Tax Certificates: plus: regulation updates and impacts to consider.

• Author: Williams, Len
• Position: CATax

A reminder: In the purchase or sale of any business, Tax Clearance Certificates should be requested from the Board of Equalization (sales tax) and FTB, before the closing. It's common for either agency to rise up in response, especially with respect to certain types of cash intensive businesses such as restaurants, bars, garment, jewelly, etc.

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When the buyer of a business makes a written request for a sales tax clearance, the BOE must issue the certificate or mail a notice to the buyer at the address as it appears on the records of the BOE with the amount that must be paid as a condition of issuing the certificate. The BOE must issue the certificate or mail the notice of payment due within:

* 60 days after receipt of the request by the BOE:

* 60 days from the date on which the former owner's records are available for audit: or

* 60 days from the date of the sale of the business or stock of goods, whichever expires later.

It's a routine process, and most business escrow agents will handle the request for a Tax Clearance Certificate. See Chapter 6 in the BOE Compliance Policy and Procedures Manual, available at www.calcpa.org/BOEmanualCh6.

The Cutler Decision

The gist of Cutler is that the FTB is disallowing small-business stock exclusions and deferrals claimed by taxpayers for years beginning on or after Jan. 1, 2008. A supplement to the March 2013 issue of Spidell's California Taxletter states that the FTB will be sending Notices of Proposed Assessment to taxpayers who claimed a small-business stock benefit on their 2008 returns. Many of these taxpayers are considering challenging those assessments, and there are a number of bills pending that could provide legislative relief to these taxpayers.

Tax Impact of Proposed Regs by the HCD

The portent of the proposed regulations has several new requirements, which employers will have to meet to get a voucher to support claiming the Enterprise Zone Hiring Credit. Although issued by the California Department of Housing and Community Development, they will have significant ramifications for tax purposes as a result of the California Supreme Court decision in Dicom Fibreoptis.

The proposed regs and FAQs can be found at www.hed.ca.gov/ezregs. They deal with documentation that the employer will have to present (and retain) to get a voucher, timing of filing for a voucher, rehires, etc.

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