CSEA Submits Letter of Support for SALT Workaround Bill

This week, we submitted a letter of support for SB 104 (McGuire), a bill that will help California small business owners who have been negatively impacted by TCJA’s cap on state and local tax (SALT) deductions.
SB 104 helps owners of pass-through entities that are limited by the SALT cap by allowing the entity that generates the income to pay the tax on their behalf. The bill permits owners of a pass-through entity to elect to have their tax paid at the entity level, and then offers a credit in return for that payment. Owners will report their share of the income from their pass-through entity and are then made whole by claiming a 94.9 percent tax credit for the taxes paid on their behalf.
Additionally, under SB 104, the state receives the same amount in California taxes, but by shifting the tax obligation to the pass-through entity, owners save in federal taxes and have more room under the SALT cap to deduct any other California taxes they pay.
CSEA supports bills that ease compliance with the tax code, improve administration of the tax code, and make it easier for taxpayers and businesses to comply with state tax laws. SB 104 helps both ease compliance and makes it easier for entities to comply with state tax laws by creating an alternative route to help small business owners comply with their SALT obligations.
For more information related to CSEA’s position on this and other bills, visit our newly redesigned Bill Watch List.