California Gov. Edmund G. Brown, Jr., has signed two bills that generally conform California law to the federal tax treatment of Achieving a Better Life Experience (ABLE) accounts for corporation franchise and income and personal income tax purposes. The bills apply to taxable years beginning on or after January 1, 2016. Contributions to ABLE accounts must be made in cash and are not deductible for California purposes. The additional federal contribution, rollover, and distribution rules generally apply, except that any ABLE distribution that is includible in income is subject to an additional 2.5% tax for California purposes (instead of the 10% additional tax that is imposed for federal purposes), unless the distribution is made after the death of the designated beneficiary. A copy of the report that each officer or employee having control of the qualified ABLE program is required to file for federal purposes with respect to contributions, distributions, the return of excess contributions, and other matters required by the U.S. Treasury are also required to be filed with the Franchise Tax Board at the same time and in the same manner.
S.B. 324, Laws 2015, effective January 1, 2016, applicable as noted; A.B. 449, Laws 2015, effective January 1, 2016, applicable as noted