Learn more about recent legislation governing state and local tax workarounds with this webinar from Moskowitz LLP. For more information on this topic, please watch our full webinar at: https://moskowitzllp.com/webinars/watch-our-latest-webinar-on-ab150-sb113/ You can also subscribe to our monthly newsletter for more topical tax advice.

1. AB150 and SB113
California SALT Workaround

2. DISCLAIMER
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3. AB 150
▪ Enacted in 2021
▪ Applies for 2021 to 2025 taxable years
▪ California’s SALT workaround approved in IRS
Notice 2020-75
▪ Stays in place until January after the federal SALT
limit is “repealed”

4. AB 150: Why It’s Attractive
3 issues fixed retroactively by SB 113
No more AMT limitation
Entities with partnership owners are no longer disqualified
Entities can now pay on behalf of SMLLC owners, but
SMLLCs can’t elect to pay the tax.
1.
2.
3.

5. How The Credit Works
▪ “Qualified entities” elect to pay tax on behalf of
“Qualified owners”
▪ This gives them a federal deduction on the entity K-1
▪ No deduction for federal purposes, but the owners get a
California credit

6. Qualified Entity
▪ Not allowed to be in a combined return
▪ Not publicly traded
▪ No SMLLCs
S Corp, partnership, or LLC (taxed as S Corp or
partnership), but only if:
▪ Prior to SB 113 if any owner of an entity was a
partnership, that entity was not a qualified entity
▪ This is no longer true
▪ But no tax can be paid on behalf of partnership owners
(they aren’t qualified taxpayers)
Partner Owners Allowed

7. Making the Decision
▪ Entity makes decision to elect
▪ Then owners can decide if they want tax paid on their behalf
▪ Entities may want to amend operating agreements to state
who can make the election, and when they can do
Trusts
SMLLCs
▪ Trusts are not qualified entities
▪ So no tax paid at the trust level
▪ But trusts are qualified taxpayers
▪ Elect to be taxed as a corporation
▪ Add a member
▪ Or married couples elect to be treated as a partnership
Are not qualified entities, unless:

8. Qualified Net Income
▪ The tax is 9.3% of qualified net income
▪ Owner’s pro-rata or distributive share of entity
income, plus guaranteed payments
▪ Only for income taxed to California
▪ Only for owners who consent
Consenting Owners
▪ No specific requirements for consent
▪ We recommend something in writing
▪ Entity can still elect even if not all owners consent, but
there are issues if this happens

9. Strategies for Saving
▪ Advanced planning
▪ Asset and gift freeze
▪ Coronavirus Aid, Relief, and Economic Security (CARES) Act
▪ Deductions
▪ Exit and Capital Gains
▪ Families First COVID Response Act (FFCRA)
▪ Insurance and Asset Protection
▪ International Investments
▪ Legal entity design
▪ Niche-specific planning
▪ Retirement
▪ Tax advantage wealth management
▪ Tax Cuts and Jobs Act (TCJA)
Review AB150 as part of your Tax Strategies along with:

10. Plan. Prepare. Prosper
Our goal is to help you or your business reduce or
eliminate your tax liability, in compliance with federal,
state, and local laws. By spending a little today, you can
save a lot tomorrow.
“Tax Planning is a year-round opportunity to do as the
Fortune 500 do, which is to legally minimize or eliminate
your taxes.
The actual preparation of the return is merely the
summarization of the year’s tax planning.”
-Steve Moskowitz

11. Contact the legal team
at Moskowitz LLP for a
free consultation today.
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