As in past years, the CAEZ Conference had the benefit of receiving updates from Frank Luera of HCD and Jeannie Harriman of FTB.

HCD expects the final application for the next round of zone designations to be released as early as the week of Oct. 27.  Those applications would then be due sometime next March or April.

As noted before, HCD is still working with the LAMBRAs to reexamine what ought to be the correct designation dates of those zones.

In addition, we should expect HCD to begin a process of modifying the vouchering regulations.  While the main impetus for doing so is to codify the allowance of the W4 form, there will likely be an opportunity to revisit many of the issues dealt with in the regulations.  That should be fun.

How does the current economic climate effect the program?  HCD feels that the Governor is actually embracing the program to an even greater degree than in the past and views it as an important part of an economic stimulus.

Most of the discussion with FTB centered around trying to understand the technical implications of the new budget and AB 1452 with SBX1 28.  Both the NOL suspension and the 50% usage limitation will not apply to taxpayers with “net business income” less than $500,000.  FTB is still not entirely certain how to define “net business income,” and will hopefully have some guidence out for us in the near future.

The requirement to file IRS forms 8886 and 8918 were reiterated (see also FTB Notice 2008-1).

When asked if the current budget troubles are resulting in an increase in FTB audits of credits, Jeannie answered that in fact the FTB is “winding down” their heightened interest in hiring credits.  FTB is operating with increased confidence in vouchers issued since the implementation of vouchering regulations in January 2007.  As more and more returns are filed based on vouchers issued subsequent to the regulations, FTB is reducing its audit activity with regard to the credits.