California property taxes can be complex and challenging to understand. While the laws regarding property taxes apply statewide, the ways these issues are handled can differ from county to county. Understanding the specific requirements that apply to property owners can be difficult, and failure to follow the correct procedures could result in penalties. To address issues related to property tax assessments, payment of taxes that are due, and other related concerns, property owners will need to be aware of important dates and deadlines that apply throughout the year.

Dates Related to Property Taxes

• January 1: Lien Date - Anyone who owns taxable property on this date will be liable for the taxes that apply to that property. Property taxes are generally calculated as 1 percent of the assessed value of the property on the lien date.

• January 18: Homeowners' Exemption Claim Form - Certain owner-occupied homes will qualify for a $7,000 exemption toward the taxable value of the property, and this exemption can be claimed by making a one-time filing with the county assessor. Assessors are required to mail claim forms for the homeowners' exemption to new property owners by this date.

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In California, property taxes are a notoriously complex issue, and they may apply to both individual taxpayers and businesses. While property taxes will generally apply to real estate property owned by an individual, married couple, or business, they may also apply to other types of personal property. Specifically, assets that fall under the category of "business personal property" will need to be reported, and taxes may be applied to some of these assets. By understanding the requirements that apply to business personal property, owners of small businesses and other types of companies can make sure to avoid potential penalties.

What Is Business Personal Property?

Business personal property refers to the tangible assets owned by businesses and used to conduct their operations. This includes furniture, fixtures, equipment, and other miscellaneous items used by a business in its day-to-day operations. It also includes vehicles, aircraft, and boats, as well as supplies used by a business, such as office supplies, janitorial products, or fuel for vehicles. A business may also be required to pay taxes on personal property that has been leased and is used as part of its ongoing operations.

Real estate property is not included in business personal property. Inventory, such as products meant to be sold to consumers or parts used to make products, is considered business personal property, but it is exempt from property tax.

Many businesses rely on non-compete clauses in employment contracts, severance agreements, and other types of contracts. These clauses can help businesses protect their interests and prevent unfair competition by restricting former employees, independent contractors, or other types of workers from working for competitors or starting their own competing businesses. However, under the administration of President Joe Biden, the federal government is looking to take action to restrict the use of non-compete clauses or even prohibit them altogether.

Proposed FTC Rule Regarding Non-Compete Clauses

On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule that would affect the use of non-compete clauses in the United States. Under this rule, the use of non-compete clauses would be defined as an "unfair method of competition," and employers would be prohibited from using these clauses in employment contracts or similar agreements. In addition, the rule would require employers to rescind any existing non-compete clauses and notify employees or other workers of this rescission. This rule would supersede any state laws or regulations that specify when non-compete agreements can or cannot be used.

Notably, the rule would not only apply to non-compete clauses that have been included in an employment contract or a similar agreement but also to "de facto" agreements that function in a similar fashion. For example, non-disclosure agreements that are so broad that they would prevent a person from working in the same field after leaving an employer would be considered to be non-compete agreements. Other contractual terms that would restrict a person's ability to seek future employment, such as the requirement to pay an employer for training expenses that are not functionally related to the actual costs of training the employee received, may also be considered to be non-compete clauses. Employers would also be prohibited from claiming or implying that a worker is subject to a non-compete agreement when they do not have a good-faith basis for believing that an enforceable non-compete clause applies to a person.

Since Proposition 64 legalized the personal use and cultivation of marijuana in California in 2016, many business owners have been able to take advantage of the legal cannabis market. However, there are a variety of laws and regulations that apply to these businesses, and it is important for business owners to keep abreast of changes to the laws that may affect them. One change that recently went into effect involves the cannabis excise tax. California cannabis businesses will need to make sure they are following the correct procedures to avoid potential tax penalties while addressing any other small business tax issues that they may encounter.

What Is the Cannabis Excise Tax?

Excise taxes are levied on specific products, services, or activities. There are multiple types of federal and state excise taxes that apply to products such as gasoline, cigarettes, or alcohol. The state of California levies a 15 percent excise tax on cannabis businesses and microbusinesses.

Changes to the Cannabis Excise Tax for 2023

Previously, the cannabis excise tax applied to marijuana and marijuana products sold by distributors to retailers. Distributors were required to collect excise taxes from retailers, and these taxes were calculated based on the average market price of cannabis and cannabis products.

Small business owners need to address a variety of small business tax issues, and it is important to comply with all requirements put in place by the IRS and California's Employment Development Department (EDD). Worker misclassification is one issue that has received increasing scrutiny in recent years, and businesses that improperly classify workers as independent contractors instead of employees may face a variety of tax penalties. Recently, the IRS and the federal Department of Labor (DOL) announced that they will be working together to identify tax compliance issues related to worker misclassification This may result in tax audits and penalties for businesses that have failed to follow the proper procedures.

Understanding the Joint Worker Misclassification Initiative

On December 14, 2022, the IRS and the DOL issued a Memorandum of Understanding for Employment Tax Referrals, and this document stated that the agencies will be working together to improve compliance with laws related to worker classification. The Department of Labor's Wage and Hour Division regularly investigates complaints related to the misclassification of workers. Under this initiative, the WHD may refer information related to investigations about alleged worker misclassification to the IRS's Small Business/Self-Employed Specialty Employment Tax unit. The IRS will then evaluate these referrals to determine whether to conduct audits and assess penalties against noncompliant employers.

The Memorandum of Understanding detailed certain requirements that must be met before cases can be referred to the IRS. A business must still be in operation at the time of the referral, and the IRS will typically only investigate businesses that did not have a good-faith basis for misclassifying workers. Referrals will only be made in cases where a business had an annual dollar volume of at least $500,000. That is, the business's gross earnings over a period of 12 months must be $500,000 or more.