Skip to Main Content
State of California Franchise Tax Board

Limited Liability Companies and Tax-Exempt Status

A limited liability company (LLC) is eligible for tax-exempt status with the Franchise Tax Board if it meets one of the following:

  • Classified as an association, taxable as a corporation with the Internal Revenue Service (IRS).
  • Qualified for tax-exempt status under California Revenue and Taxation Code (R&TC) Section 23701h or 23701x as a title holding company.

Once classification as an association is established under federal law, the LLC is eligible to apply for tax-exempt status under R&TC Section 23701 using Form 3500, Exemption Application, or Form 3500A, Submission of Exemption Request.

To substantiate the association classification is established, provide one of the following:

  • A copy of the IRS exemption determination letter for the LLC or Form 990, Return of Organization Exempt from Income Tax, that was filed with the IRS.
  • Documentation of approved or accepted IRS Form 8832, Entity Classification Election.

Refer to the following table for LLC tax-exempt status eligibility.

LLC treated as a: Classification per Treasury Regulation 7701 and California Regulation 23038 California Tax Factors
Single-member disregarded entity Defaults to a single-member disregarded entity if there is only one member of the LLC and no election has been made under federal law to be taxed as a corporation using federal Form 8832, Entity Classification Election and tax-exempt status has not been obtained from the IRS under one of the following.
  • Internal Revenue Code (IRC) Section 501(c) using federal Form 1023, Application for Recognition of Exemption Under Section 501(c)(3)
  • IRC Section 501(a) using Form 1024, Application for Recognition of Exemption Under Section 501(a)
The LLC can apply for tax-exempt status using Form 3500, but is only eligible to apply under R&TC Section 23701h or 23701x. The LLC is taxed using Form 568, Limited Liability Company Return of Income unless granted tax-exempt status.
Partnership Defaults to a partnership if there is more than one member of the LLC and no election has been made under federal law to be taxed as a corporation using federal Form 8832 and tax-exempt status has not been obtained from the IRS under one of the following:
  • IRC Section 501(c) using federal Form 1023, Application for Recognition of Exemption Under Section 501(c)(3)
  • IRC Section 501(a) using Form 1024, Application for Recognition of Exemption Under Section 501(a)
This LLC can apply for tax-exempt status using Form 3500, but is only eligible to apply under R&TC Section 23701h or 23701x. The LLC is taxed using Form 568 Limited Liability Company Return of Income unless granted tax-exempt status.
Corporation for federal purposes An election has been made under federal law to be taxed as a corporation using federal Form 8832 or tax-exempt status has been obtained from the IRS under one of the following:
  • IRC Section 501(c) using federal Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
  • IRC Section 501(a) using Form 1024, Application for Recognition of Exemption Under Section 501(a)
The LLC is eligible to apply for tax-exempt status under R&TC Section 23701 using Form 3500 or Form 3500A. The LLC remains taxable unless tax-exempt status is granted under California law.

Back to Charities and Nonprofits (Exempt Organizations)

Help us improve our website

Don't include social security numbers or other personal/confidential information.



Thank you for your help.

If you need assistance, contact us.

Oops! Something went wrong.

We appreciate your feedback. Please try again later

Chat with an FTB Representative
 

You are leaving ftb.ca.gov

We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. Review the site's security and confidentiality statements before using the site.

If you have any issues or technical problems, contact that site for assistance.

Ahora está saliendo de ftb.ca.gov

Nosotros no controlamos el sitio web al que se destina y no podemos aceptar ninguna responsabilidad por su contenido, enlaces, u ofertas. Revise las declaraciones de seguridad y confidencialidad del sitio antes de usar el sitio. Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.

Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.