California extended due dates for corporate taxpayers October 2018 Tax News

Background

In order to provide a due date for pass-through entities 1 month earlier than non-pass-through entities, for taxable years beginning on or after January 1, 2016, the federal original due dates for many business entity returns were changed by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (H.R. 3236, 114th Cong. (2015-2016)).

In response to the federal law changes, California law changed to generally provide an original due date for pass-through entities 1 month earlier than for non-pass-through entities. (Stats. 2016, Ch. 348) For taxable years beginning on or after January 1, 2016, the California original due date of a/an:

  • C corporation return was moved later to the 15th day of the 4th month following the close of the taxable year.
  • S corporation return remained the 15th day of the 3rd month following the close of the taxable year. (Revenue and Taxation Code (R&TC) Section 18601) 

The automatic extension period for C and S corporations was shortened from 7 months to 6 months. (FTB Notice 2016-04)

Extended due dates for corporate taxpayers

Under California law, we may grant a reasonable extension of time for taxpayers subject to California Corporation Tax Law to file their returns. (R&TC Section 18604)  An extension, however, may not exceed 7 months from the original due date of the return. (Id.) In 1992, we issued FTB Notice 92-11providing a 7-month automatic paperless extension for C and S corporations in good standing. In 2016, we issued FTB Notice 2016-04 providing a six-month automatic paperless extension for C and S corporations in good standing. As explained in FTB Notice 2016-04, the extended due date for:

  • C corporations is the 15th day of the 10th month following the close of the taxable year.
  • S corporations the extended due date is the 15th day of the 9th month following the close of the taxable year.

This extension of time to file is not an extension of time to pay. Tax is due on the original due date of the return, without regard to extension. A late filing penalty and or a delinquent filing penalty will be imposed on any return filed after the extended due date, unless the late filing was due to reasonable cause. (R&TC Sections 19131 and 19172.5)[1] If the return is not filed by the extended due date, no extension exists, and the penalty amount will be computed based on the original due date. 

Several taxpayers recently asked if we would extend the due date for filing a corporate return to November 15. We cannot extend the due date beyond the October 15 extended due date for filing a C corporation return due to year end processing limitations. If a taxpayer files a return beyond the extended due date and receives a penalty for filing late, the taxpayer may request abatement of the penalty upon a showing of reasonable cause. We will consider a request for penalty abatement for reasonable cause on a case by case basis.

[1] A late filed S corporation return may be subject to a delinquent filing penalty pursuant to R&TC Section 19131 and a late filing penalty pursuant to R&TC Section 19172.5. A late filed C corporation return may be subject to a delinquent filing penalty pursuant to R&TC Section 19131.