All About Business February 2021 Tax News

Blank or incomplete corporation tax returns

We have received corporation tax returns filed with blank or incomplete forms and schedules. These returns are submitted with no information regarding the corporation’s:

  • Gross income
  • Deductions
  • State adjustments
  • California apportionment

There are several risks associated with filing an incomplete tax return. Under certain circumstances when a return does not contain sufficient data to allow for the calculation of tax, an incomplete tax return may not be considered a valid return and may not be sufficient to trigger the running of the statute of limitations for that year. In this case, we may demand that a valid return be filed, and may issue a notice of proposed deficiency assessment to the corporation based on a reasonable income estimate if no valid return is filed.

A corporation is required to file the appropriate form (California Form 100 or 100W) if it is doing business within California and pay the appropriate tax and fee. To help you better understand what is required to file, please refer to California Form 100/100W Corporation Tax Booklet and Instructions. If your corporation is inactive, refer to FTB Publication 1038 for information regarding dissolving, surrendering, or cancelling a business entity.

In some cases, incomplete tax returns are filed by corporations that are relying on a federal provision, Public Law (PL) 86-272, that preempts states, including California, from taxing business entities. A corporation asserting immunity under PL 86-272 is not required to include its net income or loss for California purposes on Line 18 of Form 100/100W. For processing purposes, it is helpful if you indicate on the return that you are asserting PL 86-272 immunity when leaving Line 18 blank. Refer to FTB Publication 1050 for more information regarding the application and interpretation of PL 86-272.

We encourage you to consult with a tax professional knowledgeable in California tax law to assist you in filing a complete tax return with all the necessary forms and schedules.