California Tax Update Dec 2025: E-Filing, Research Credit, PTE, Wildfire Rules
Can you believe it? We are already staring down the barrel of the 2026 tax season. 😲 If you’re like me, the end of the year is a mix of holiday cheer and a frantic scramble to figure out what changed in the tax laws. California’s tax landscape is always shifting, and this December’s update from the Franchise Tax Board (FTB) is packed with some seriously heavy hitting changes.
Whether you are a business owner trying to figure out the new e-filing mandates or a tax pro looking into the Pass-Through Entity (PTE) tax extension, missing these details could cost you time and money. But don’t worry! I’ve dug through the official December 2025 Tax News to break it all down for you. Let’s dive in! 😊
Major Shift: SB 711 & Federal Conformity 🏛️
First up, let’s talk about Senate Bill (SB) 711. This is probably the biggest technical update for this year. Essentially, California has updated its “specified date” for conforming to the Internal Revenue Code (IRC).
Previously, we were looking at a conformity date back in 2015. Now? The date has moved to January 1, 2025 for both personal income and corporate tax purposes. This alignment simplifies things, but it also triggers some immediate changes you need to be aware of.
This conformity includes IRC section 6011(e) and 6011(h). In plain English? The rules for who must electronically file (e-file) have gotten much stricter.
New Business E-Filing Mandates
For taxable years beginning on or after January 1, 2025, the threshold for mandatory e-filing has been lowered significantly. If you are still filing paper returns for your business clients, you might need to change your process immediately.
- Corporations: Must e-file if they are required to file at least 10 returns during the calendar year.
- Partnerships: Must e-file if they file at least 10 returns OR have more than 100 partners.
- Exempt Organizations: Any organization with unrelated business income must now file electronically.
Wait, what if you simply can’t e-file? The FTB still allows for waivers in specific cases, such as technology constraints or undue financial burden. But you have to request it annually—it’s not automatic!
The End of the Alternative Incremental Credit (AIC)
If you claim the Research Credit, pay attention. SB 711 has repealed the Alternative Incremental Credit (AIC) for taxable years starting on or after Jan 1, 2025. If you were using this, you cannot just coast on your previous election.
A previous AIC election will NOT default to another credit. You must actively elect the regular credit or the new Alternative Simplified Credit (ASC) on your original return.
The new California ASC generally adopts a 3% rate (or 1.3% if you had no qualified research expenses in the prior three years). But be careful—revoking an ASC election isn’t as easy as it is federally; you need explicit FTB consent.
PTE Elective Tax: Extended & Amended 📊
The Pass-Through Entity (PTE) Elective Tax has been a huge topic for tax planning, and the good news is that SB 132 has extended this program through taxable years beginning before January 1, 2031.
However, there is a very specific change regarding the famous “June 15th Pre-payment.” In the past, missing this payment could disqualify you entirely. Now, there is a safety net, but it comes at a cost.
| Scenario | Old Rule | New Rule (SB 132) |
|---|---|---|
| Missed June 15 Payment | Cannot make the election for the year. | Can still elect, but with a penalty. |
| The Penalty | N/A | Credit reduced by 12.5% of the unpaid amount. |
Even with this flexibility, remember that the election must still be made on an original, timely filed return. You cannot fix this on an amended return!
🔢 PTE Late Payment Credit Reduction Calculator
Curious how much credit you might lose if you miss the June 15th payment? Use this simple estimator.
Wildfire Settlements & Nonresident Relief 🌲
Living in California, we are all too familiar with the devastation of wildfires. In a compassionate move, expanded tax relief is now available. Under SB 132 and SB 159, qualified taxpayers can exclude qualified wildfire settlement amounts from gross income.
This relief is retroactive for taxable years beginning on or after January 1, 2021. If you or a client received a settlement for a qualified disaster, it's time to check if you can claim a refund. The statute of limitations generally gives you four years, so for 2021 returns, you have until April 15, 2026.
Good News for Nonresident Aliens
For tax pros handling group returns: The FTB is continuing to waive the estimated tax payment requirement for electing nonresident aliens included in a group return for the 2025 taxable year. This cuts down a lot of administrative headaches!
Important Reminders for Tax Pros 👩💼
Before I wrap up, there are a few procedural updates you should bookmark. The FTB is emphasizing the importance of getting your Power of Attorney (POA) and Tax Information Authorization (TIA) forms submitted correctly to avoid delays.
Common Rejection Pitfalls
- Incomplete Fields: Fill out every single required field.
- Missing Documents: If someone other than the taxpayer signs, attach the legal proof (e.g., trustee certification).
- Signature Issues: This is huge—Use a wet signature! Copied, digital, or electronic signatures on the uploaded declaration will result in rejection.
The FTB has also launched new self-help videos on their YouTube channel to guide you through these processes. It's worth a watch if you've had rejections in the past.
Key Takeaways: Dec 2025
Frequently Asked Questions ❓
That wraps up the major updates for December! It looks like 2026 is going to be a year of transition, especially with the e-filing mandates and the new Research Credit rules. Taking a moment now to digest these changes will save you a world of stress when filing season hits its peak.
How do you feel about the PTE extension and penalty changes? I think it's a fair trade-off for the flexibility. If you have any questions or want to share your thoughts on these updates, feel free to drop a comment below! Let's get through this tax season together. 😊
