Small Business Accounting/Percentage of Completion Method

For taxable years beginning on or after January 1, 2019, California law generally conforms to the federal Tax Cuts and Jobs Act's definition of small businesses as taxpayers whose average annual gross receipts over three years do not exceed a certain amount. For the current taxable year, the threshold amount is $30 million. These small businesses are exempt from the requirement of using the Percentage of Completion Method of accounting for any construction contract if the contract is estimated to be completed within two years from the date the contract was entered into. A taxpayer may elect to apply the provision regarding accounting for long term contracts to contracts entered into on or after January 1, 2018.