed and the bill passed.

CSEA strongly urged the Governor to sign this bill: filing a letter of support, working with the Governor’s staff and launching a “Call to Action” asking CSEA Members to urge the Governor to sign the bill. Unfortunately, despite these efforts, the Governor vetoed the bill on October 10, 2015 due to cost.

Our legislative program is an enormous benefit to CSEA Members and the industry. CSEA has tracked more than 100 bills impacting EAs and taxpayers just this year, staying on top of legislation to ensure CSEA Members are aware of bills that will impact the work you do every day. Our legislative team has:

  • Analyzed, monitored, supported and opposed legislation with letters, meetings with decision makers, and testimony in legislative hearings;
  • Provided legislators and staff with an understanding of the EA profession and issues of importance to EAs and the clients they serve;
  • Built relationships with other tax related groups, legislators, staff and Administration officials in the State Capitol; and
  • Bolstered CSEA’s credibility as America’s Tax Experts in California.

Following is a full report of CSEA sponsored, supported, and opposed bills.

CSEA Sponsored Bill

AB 871 (Brown, D-San Bernardino) – Statement of Information (SOI) Filing Date Proposal

This bill would change the SOI filing date from the date an entity was formed, to a date based on the federal filing date requirement for each entity type. By streamlining the SOI filing dates there will be less confusion as to when the SOI is due. Standardizing the due dates will increase filing compliance and prevent businesses from becoming suspended and suffering the consequences of a suspended status.

CSEA staff and lobbyist Jennifer Tannehill accompanied CSEA Legislative Affairs Committee Vice Chair Joyce Cheng, EA to the Assembly Committee on Banking and Finance hearing on April 20, 2015 to provide testimony as sponsor of the bill. The bill passed 11-0 and moved on to the Assembly Committee on Appropriations. The Appropriations Committee placed a $2 million price tag on the bill and attempted to send the bill to the Suspense File. Last year, the bill was held on the Suspense File and had great opposition from the Secretary of State’s (SOS) office.

This year, we’re excited about our working relationship with the new SOS on this matter. Assemblywoman Brown pulled the bill from the hearing so it would not go to the Suspense File, where many bills are held due to cost and die. By pulling the bill we saved it from the Suspense File. AB 871 is a two-year bill and will begin moving again in January. Since the SOS is working with us and has maintained a neutral position on the bill, we are working to negotiate amendments with the SOS that will allow the bill to be implemented effectively. Our discussions with the SOS continue on this issue and we are pleased there is a desire by all to address the SOI issue for taxpayers.

CSEA Supported Bills

AB 99 (Perea, D-Fresno)Personal Income Tax: Income Exclusion: Mortgage Debt Forgiveness

This bill would have extended the tax relief on forgiven mortgage debt by conforming California law to federal law. The Personal Income Tax Law provides for modified conformity to specified provisions of federal income tax law relating to the exclusion of the discharge of qualified principal residence indebtedness, if that debt is discharged after January 1, 2007, and before January 1, 2014. The federal Tax Increase Prevention Act of 2014 extended the provisions to debt that is discharged before January 1, 2015. This bill would conform to the federal extension.

The estimated cost for 2014-15 fiscal year is $47 million and $5 million in 2015-16. CSEA worked with the author to keep the bill moving quickly through the legislative process hoping taxpayers who received mortgage debt forgiveness could file returns reflecting the exclusion and not owe thousands of dollars in taxes based on income they did not receive. While this bill passed the Legislature, the Governor vetoed the bill on October 10, 2015.

STATUS: Vetoed.

AB 154 (Ting, D-San Francisco)Federal Conformity

California has been out of conformity with federal tax laws since 2009 and each year that goes by makes compliance with the tax system more confusing and difficult. According to the author’s office, the bill is “intended to narrow differences between state and federal law and provide relief to members of the United States Armed Forces, businesses, and individual taxpayers.” The bill specifically addresses conformity on: taxing of Homeowner Assistance Payments to members of the armed forces; the tax treatment of the annual fee on branded prescriptions as it applies to manufacturers and importers; and NOL carryback procedures. The changes result in an increase in revenue to the state and required a two-thirds vote of the Legislature in order to pass. CSEA worked with a coalition supporting the bill and worked to get enough votes to get it passed. The bill was enrolled on September 2, 2015, approved by the Governor and chaptered on September, 30, 2015.

