On September 22, 2006, the Governetor (California) signed AB 2962. This new law amends Revenue and Taxation Code Sections 18662 and 18668, making changes to real estate withholding requirements for all transactions closing on or after January 1, 2007. Commonly referred to as "CAL-FIRPTA".

Previously, where withholding was required under CAL FIRPTA, a Seller had to withhold 3 1/3% of the property's gross sale price. Now, for all transactions closing on or after January 1, 2007, a Seller may choose between the original withholding method or elect an alternate withholding amount based on the Seller's estimated gain. The alternate withholding amount will be based on the calculation of applying the maximum tax rate to that Individual or Entity, as Seller, to the Seller's estimated gain.

The maximum tax rates are:

• Individuals:                   9.3 % percent
• Corporations:                 8.84 % percent
• Banks & Financial Corps:  10.84 % percent
• S Corporations:               1.5 % percent
• Financial S Corporations:  3.5 % percent

Seller's electing the new alternative withholding amounts based on their gain will be required to certify the amounts in writing, under penalty of perjury. The new form for calculating a Sellers gain is entitled Form 593E (Real Estate Withholding-Computation of Estimated Gain or Loss), which can be obtained through your Escrow Officer or the California Franchise Tax Board's Forms website. For more information about these changes, I suggest you read California Real Estate Withholding Information for Sellers and Buyers and Changes to California Real Estate Withholding Law for 2007. And contact your CPA or the FTB to help you out with any Withholding questions.