California A.B. 150

On July 16, 2021, California enacted A.B. 150, which included the “Small Business Relief Act” providing a pass-through entity (PTE) tax election for the years 2021-2025.

What is A.B. 150?

Assembly Bill 150 is a new California law that allows partnerships, S-corporations, and LLC’s to make an election to pay state income tax at the company level and deduct the expense against federal taxable income while generating a California credit the owners can use on their individual tax return.

Why make the election?

Individual owners of PTE’s can potentially realize significant federal tax savings by getting around the $10,000 state and local tax (SALT) deduction limit enacted in 2018.

Who does it apply to?

Election eligibility is limited to a “qualified entity.” A qualified entity must satisfy two requirements: (1) it must be an entity […]