Limited Liability Company - Computation of Fee
PURPOSE OF BULLETIN
To advise staff of changes made to California Revenue and Taxation Code (CR&TC) Section17942 by Assembly Bill 198, regarding computation of the annual Limited Liability Company (LLC) fee that applies for taxable years beginning on or after January 1, 2007.
Before AB 198, the annual LLC fee was based on the LLC's total income from all sources reportable to the state. Total income was defined as gross income from whatever source it was derived, plus the cost of goods sold.
NEW LLC FEE CALCULATION
For taxable years beginning on or after January 1, 2007, the LLC fee will be determined based on the LLC’s total income from all sources derived from or attributable to the state.
“Total income from all sources derived from or attributable to the state” will generally be determined by applying existing allocation and apportionment rules for assigning sales to California.
This change will not affect LLCs that do business entirely in California, since all their income is sourced to California.
Note: More information about the LLC fee calculation will be available in the 2007 568 Booklet, LLC Income Worksheet Instructions, which will be available on the FTB Website on December 17, 2007.
WHAT HAPPENS TO THE PROTECTIVE CLAIMS?
This bill also added CR&TC Section19394, which applies to taxpayers that file, or have filed a timely claim for a refund due to pending litigation cases. If these cases are determined as discriminatory or unfairly apportioned, the refund will be the amount of the LLC fee paid plus any interest assessed, exceeding the amount that would be due based on the changes for determining total California income.
Taxpayers should be advised of the refund calculation so they can be prepared to provide Franchise Tax Board with their revised calculation fee based on the total California income changes. FTB will provide more information after the court decision becomes final.