STATUS: Chaptered, takes effect immediately.

AB 557 (Irwin, D-Thousand Oaks)Nonprofit Corporations: Dissolution: Surrender

This bill streamlines the dissolution process for nonprofit corporations. There is a significant problem with nonprofit corporations filing incorporation papers with the SOS, and then failing to launch or continue operations. This leads to the entity failing to remain up-to-date on filing and tax requirements.

The SOS and Franchise Tax Board (FTB) estimate that there are close to 60,000 nonprofits currently in their systems that would be eligible for the administrative dissolution process established under AB 557. This bill creates a streamlined administrative dissolution process for nonprofits that have been suspended for at least 48 continuous months after proper notice has been served. This new process will allow FTB and SOS to dissolve nonprofits that have been sitting inactive on the “books.” AB 557 successfully passed the Assembly unanimously. The bill then went to the Senate, passed Senate Banking Committee and then sat pending with the Senate Appropriations Committee, on the Suspense File. The bill passed the Senate late August and was presented to the Governor on September 3, 2015. The Governor approved the bill and it was then chaptered on September 30, 2015.

STATUS: Chaptered, takes effect January 1, 2016.

SB 35 (Wolk, D-Napa)Income and Corporation Taxes: Deductions: Disaster Relief: Counties of Napa, Solano, and Sonoma

On September 1, 2015 Governor Jerry Brown signed SB 35, a bill that provides relief to those affected by the 2014 Napa earthquake. This CSEA-supported bill also resolves a long-standing issue of bureaucratic delays, providing relief to disaster victims in the future. Similar to the federal process, Californians will now automatically be able to claim the deduction, instead of having to wait for the Legislature to pass a bill specific to each disaster. Due to a California law that required a governor-declared disaster to be supported by follow-up legislation, August 2014 Napa earthquake victims were unable to apply losses to their tax returns filed in the previous year. This resulted in delayed tax refunds that could have been used to help with the immediate rebuild and recovery from the disaster.

The Legislature has enacted identical treatment for almost every significant disaster that has occurred in California for the last 25 years. These bills have usually passed long after the tax filing deadline and taxpayers impacted by the disaster have had to file amended returns. CSEA has repeatedly brought this issue forward, including most recently at the 2014 FTB Taxpayers’ Bill of Rights Hearing. SB 35 solves this issue by providing for an automatic deduction when a state of emergency is called by the Governor, for taxable years beginning on or after January 1, 2014. CSEA is thrilled that the signing of this bill will remove a legislative hurdle for you and your disaster affected clients.

STATUS: Chaptered, takes effect immediately.

CSEA Opposed Bill

SB 8 (Hertzberg, D-Van Nuys)Taxation: Tax on Specified Services – The Upward Mobility Act

The bill’s author maintains that the bill would enhance the state’s business climate, incentivize entrepreneurship and business creation by evaluating the corporate tax, and would examine the impacts of a lower and simpler personal income tax. The State Board of Equalization issued an estimation of potential revenue to be derived from taxation of currently non-taxable services, determining that if the tax on services in all sectors was levied at a rate of 8.4 percent, this would result in a $122.63 billion revenue increase.

CSEA joined 48 other associations and industry representatives in a coalition opposing the bill with success. The bill has not had a committee hearing and is on hold in the Senate. The bill as currently written exempts healthcare and education services, would maintain all other tax rates at least until over $10 billion in new revenue is collected, and outlines how the $10 billion increase would be allocated.

It is unlikely the bill could pass the Legislature as written without extensive opposition. Bills which increase taxes require a two-thirds vote in the Legislature. That means that two-thirds of the legislators in each house and on each committee must vote to support the bill. CSEA advocates don’t believe the votes are there for this bill to pass as written, and the author has stated that the bill is not worth doing if it doesn’t increase taxes. Knowing this, it is likely the bill will be the basis for a ballot initiative in 2016.

