California, saddled with a $40 billion deficit, is stepping up its revenue collection activities and has focused on collecting taxes from property management companies that manage residential rental properties owned by out-of-state owners.
California property management companies who collect residential rent for out-of-state owners are now required to withhold and remit seven (7%) percent of the rent when the rent exceeds $1500 for the calendar year.
Withholding rent from non-resident owners is nothing new for the California Franchise Tax Board. For several years this practice of withholding rent has been enforced for commercial property only.
Although residential non-resident owners have been exempt from this rule in the past, as of February 9th new guidelines were posted to the California Franchise Tax Board website without an opportunity for the public to comment.
The California Appartment Associationsays it is in discussions with the California Franchise Tax Board regarding this matter and challenges the new Guidelines as inconsistent with the underlining regulations. At the same time, CAA argues that the California Franchise Tax Board cannot unilaterally change its Guidelines and hold management companies responsible for the tax and then impose penalties.
Click here for the regulations posted several days ago by the FTB to its web site >> http://www.ftb.ca.gov/forms/2009/09_1017.pdf
This blog by:
Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com
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