SB 1501: Small Business Relief Act: elective tax.

Existing law, known as the Small Business Relief Act, for taxable years beginning on or after January 1, 2021, and before January 1, 2026, authorizes a partnership or S corporation to elect to pay an elective tax at a rate based on its net income, as specified, for the taxable year, if it meets certain requirements, including a requirement that the taxpayer makes a prepayment on or before June 15 of the taxable year of the election in an amount equal to the greater of $1,000 or 50% of the elective tax paid by the taxpayer in the prior taxable year. Existing law provides for interest to be imposed on any amount of tax imposed but not paid, as provided.

Existing law, for taxable years beginning on or after January 1, 2021, and before January 1, 2026, allows a credit against the personal income tax of a taxpayer, other than a partnership, that is a partner, shareholder, or member of an entity that elects to pay the above-described elective tax authorized by the act, in an amount equal to a specified percentage of the partners, shareholders, or members pro rata share or distributive share, as applicable, of income subject to the elective tax paid by the entity.

This bill would, for taxable years beginning on or after January 1, 2024, and before January 1, 2026, authorize a partnership or S corporation to elect to pay the above-described elective tax without making the above-described prepayment or without making the prepayment in full on or before June 15 if the taxpayer pays the full amount of the elective tax on or before the due date of the original return without regard to any extensions. The bill would impose interest on the amount of the prepayment that was unpaid or underpaid for the period that begins on the June 15 that the prepayment was due and ends on the day of payment, as provided. The bill, for a taxpayer whose entity does not make the above-described prepayment on or before June 15, or makes a payment that is less than the amount due on or before June 15, as specified, would allow a credit for the taxpayer equal to 10% of the amount of the above-described credit, in a reduced amount, as specified.