Ask the Advocate. Inside This Issue. Stay in the loop! Make sure you re receiving the NATP Chapter News s to find out what we are working on.

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1 Summer Edition 2016 From the President By Jim Vann Congratulations for making it through tax season. Personally this was my most challenging season yet in my ten years of preparation. The extra days in the filing season came in handy, but extended the pain. We look forward to you sharing your experiences with this tax season at one of our Neighborhood Meetings. I d like to thank Rich Moring III for his service as President of the California Chapter for the past two years. I'd also like to thank Barbara Sonin, and Becky Neilson for their board service that ended last year. I'd also like to introduce our new board members: Jenny Shilling, Ryan Benton, and Tim Powell. In case you didn t know, your California Board is comprised of volunteers that are elected to three year terms. Check the map on page 5 of this newsletter to see where we are located. Perhaps we have a board member near you. We have three board positions opening up this year, and we are always looking for other volunteers to help with Neighborhood Meetings and other short term projects. If you are interested or want additional information, please contact us at chris@ymminc.com. Continued on page 2 Ask the Advocate Reprinted from the July taxnews Did Your Client Receive a Withholding Adjustment this Year? Many practitioners have seen an increase in the number of withholding adjustments this filing season when compared to prior years. Every filing season, FTB processes more than 15 million taxpayer returns and relies upon a variety of information sources to verify refund amounts before they are issued. FTB performs this verification to make sure the amounts listed on the return were correctly entered, to catch unintentional errors, and make sure the proper amount of withholding was applied to the return. When an error or discrepancy is identified, FTB issues a notice to explain that the refund or tax liability was adjusted above or below the expected amount. As a result, some taxpayers received smaller than expected refunds, some expecting a refund instead received a balance Continued on page 3 Inside This Issue From the President continued 2 Nothing to do with tax 2 Neighborhood Meetings 2 FTB Legislation Did you know? 3 Ask the Advocate continued 3 California Annual Meeting 4 Is that taxable income? 4 Your California Volunteer Board Members 5 Stay in the loop! Make sure you re receiving the NATP Chapter News s to find out what we are working on. Do you have ideas for the newsletter? Contact Jenny at communications@califnatp.com

2 Page 2 From the President continued from page 1 Our 2016 Goals for the California Chapter include: Grow the Chapter (this has a retention and new member component), Expand our Neighborhood Meetings, Get a CA Member on the National Board within the next few years, and Host a National Convention. We are making progress on these goals as National has selected Anaheim as the location for the 2018 National Convention. We can use your help with growing the Chapter, so don t be shy about introducing your friends to us. Your National NATP Membership automatically makes you a member of the California Chapter. You may even qualify for some referral awards from National for getting your friends to sign up as members. Mark your calendars for our Chapter Annual Meeting on September 30th. The location is Skylinks in Long Beach. We will also be conducting five hours of California Continuing Education for CTEC. More information and registration details can be found on page 4 of this newsletter. I highly recommend you consider attending the National Convention in Indianapolis, IN (9-12 Aug) and/or the National Tax Forum & Expo in Las Vegas (22-23 Sep). Look for and say hello to your California Board members in attendance. Both of these events are excellent and offer superb education. The Las Vegas event is a value priced event and has no meals included in the price, while the National Convention has some meals & snacks included. Check out the National webpage for full details. I ve attended both of these in the past and plan to attend both again this year and future years because they are that good. Finally, 2017 will be a landmark year for the CA Chapter as we celebrate our 25 year anniversary. Look at future Chapter communication s for more information. If you were a past board member of the California Chapter or have any historical information/pictures of the Chapter, I would appreciate you sharing with us. Thanks again for your membership in NATP! Jim Vann California Chapter, President president@califnatp.com Nothing To Do With Tax By: Jen Horton I can neither confirm nor deny any of these little known California city laws; but I got a chuckle from reading them anyway: No matter how luxuriously comfortable that divided highway may look, it is illegal in Eureka, California, to use a road as a bed. In order to save money on having to crop dust their streets, officials in Chico, California, have made it illegal to plant rutabagas in roadways. Officials in Glendale, California, no doubt, caved in to insurance lobbyists when they inexplicably decided to make it illegal to jump from a car at 65 mph. Don t expect to find any salt-rimmed curbs in Hermosa Beach, California. Officials there have made it illegal to spill your Margarita on any street. I paid special attention to that last one since I ve been known to have a Margarita or two in Hermosa Beach! I ll make sure to only spill on the Boardwalk! Neighborhood Meetings You may have heard us throw this term around; do you know what a neighborhood meeting is? It s a chance to meet other preparers in your area and discuss topics important to you. We are working on finding locations and get more meetings scheduled. If you want to help us get a meeting scheduled near you or if you have any questions please contact Farid at vicepresident@califnatp.com

