AB 2503 Administrative Dissolution ProgramSeptember 2021 Tax News

With the passage of legislation under AB 2503, beginning January 1, 2019, FTB established the Voluntary Administrative Dissolution Program, allowing a qualified domestic Corporation or qualified domestic Limited Liability Company (LLC) the ability to request a Voluntary Administrative Dissolution/Cancellation of their business entity. Since implementation, the Program has successfully dissolved and/or cancelled over 1500 Corporations and LLCs; educated and assisted business entities in properly dissolving/cancelling their business, and prevented further undue hardship.

As part of a planned phased approach, the Program implemented the Administrative Dissolution portion of the Program in early 2020 which authorizes FTB to initiate the Administrative Dissolution process for those business entities that have been suspended for 60 consecutive months, are no longer conducting business, and have no assets in the business. This has resulted in FTB and Secretary of State (SOS) to work collaboratively to successfully dissolve over 500 Corporations. FTB will continue to work with SOS to Administratively Cancel domestic LLCs in the near future; anticipated to begin in early 2022.

Below are current steps FTB take prior to Administratively Dissolving a qualified business entity (Corporation):

  • FTB will mail the Administrative Dissolution – Intent Notice (Form 5125C) to the entities last known address. The form provides instruction for submitting a written objection of the pending Administrative Dissolution to FTB.
  • FTB will then send notification to SOS that includes the entity name and SOS number.
  • SOS will post a notice of pending dissolution on its website, listing the name and SOS file number for 60 days.

A qualified business entity may provide us with a written objection to the Administrative Dissolution of a domestic corporation. FTB must notify the SOS if a written objection has been received. If the written objection is not received within the 60 days of SOS posting and the date of notification, the domestic corporation may be Administratively Dissolved.

If timely written objection is received, the entity has 90 days from receipt of the objection to:

  • File all returns
  • Pay all taxes, fee, penalties, and interest
  • File a current Statement of Information with the SOS
  • Fulfill any other requirement
  • Apply for a revivor

If the entity is reinstated by FTB, the Administrative Dissolution will be canceled.

FTB may extend the 90-day period, but for no more than one period of 90 days, if requested by the taxpayer.

If the entity does not revive within the time frame, the entity will be Administratively Dissolved. The taxpayer does not have appeal rights after the Administrative Dissolution is final. The Administrative Dissolution will legally terminate the business.

FTB will continue to work collaboratively with SOS and refine the program to better assist businesses to save money, dissolve accordingly, and further educate business owners and their representatives.