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TAX CLEARANCE REQUIREMENT ELIMINATED

PURPOSE OF BULLETIN

To advise staff of the provisions of Assembly Bill 2341, chaptered September 29, 2006.

BACKGROUND

Beginning September 29, 2006, business entities that file dissolution, surrender, or cancellation papers with the California Secretary of State, will no longer require a Tax Clearance Certificate from the FTB.

In addition, under certain circumstances business entities may avoid the minimum franchise tax or annual tax for the current taxable year.

AFFECTED ENTITIES

  • Corporations
  • Limited liability companies
  • Limited liability partnerships
  • Limited partnerships
  • Not-for-profit corporations
  • Exempt entities

SPECIFIC PROVISIONS

  • Eliminates the tax clearance certificate beginning September 29, 2006.
  • For corporations filing a final return this will be considered a request for information to dissolve or withdraw. LLCs, LPs, and LLPs currently receive this type of information upon filing a final return.
  • Allows entities to avoid the minimum franchise tax or annual tax for the current taxable year if all the following requirements are met:
    • Files a timely final return, including extensions, for the preceding taxable year.
    • Does not conduct business after the preceding taxable year.
    • Files the appropriate paperwork with the SOS within 12 months of the timely filing of the entity‚Äôs final return.

Examples

Suspended or forfeited entities: These provisions will not apply to suspended or forfeited entities. These entities must revive to good standing in order to dissolve, withdraw, or cancel.

  • TAX CLEARANCE
  • REQUESTS

Requests Received Prior To September 29, 2006

All tax clearance requests received prior to enactment will receive a letter from the FTB advising them of what to do to finalize their dissolution, withdrawal, or cancellation process.

Requests Received After September 29, 2006

Any tax clearance requests received by the SOS or the FTB on or after the date of enactment will not be processed. However, when the entity files a final return they will be sent information on how to withdraw, cancel, or dissolve.

FORMS & PUBLICATIONS

The following publications are being revised to reflect the changes made by AB 2341. The current tax clearance related information in these publications no longer applies but the publications remain available for the SOS related information.

  • Publication 1038, Instructions for Domestic and Qualified Foreign Stock Corporations Requesting a Tax Clearance Certificate
  • Publication 1038A, Instructions for Exempt Organizations Requesting a Tax Clearance Certificate
  • Publication 1038L, Instructions for Limited Liability Companies or Limited Liability Partnerships Requesting a Tax Clearance Certificate
  • Publication 1038T, Instructions for Domestic Taxable Nonprofit Corporations Requesting a Tax Clearance Certificate

Form 3555, Request for Tax Clearance Certificate, Form 3555A Request for Tax Clearance Certificate – Exempt Organizations and Form 3555L, Request for Tax Clearance Certificate – Limited Liability Company are now obsolete and no longer available on FTB public website.

 

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