3 Page 3 FTB Legislation Did you know? By Jen Horton AB 1944 Exculsion/Medals, Prize Money or Honoraria from Olympic or Paralympic Games Currently, Olympic Medal winners must include prize money in their gross income; this California bill would provide an exclusion of these funds from gross income. If passed, this bill would be effective immediately and specifically operative for taxable years beginning on or after January 1, 2016, AND BEFORE January 1, Fiscal Impact in a nutshell: FTB estimates California athletes could receive $1.3M during the Summer Olympics/Paralympic games in 2016 and $120K during the Winter Olympics/Paralympic games in 2018 resulting in an estimated revenue loss of <$100K> in 2016 and <$10K> in Conformity? No; Federal law does not allow an exclusion from income for this type of revenue. This will be one more Non-Conformity item to address. AB 1710 Near-Zero-Emission or Zero-Emission Vehicle credit and deduction/ftb Report to Legislature Annually Regarding Efficacy of the Credit. Always on the mind of Californians Air Quality. This bill would allow a tax credit or tax deduction for purchasing a near-zero-emission or zero-emission vehicle; any unused credit could be carried forward for seven years. If passed, this bill would be effective January 1, 2017, and specifically operative for taxable years beginning on or after January 1, 2017, AND BEFORE January 1, Fiscal Impact has not yet been determined Estimated revenue loss (from Credit/or/Deduction) <$55M> ; <$120M> ; <$160M> AB 2692 FTB & BOE Tax Penalty & Fee Waiver Amnesty Program to encourage taxpayers to come forward and begin to comply with the state s tax laws. AB 2472 Disabled Animal Service Credit to enable more veterans to own service animals. AB 2694 Renter s Credit/Increase Credit/FTB Annually Adjust AGI for Inflation to increase the Renter s Credit in response to inflation and expand the benefit to more California Renter s. Read More About All Legislation Pending With The California Assembly/Senate: Ask the Advocate continued from page 1 due notice, while others who reported a balance due received an increase in the amount they owed. FTB made several enhancements this year to rely more heavily on real-time information, and as a result, a largerthan-usual number of adjustments occurred due to problems related to wage withholdings. This generated an enormous wave of calls to FTB s customer service center from taxpayers and tax professionals with questions. FTB promptly issued apology letters to approximately 30,000 taxpayers whose returns should not have been adjusted, letting them know that any refunds would be mailed within 7 to 10 days. The first of these letters were sent with a mail date of June 15. Additionally, FTB increased the call center staff levels to provide immediate assistance to practitioners and taxpayers with questions and concerns. The procedural changes FTB instituted were to not only catch reporting errors, but also prevent tax fraud and refund theft schemes, two trends which have increased dramatically worldwide. These changes, combined with late and some inaccurate reports from employers, caused some taxpayers to receive a reduced refund or an increase to their tax liability. FTB is currently reviewing the procedures used in the 2015 filing season to identify improvements which can reduce the number of adjustments in future years and provide quick feedback and resolution to taxpayers that need assistance. Susan Maples, CPA Taxpayers' Rights Advocate Follow me on Twitter at twitter.com/ftbadvocate

4 Page 4 California Annual Meeting It s that time of year again the California Conference is coming to Long Beach in September! The quick and clean on this fabulous event: Start your morning off right buffet breakfast with your peers; Rod Couts, EA, will kick off the education with a California update, emphasis on the new MyFTB; Susan Maples, California Taxpayer Advocate will give you tips on how to make the most of the services she can offer to your clients; Jerome Horton, Chairman of the Board of Equalization will be our keynote speaker during the lunch hour; Best of all, we will hear all about what s happening at National from our very special guest speaker, Brett Rosser; Members who attend the Annual Meeting will vote on the three open Director positions on their Chapter Board; Members will also vote on open positions on the National Board. We ll have networking opportunities, exhibitors, and plenty of door prizes throughout the event so register now for the early bird pricing of $99! Is that taxable Income? By NATP Research Department Severe droughts and a growing awareness of limited freshwater resources are driving communities across the nation to cut water usage. Water districts across the state are encouraging residents to reduce water usage by replacing water-thirsty lawns, installing grey-water capture systems or purchasing new water-efficient appliances. While providing a significant water savings, these improvements are often too expensive for property owners to install without a financial incentive. To encourage more installations, water utilities have established programs to provide rebates to offset the costs. These rebates are not taxable by the State of California. However, the U.S. tax code is unclear on whether or not the rebates are federally taxable. The Metropolitan Water District of Southern California and its member agencies are working with federal legislators to change the federal tax code to clarify that water conservation rebates are exempt. On December 11, 2015, several members of Congress sent a letter to John Koskinen, Commissiner, and Mark Mazur, Assistant Secretary of Tax Policy, requesting resolution as to whether or not the water conservation rebates are federally tax exempt. Commissioner Koskinen responded on January 5, In summary: Under 61(a) except as otherwise provided by law, gross income means all income from whatever source derived. Thus, gross income generally includes governmental grant payments. The Commissioner further cites, 136 excludes from gross income subsidies from electric and natural gas public utilities for energy conservation measures. However, expansion of 136 to water conservation subsidies provided by water utilities would require a legislative change. Currently the IRS and the Department of the Treasure are working together to analyze the legal principles to determine whether published guidance is appropriate on this issue. This indicates there is still no definitive answer regarding whether or not water subsidies are excludable from income under 136. Because this issue is still under investigation with the IRS, NATP conservatively advises to include the rebates as income. The more aggressive approach would be to not include the rebates in income and instead treat them as basis adjustment to the cost of relandscaping. This may be disallowed and penalties and interest would be incurred. If tax preparers do choose to exclude the rebates from income, for matching purposes, acknowledge the receipt of the 1099-MISC by reporting it on Form 1040, Line 21, and then backing it out on Form 1040, Line 21 as a negative with reference to basis adjustment.

5 Page 5 Your California Volunteer Board Members Contact Us Jim Vann president@califnatp.com Farid Kanji vicepresident@califnatp.com Carmen Nieves secretary@califnatp.com Jen Horton treasurer@califnatp.com Jenny Shilling communications@califnatp.com Ryan Benton membership@califnatp.com Rich Moring III info@califnatp.com Chris Basom nominations@califnatp.com Tim Powell education@califnatp.com