Interest Computation Adjustments - Update

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October 2, 2015

Purpose of bulletin

To provide staff with additional information about interest computations in certain circumstances involving either:

  • May Department Stores v. United States (IRS Revenue Ruling 99-40)
  • Corporate Interest Netting (IRS Revenue Procedure 94-60)

Background

On July 21, 2015, at the Franchise Tax Board (FTB) meeting staff provided an update on progress made to identify tax years that may be subject to interest computation adjustments as a result of the May Department Store ruling and Corporate Interest Netting.

We provided an update on the fiscal impact prior to the September FTB meeting. We  added the estimated fiscal impact to the table below:

Tax Type Computation Type Maximum Taxpayers Impacted Estimated Maximum Fiscal Impact
Personal Income Tax May Dept Store 24,000 $1.5 million
Business Entities May Dept Store 2,000 $14.5 million
Business Entities Corporate Interest Netting 1,000 To Be Determined
Total   27,000  

Next Steps

We will determine the fiscal impact of Corporate Interest Netting and provide an update to include those figures. We will credit impacted accounts, issue refunds, if applicable, and send letters of explanation to impacted taxpayers beginning in the fall 2015.

Taxpayer Inquiries

For more information about the interest computation adjustments, go to ftb.ca.gov and search for interest adjustments, or go to the original PSB 15-07, Interest Computation Adjustments

Taxpayers can call us at 800.852.5711, weekdays, 7 a.m. to 5 p.m., except state holidays.

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