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LLCs filing protective claims – LLC FEE

PURPOSE OF BULLETIN

To advise staff on the procedure for limited liability companies filing protective claims in light of several pending court cases.

BACKGROUND

There are two 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 (NES), and
  • Ventas Finance I, LLC

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 Franchise Tax Board at (916) 845-9796 with the following information:

To file a protective claim for the LLC fee issue, have the representative or the LLC fax a letter 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 person to contact, phone number, and fax number.

The letter must be signed by a representative with POA or signed by the LLC's managing member.

FTB will provide a confirmation of the faxed protective claim receipt. The claim will be held pending result of the court's final decision on this issue. FTB cannot email information since the letter will contain confidential information.

MAILING ADDRESS

Although a fax is preferred, protective claims for this issue may also be made by correspondence or by filing an amended return to the following address:

Franchise Tax Board
PO Box 942867
Sacramento CA 94267-8888

 

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