AB 91

AB 91: Making an Election Under Sect. 16(d)(1)

Section 16(a) of Assembly Bill 91, Loophole Closure and Small Business and Working Families Tax Relief Act of 2019, incorporated certain federal changes to Internal Revenue Code Sec. 708, dealing with a technical termination of a partnership, as of Jan. 1, 2019. Sec. 16(d)(1) of AB 91 allows taxpayers to elect to apply the changes to IRC Sec. 708 for taxable years beginning after Dec. 31, 2017 and before Jan. 1, 2019. Pursuant to Sec. 16(d)(2) of AB 91, the FTB shall determine how the election will be made and in what manner. 
 
AB 91 was chaptered on July 1, 2019, and the FTB began the process to implement the provisions of AB 91, including determining the method in which the election under Sec. 16(d)(1) will be made. The FTB has recently received some questions regarding AB 91 and the method for making the election under Sec. 16(d)(1). FTB is developing formal procedures for taxpayers to make the election in Sec. 16(d)(1) and will make those procedures available to the public through its various communication channels. 
 
Until formal procedures have been adopted, taxpayers may make the Sec. 16(d)(1) election by providing the following information to the FFTB:

1. Include a statement with their original or amended California tax return, for the appropriate tax year, stating the taxpayers’ intent to make an election under Sec. 16(d)(1) of AB 91.
2. On the top of each page of the original or amended tax return, write “AB 91 – Section 16 Election” in red ink.
3. Mail all “AB 91 – Section 16 Election” returns to: Franchise Tax Board; P.O. Box 1570; Rancho Cordova, CA 95741-1570

July 23, 2019