Amended Market-Sourcing Rules for Intangible Property

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October 3, 2016

Purpose of Bulletin

To advise FTB staff how to handle taxpayer inquiries about the amended market-sourcing rules in Regulation 25136-2.


Recent amendments to the California Code of Regulations, Title 18, Section 25136-2 have been approved by the Office of Administrative Law and have been sent to the Secretary of State for finalization. These amendments are effective on January 1, 2017, and will be operative for most taxpayers for tax years beginning on or after January 1, 2015.

The amendments provide:

  • The definition of and assignment rules for "marketable securities"
  • Assignment rules for dividends and goodwill, and
  • Assignment rules for interest

Additional Information

For tax year 2015, the new amendments may require some taxpayers to file an original return if they were not previously aware they had a filing requirement.

Please see the matrix below for additional information on a taxpayer’s eligibility to file in a group return:

Taxpayer Residency Taxpayer Filing Status Can Taxpayer File in a Group Return? Can Taxpayer File in Multiple Group Return?
Nonresident Filed Own 540NR No No
Nonresident Filed In Group Yes Yes
Nonresident Not Filed Return Yes Yes
Resident Filed 540 No No
Resident Not Filed Return No No

FTB will abate applicable penalties as allowed by law. This will be explained in a Franchise Tax Board Notice which will be issued at a later date.

Taxpayer Inquiries

Taxpayers can obtain information at:

  • 800.852.5711 (within the United States)
  • 916.845.6500 (outside of the United States)

Preparers can call the practitioner hotline at 916.845.7057.

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