| California Assembly Bill AB 2962 was approved | | | | estate by certain taxpayers. It is designed to |
| and signed into law by California Governor Arnold | | | | reduce the problem of over-withholding by |
| Schwarzenegger on September 22, 2006. | | | | allowing taxpayers to elect an alternate method |
| California's current income tax withholding law | | | | for calculating the withholding amount instead of |
| enacted in 2002 and effective January 1, 2003 | | | | the current 3 1/3% based on the taxpayer's |
| under Governor Davis requires a mandatory | | | | gross sales price. |
| income tax withholding requirement of 3 1/3% | | | | Taxpayers will be able to choose a withholding |
| based on the gross sales price on the disposition | | | | amount based on the maximum income tax rate |
| (sale) of real property under certain | | | | for individuals or corporations applicable to the |
| circumstances. | | | | actual capital gain on the disposition (sale) of their |
| "The problem with California's current income tax | | | | real property. "This solution should eliminate most |
| withholding law is that the calculation of the | | | | of the California withholding problems that we |
| mandatory withholding requirement of 3 1/3% is | | | | have seen day in and day out," said Mr. Exeter. |
| based on the taxpayer's gross sales price and | | | | Taxpayers will be required to complete a |
| bears absolutely no relationship to the taxpayer's | | | | certification under penalty of perjury to the buyer |
| actual capital gain income tax liability," said William | | | | or REEP (Real Estate Escrow Person, including but |
| L. Exeter, president and chief executive officer, | | | | not limited to attorney, escrow officer or qualified |
| Exeter 1031 Exchange Services, LLC. Mr. Exeter | | | | intermediary) to elect this withholding method. |
| further stated, "It actually causes over-withholding | | | | Industry professionals may be interested in |
| for many taxpayers." | | | | reading the California Franchise Tax Board's |
| Assembly Bill AB 2962 amends Sections 18662 | | | | Analysis of Amended Bill and the Revised Analysis |
| and 18668 of the California Revenue and Taxation | | | | on Assembly Bill AB 2962. Click here for more |
| Code with regards to the mandatory withholding | | | | complete details and links to text and analysis of |
| requirements on the disposition (sale) of real | | | | AB 2962. |