STATUS: Held in Senate Governance and Finance Committee.

The CSEA legislative bill list, history, analyses and more is available on the CSEA website at

Jennifer Tannehill is a legislative advocate for Aaron Read & Associates. She has more than twenty years of experience, having served two governors and six legislators in several capacities. In addition to her experience in both houses of the legislature and the governor’s office, Jennifer has served candidates for office as an account manager for a prominent political fundraising team, giving her insider knowledge of Sacramento and a broad perspective of state government and politics.

Scarlett D. Vanyi, CAE is the Executive Vice President of California Society of Enrolled Agents. She holds a Bachelor’s of Science Degree in Organizational Behavior & Leadership from the University of San Francisco and is designated as a Certified Association Executive (CAE) from the American Society of Association Executives. Ms. Vanyi has more than 20 years of experience in the nonprofit association and legislative advocacy arenas and has expertise across a wide array of nonprofit management disciplines.

Feb. 12 2015 – FTB Responds to CSEA Testimony at Taxpayers’ Bill of Rights Hearing

For many years CSEA has attended and testified at the Franchise Tax Board’s (FTB) Taxpayers’ Bill of Rights Hearing, which gives taxpayers and tax professionals a once-a-year opportunity to bring items of concern regarding tax law and administration before the Board. On December 4, 2014 Vicki Mulak, EA, CFP®, CSEA Executive Vice President Scarlett Vanyi and Director of Member Services Cara Watson attended the annual hearing, which was held in the auditorium of FTB’s headquarters in Sacramento.

FTB has now submitted a written response to the written and verbal questions presented by CSEA.  Click Here to read the FTB response letter. As always, CSEA continues to advocate on behalf of its Members, California tax professionals and taxpayers while promoting effective tax administration.

Dec. 4 2014 – CSEA Testifies at Taxpayers’ Bill of Rights Hearing

For many years CSEA has attended and testified at the Franchise Tax Board’s (FTB) Taxpayers’ Bill of Rights Hearing, which gives taxpayers and tax professionals a once-a-year opportunity to bring items of concern regarding tax law and administration before the Board. On December 4, 2014 Vicki Mulak, EA, CFP®, CSEA Executive Vice President Scarlett Vanyi and Director of Member Services Cara Watson attended the annual hearing, which was held in the auditorium of FTB’s headquarters in Sacramento.

Ms. Mulak presented testimony on behalf of CSEA focusing on three issues of primary concern:

  • Inability to Dissolve/Cancel Business Entities Formed and not “Launched”
  • FTB Withhold-at-Source Programs (including Real Estate Withholding in General and Withholding on Pass-through Entities)
  • Disaster Declarations vs. LegislationPrior to the meeting, CSEA President Patricia Kappen, EA sent FTB a detailed letter explaining CSEA’s position on each of these topics. Click here to read the letter.To listen to Ms. Mulak’s full testimony, click here.

FTB will respond to written and verbal questions in the near future. Responses will also be published on the FTB website. As always, CSEA continues to advocate on behalf of its Members, California tax professionals and taxpayers while promoting effective tax administration.

July 2014 – CSEA Supported Bills Signed Into Law

Senate Bill 1131 (Walters) which allows for personal income tax (PIT) conformity for LLC members for tax purposes allowing the same consideration LLC members currently receive under federal law was chaptered on July 10, 2012. California law conformed to federal law by exempting members of LLCs taxed as partnerships from being employees for UI (unemployment insurance) ETT (employment training tax) and SDI (state disability insurance) tax purposes and to treat LLC members as employees when the LLC has a corporate election in place. This was accomplished in 2010 through SB 1244. However PIT was excluded from the federal conformity causing confusion for tax practitioners and taxpayers alike.

CSEA worked with legislative staff to craft and shepherd the bill and many Members responded to an action alert to urge Governor Brown to sign the bill into law. With the enactment of SB 1131 California is now in full conformity with federal rules regarding remuneration of LLC members. Conformity in this area will ease administration of the tax code and remove the confusion for tax practitioners and taxpayers alike.

