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2005 Tax Amnesty: Combined Reporting Issues -- Key Corporation

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Updated - December 23, 2004

Overview

  1. How should corporate taxpayers that file their returns on a group basis apply for amnesty?
  2. How may corporate taxpayers that have become disaffiliated from a combined reporting group participate in amnesty?
  3. Can key corporations that have terminated their agency/surety status with respect to a combined reporting group participate in amnesty?

1. How should corporate taxpayers that file their returns on a group basis apply for amnesty?

California corporate taxpayers that are members of the same combined reporting group may elect to file their returns on a group basis. However, one of the California corporate taxpayers must be designated to act as the agent and surety for the remaining taxpayers. (See FTB Pub. 1061 and FTB Form 100, Schedule R). As an agent, the key corporation may file an application for amnesty on behalf of the corporations included on the Schedule R-7. The key corporation must also file the requisite amended returns and remit any required payments.

2. How may corporate taxpayers that have become disaffiliated from a combined reporting group participate in amnesty?

It is common for a taxpayer member that was previously included in a Schedule R-7 to disaffiliate from the combined reporting group. If the disaffiliated corporation has formally notified FTB that it is terminating the key corporation's authority to act as its agent and surety, then the disaffiliated corporation must file an amnesty application on its own and satisfy the amended return filing and payment requirements to participate in amnesty. The disaffiliated corporation may participate in the amnesty program even if none of the other taxpayer members of its former combined reporting group choose to do so. If the key corporation files an application that includes a disaffiliated corporation and the disaffiliated corporation does not wish to be included in the amnesty program, it can opt out of the program by telling FTB in writing that it does not want to participate. Otherwise, the disaffiliated corporation will be treated the same as the other taxpayer members that have not become disaffiliated.

3. Can key corporations that have terminated their agency/surety status with respect to a combined reporting group participate in amnesty?

A key corporation can terminate its agency and surety relationship by formally notifying FTB in writing of the termination. However, the corporation cannot use an amnesty application to formally notify FTB of the termination. In addition, the key corporation must notify the taxpayer members of the combined reporting group of its termination, as well as notifying them that they separately qualify for the amnesty program. This is necessary because in many cases, only the key corporation will have been notified about the amnesty program.