After a meeting between California Apartment Association (CAA) staff and Franchise Tax Board (FTB) officials, CAA is pleased to announce that the FTB has agreed to delay implementation of its withholding requirement for property managers who manage California residential property for out-of-state owners. FTB will instead utilize 2009 to educate management companies and other agents about this requirement and will begin to enforce the withholding in 2010. According to the FTB's public statement, they will "focus on education and outreach, [and] residential property managers will be given time during 2009 to come into compliance with our nonresident, quarterly withholding program, with the goal of full compliance by 2010."

CAA objected to the FTB Guidelines when they were posted to the Board's Web site on February 9 of this year. These new Guidelines "reinterpreted" existing regulations, ruling that residential rental property managers must now withhold a portion of the rent collected from a California residential property before sending the proceeds to an out-of-state client. While commercial property has been subject to a withholding requirement for a number of years, this was the first time that residential property would fall under the same rule. Indeed, under the old guidelines residential property was expressly exempted from the withholding requirement.

In the mean time, CAA will work with the Department of Real Estate (DRE) to resolve conflicts that exist between the FTB withholding requirement and the DRE trust account mandates.