Special thanks to Advocacy Partnership Subcommittee Chair Vicki Mulak EA CFP® for stellar work on this bill.

Assembly Bill 1393 (Perea) which conforms state law with federal law by extending tax relief for mortgage debt forgiven in 2013 was chaptered on July 21 2014. While California law previously conformed to federal law in this regard it went out of conformity when the federal debt forgiveness tax relief was extended for the 2013 tax year.

This legislative success comes as a great relief for Enrolled Agents and the taxpayers they represent providing Californians with relief from state tax bills and economic hardship. This bill was supported by CSEA and the Society thanks all Members who responded to the call to action by contacting Governor Brown and requesting that he sign AB 1393 into law.

Click here to learn more about CSEA’s advocacy efforts and to make a donation to the Legislative Action Fund.

April 30 2014 – Breaking News: CSEA Sponsored Bills Clear Legislative Hurdles

CSEA Activism Wins the Day!

The synergistic power of CSEA Members working together to advocate for the profession and sound tax policy has propelled two CSEA sponsored bills this legislative session. On Monday both bills cleared legislative hurdles as they passed out of various committees due in large part to CSEA’s advocacy efforts and the compelling testimony delivered by Legislative Committee Members Vicki Mulak EA (SB 1131) and Joyce Cheng EA (AB 2180). These bills are a direct result of CSEA Member activism at the 2014 Jim Stern Legislative Day where Member meetings with legislators and key staff generated interest and support for the concepts embodied in these CSEA sponsored bills:

  • SB 1131 (Walters R-Irvine) – Limited liability company (PIT conformity) – SB 1131 would bring conformity with the federal rules for Limited Liability Companies (LLCs) for Personal Income Tax (PIT) purposes and provide that for purposes of specified withholding laws an employee does not include any member of an LLC that is treated as a partnership for federal income tax purposes. Conformity in this area would ease administration of the tax code and remove the confusion for tax practitioners and taxpayers that has existed since CSEA sponsored bill SB 1244 was enacted in 2010.
  • AB 2180 (Brown D-San Bernardino) – Statement of Information (SOI) Filing Date Proposal – AB 2180 would streamline the filing time for all SOI other than the initial filing to coincide with the entities’ filing with the Franchise Tax Board (FTB). By streamlining the FTB and Secretary of State SOI filing dates and allowing a five month window to file preceding the due date it would be easier for businesses to remain compliant as there would be less confusion as to when the SOI is due.

These are very exciting wins for CSEA its Members and the taxpayers they represent. CSEA thanks all those Members who testified on the Society’s behalf and participated in Jim Stern Legislative Day to help educate legislators about important issues facing taxpayers. We will keep you informed of any new developments on SB 1131 and AB 2180 in the coming months.

For more details on these bills be sure to check your email inbox for the article “CSEA Activism Wins the Day” in the April 2014 CSEA News & Events newsletter or visit the Publications page of the CSEA website under the Members Area.

Jan. 14 2014 – FTB Responds to CSEA Recommendations

On December 4 2013 State Tax Agency Liaison Subcommittee Chair Vicki Mulak EA CFP® attended the Franchise Tax Board’s (FTB) Taxpayers’ Bill of Rights Hearing which provides taxpayers and tax professionals the opportunity to propose improvements to FTB’s current policies and procedures. CSEA has testified at this annual hearing for many years. Click here to read the text testimony delivered by Ms. Mulak at the December 4 hearing. Prior to the meeting CSEA President Patricia Kappen EA sent FTB a detailed letter explaining CSEA’s position on the following six topics:

  • Inability to Dissolve/Cancel Business Entities that are Formed and not “Launched”
  • Mortgage Relief Nonconformity
  • Taxpayer Education re: Market-Based Sourcing Rules
  • Small Tax-Exempt Organization Revocations
  • Amended Return Processing
  • POAs and Implementation Delay of 2014 EDR Enhancements to MyFTB Account

The Franchise Tax Board has issued its formal response to President Kappen’s letter and corresponding testimony delivered by Ms. Mulak on CSEA’s behalf at the December 4 hearing. Click here to read the response from FTB Taxpayers’ Rights Advocate Steve Sims EA.