March 2026 FTB Updates: Conformity Act of 2025 & PTE Changes
Welcome to the peak of the 2026 tax season! If you’re anything like me, you might be feeling that familiar mix of stress and determination as deadlines approach. Whether you are a dedicated tax professional managing a large roster of clients, a small business owner trying to make sense of your forms, or just someone looking to get their personal income tax filed correctly, keeping up with the ever-changing landscape of state and federal tax laws can feel like a full-time job in itself.
But don’t worry, you are not alone in this! I’ve been diving deep into the Franchise Tax Board’s (FTB) Tax News for March 2026, and I want to share the most critical updates with you. This month’s updates are packed with valuable information, from new state conformity rules to critical updates on the Pass-Through Entity (PTE) elective tax. Let’s break down these complex tax jargon into simple, actionable steps so you can tackle this tax season with absolute confidence. Let’s dive in! 😊
1. 2026 Tax Season Readiness: Power of Attorney & TIA 📝
As things ramp up, the absolute first thing you need to ensure is that you and your clients are completely prepared with timely submitted Power of Attorney (POA) declarations and Tax Information Authorization (TIA) forms. Trust me, dealing with authorization bottlenecks in the middle of April is something we all want to avoid!
For the fastest processing, the FTB highly recommends using MyFTB. This portal offers 24/7 access to self-service options, which is a massive time-saver. You can handle online TIA renewals and access detailed tax information once you are officially authorized.
Remember the lifespans of these authorizations! TIA relationships last for 13 months. You can start renewing them 90 days before they expire, but the window closes five days prior to expiration. On the other hand, POA relationships last for six years. Once those six years are up, new declarations must be submitted to continue representation.
If you hate chasing down physical signatures, I have great news. There are now several streamlined options for submitting these forms without a physical signature:
- For Taxpayers (POA): You can submit electronically directly through MyFTB with no paper form or signature required.
- For Tax Professionals (POA & TIA): You can submit the request through your MyFTB account. The taxpayer then approves it online, completely eliminating the need for physical signatures and mailing delays.
2. Big Changes: The Conformity Act of 2025 (SB 711) ⚖️
This is perhaps the most significant update for the year. Senate Bill (SB) 711, which was enacted on October 1, 2025, fundamentally changes California’s specified conformity date to the Internal Revenue Code (IRC). It moves the conformity date from January 1, 2015, all the way to January 1, 2025, for both personal income tax and corporate tax purposes.
However, it’s crucial to understand that California still does not conform to everything. For instance, SB 711 explicitly does not include federal tax laws enacted after January 1, 2025, such as the new “One Big Beautiful Bill Act” (Public Law 119-21).
Here are a few specific areas where conformity is changing or notably applying this year:
| Tax Category | California Law Updates & Details |
|---|---|
| Alimony | For divorce or separation agreements executed after December 31, 2025, alimony is no longer included as income for the recipient, nor is it deductible by the payor, aligning with federal rules. |
| Military Retirement | For taxable years 2025 through 2029, CA allows a gross income exclusion up to $20,000 for qualified taxpayers receiving federal military retirement or survivor benefits. |
| Organ Donor Election | Starting in 2025, resident income tax returns (Form 540) now have checkboxes allowing individuals to consent to enroll in the Donate Life California registry. |
| Financial Institutions | For tax years beginning on or after Jan 1, 2025, CA removes savings and loan/banking activities from the definition of qualified business activities for Single Sales Factor Apportionment. |
Always remember that when California conforms to federal tax law, it doesn’t automatically adopt every single change made at the federal level. You must carefully review California-specific instructions, especially regarding the new OBBBA legislation, to which California generally does not conform.
3. Navigating the Pass-Through Entity (PTE) Add-back 📊
If you handle taxes for eligible partnerships, LLCs, or S corporations, you are likely very familiar with the California PTE elective tax. This was established to help alleviate the impact of the federal State and Local Tax (SALT) deduction limit. Thanks to Senate Bill 132, this popular program has been extended through taxable years before January 1, 2031.
However, the reporting mechanics can trip people up. Here is the core issue: While the IRS (via Notice 2020-75) allows the PTE elective tax to be deducted as a state income tax expense when computing federal taxable income, California does NOT allow this deduction.
Because of this discrepancy, if the qualified entity deducted the PTE elective tax on their federal return, that exact amount must be added back for California purposes to calculate the correct California net income.
📝 How to Report the PTE Add-back
- Make a positive adjustment under the “California Adjustments” column (column c) on the adjustments section of Schedule K/K-1 for Forms 565, 568, and 100S.
- Report it as a nondeductible and noncapitalizable expense on the CA Schedules K/K-1.
- For S corporations specifically: You must add back the deduction on Form 100S, Side 1, Line 2 to ensure the 1.5% entity-level tax is computed correctly.
4. Military Retirement Exclusion Estimator 🔢
As mentioned earlier, California now allows an exclusion from gross income for qualified taxpayers who received military retirement pay or survivor benefits, up to $20,000 annually (between 2025 and 2029). I’ve built a quick interactive calculator below to help you estimate your taxable military retirement income for California purposes!
Military Retirement Taxable Income Estimator (CA)
Enter your total federal military retirement pay to see how much is taxable in California under the new SB 711 rules.
5. Transcripts, Fraud Prevention, and Resources 👩💼👨💻
It's impressive to see that California has stopped more than $6 billion in tax fraud over the last 8 years! To keep up this fight, the FTB has launched a new online service allowing taxpayers and practitioners to verify a submitted tax return online using a fraud prevention letter, whether they have a MyFTB account or not.
There was also an important update from the Taxpayers' Rights Advocate regarding account transcripts. While the FTB doesn't currently offer a single, consolidated transcript like the IRS does, professionals can use MyFTB to pull up to six prior years of data, or they can request a "Taxable Year Summary" for business entities (which takes about 30 days). Also, Individual Status Letters (ISLs) can now be requested online by individuals or authorized reps without needing a MyFTB account.
March 2026 FTB Highlights
Frequently Asked Questions ❓
I hope this breakdown of the March 2026 FTB updates helps you navigate this tax season with a bit more ease. Remember, these changes can be nuanced, so always consult with a qualified tax professional regarding your specific situation. What update surprised you the most this year? Let me know in the comments below, and happy filing! 😊
