Income taxes: withholding: real property sales: Katz-Harris Taxpayers’ Bill of Rights Act: report.
Impact
The amended provisions will take effect on January 1, 2022, and will ensure that the withholding requirements are closely tied to intermediary or accommodator actions during property transactions. The bill empowers the Franchise Tax Board (FTB) to establish guidelines that do not necessitate adherence to the usual rulemaking processes. This adjustment is intended to streamline compliance for real estate transactions involving withholding, potentially leading to improved efficiency and clarity in tax administration.
Summary
Assembly Bill No. 1582, also referred to as AB1582, focuses on amendments to the Revenue and Taxation Code related to income tax withholding on real property sales in California. It primarily affects transactions involving two categories of transferees: individuals and entities without a permanent place of business in California. The bill mandates the withholding of 3.33% of the sales price, although certain conditions may exempt transferees from this withholding if they can certify under penalty of perjury that the property involved meets specific criteria, such as being a principal residence or qualifying for a like-kind exchange.
Sentiment
The general sentiment around AB1582 has been largely supportive, as it aims to clarify and enhance the existing laws governing property sales and related withholding requirements. Stakeholders generally perceive it as a step towards protecting taxpayer rights while ensuring proper compliance. However, concerns linger regarding the practical implications of ensuring proper reporting and withholding measures, which can significantly influence the ease of real estate transactions.
Contention
Notable points of contention include the possible burden the new withholding provisions may place on individuals and small businesses involved in property transactions. While supporters endorse the clarity and protections offered by the bill, critics express concern about the administrative complexities that may arise with the new requirements. The necessity for reporting to the FTB may pose challenges for those unfamiliar with the procedures, potentially complicating what is intended to be a straightforward tax compliance process.