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LLCs filing protective claims - LLC fee (supersedes 3-21-2006)

PURPOSE OF BULLETIN

To advise staff on the procedures for limited liability companies (LLCs) filing protective claims, in light of several pending court cases.

BACKGROUND

There are three court cases pending on the constitutionality of the way the LLC fee is calculated for foreign LLCs. Pending the outcome of these court cases, LLCs may want to file protective claims for refund before the statute of limitations expires. The plaintiffs for these cases are:

  • Northwest Energetic Services, LLC – a foreign LLC registered in California that did not earn income in California.
  • Ventas Finance I, LLC – a foreign LLC registered in California that earned income inside and outside California.
  • Bakersfield Mall, LLC – a foreign LLC registered in California that claims it earned income only in California.

WHAT IS A PROTECTIVE CLAIM?

To protect the statute of limitations on a claim, the taxpayer may file a request with the Franchise Tax Board to withhold any action on the claim while an audit determination or litigation is still pending. The taxpayer may file a protective claim pending the outcome of:

  • An appeal to the State Board of Equalization.
  • A court case.
  • An audit by the Internal Revenue Service.
  • An audit by another state taxing agency.
  • Other litigation.

Note: Taxpayers can get more information on the Franchise Tax Board Website at: www.ftb.ca.gov.

PROTECTIVE CLAIM PROCEDURES

If an LLC wants to file a protective claim based on recent court cases, the representative or LLC should fax a letter to the Franchise Tax Board at (916) 845-9796 stating:

  • The LLC name and identification number issued by the Secretary of State. Unregistered LLCs use the identification number issued by the Franchise Tax Board.
  • This is a protective claim.
  • The tax years involved.
  • A description of the issue (stating that the LLC fee is unconstitutional is enough)
  • The amount of the claim, which should match the amount of the annual fee that the LLC paid.
  • Name of the person to contact, phone number, and fax number.

The letter must be signed by a representative with a POA or signed by the LLCs managing member.

FTB will send a fax confirmation receipt. FTB cannot email a confirmation receipt since the letter will contain confidential information.

Caution: The procedures listed above are for the LLC Fee protective claims only.

MAILING ADDRESS

Although a fax is preferred, an LLC may file an amended return or mail the required information to the address below (see Protective Claim procedures):

Franchise Tax Board
PO Box 942857
Sacramento CA 94257-0600

 

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