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Changes to 2008 Forms

Updates to the 100S Booklet on 03/14/2014 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on Page 17, Column 2, Line 10b.

Previous Version

Note: new text added.

Revised Version

f. Eligible gain from the sale or exchange of qualified small business stock (defined in R&TC Section 18152.5). Also report on an attachment to Schedule K and Schedule K-1 (100S) the name of the corporation that issued the stock and the adjusted basis of that stock.

The exclusion allowed under R&TC Section 18152.5 for small business stock is not allowed for an S corporation but is allowed for the shareholder.

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012.

Impact

This revision may decrease the tax liability for taxpayers who did not report a QSBS exclusion or deferral for taxable years beginning on or after January 1, 2008.

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Updates to the 100S Booklet on 02/27/2013 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on:

  1. Page 17, Line 10b, Column 2, item f
  2. Page 51, California Tax Forms and Publications, 817 California Corporation Tax Forms and Instructions, 5th form

Previous Version

  1. Eligible gain from the sale or exchange of qualified small business stock (defined in R&TC Section 18152.5). Also report on an attachment to Schedule K and Schedule K-1 (100S) the name of the corporation that issued the stock and the adjusted basis of that stock.

    The exclusion allowed under R&TC Section 18152.5 for small business stock is not allowed for an S corporation but is allowed for the shareholder.
  2. FTB 3565, Small Business Stock Questionnaire

Revised Version

  1. Note: text deleted.
  2. Note: text deleted.

Reason for the changes

The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

Impact

This revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

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Updates to the instructions on the 100S Booklet on 08/27/2010 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on the 100S Booklet’s instructions on Page 3, Column 2, Installment Sales paragraph.

Previous Version

For taxable years beginning on or after January 1, 2009, buyers will be required to withhold on each installment sale payment if the sale of California real property is structured as an installment sale.

Revised Version

For installment sales occurring on or after January 1, 2009, buyers will be required to withhold on each installment sale payment if the sale of California real property is structured as an installment sale.

Reason for the changes

AB 3078 was chaptered on September 28, 2008 and revised the law regarding installment sale. We are revising the 2008 installment sale paragraph to correct the effective date to be "For installment sales occurring on or after January 1, 2009," instead of "For taxable years beginning on or after January 1, 2009."

Impact

No tax impact. This revision will allow buyers to withhold for installment sales occurring beginning on or after January 1, 2009, instead of for taxable years beginning on or after January 1, 2009.


Updates to the 100S Booklet on 06/09/2009 –– California S Corporation Franchise or Income Tax Return

We replaced text on the 100S Booklet, on:

  1. Page 3, Column 2, Withholding Rates
  2. Page 31, Column 2, Withholding Rates

Previous Version

  1. Withholding Rates – For taxable years beginning on or after January 1, 2009, the alternative withholding rates for the sale of California real property will be increased to 10.8% for S corporations or 12.8% for Financial S corporations.
  2. Withholding Rates – For taxable years beginning on or after January 1, 2009, the alternative withholding rates for the sale of California real property will be increased to 10.8% for S corporations or 12.8% for Financial S corporations.

Revised Version

  1. Withholding Rates – For taxable years beginning on or after January 1, 2009, the alternative withholding rates for the sale of California real property will be increased to 11.05% for S corporations or 13.05% for Financial S corporations.
  2. Withholding Rates – For taxable years beginning on or after January 1, 2009, the alternative withholding rates for the sale of California real property will be increased to 11.05% for S corporations or 13.05% for Financial S corporations.

Reason for the changes

AB X3 3 was chaptered on February 20, 2009. This new law increased the alternative withholding rate by .25%, for taxable years beginning on or after January 1, 2009.

This change would not have any tax impact, because the taxpayer would not be subject to the underpayment of estimated tax penalty. The FTB will waive any penalty if the penalty is because of a new law for the same taxable year.

Impact

No tax impact.


Updates to the 2008 100S Booklet -- California S Corporation Franchise or Income Tax Return

The revised Internet version is available for download as of 01/29/2009.

Revision Details:Revision 1. We are revising to fix a typo.

Revision 2. The current Form 100S instructions indicate that corporations that meet certain requirement must remit all of their payments through EFT rather than by paper checks. These instructions are not clearly stating that the first payment of $20,000 or total tax liability of $80,000 does not need to be submitted electronically. We revised the instructions to clarify that once the corporation meets the EFT threshold requirements, all subsequent payments regardless of amount, tax type, or taxable year must be remitted electronically to avoid the 10% non-compliance EFT penalty.

  • These updates are located: Revision 1. Page 5, Column 3, Minimum franchise tax, 1st bullet; Revision 2. Page 6, column 2, Electronic Funds Transfer (EFT) paragraphs.

Previously read:

Revision 1. • Corporations that are not incorporated in California, not qualified under the laws of California, or are not doing business in California even through they derive income from California sources. For more information regarding “doing business,” get FTB Pub. 1050, Application and Interpretation of Public Law 86-272; FTB Pub. 1060, Guide for Corporations Starting Business in California; or FTB Pub. 1063, California Corporation Tax Law – A Guide for Corporations. Revision 2. Corporations or exempt organizations that meet certain requirements must remit all of their payments through EFT rather than by paper checks to avoid the 10% non-compliance EFT penalty. Corporations or exempt organizations that remit an estimated tax payment or extension payment in excess of $20,000 or that have a total tax liability in excess of $80,000 must remit all of their payments through EFT. The FTB will notify corporations or exempt organizations that are subject to this requirement. Those that do not meet these requirements and wish to participate on a voluntary basis may do so. If the corporation is an EFT taxpayer, complete the form FTB 3539 worksheet for its records. DO NOT SEND THE PAYMENT FORM. For more information, go to our website at ftb.ca.gov and search for eft, call 916.845.4025, or get FTB Pub. 3817, Electronic Funds Transfer Program Information Guide.

Revised to:

Revision 1. • Corporations that are not incorporated in California, not qualified under the laws of California, or are not doing business in California even though they derive income from California sources. For more information regarding “doing business,” get FTB Pub. 1050, Application and Interpretation of Public Law 86-272; FTB Pub. 1060, Guide for Corporations Starting Business in California; or FTB Pub. 1063, California Corporation Tax Law – A Guide for Corporations. Revision 2. Corporations or exempt organizations that remit an estimated tax payment or extension payment in excess of $20,000 or that have a total tax liability in excess of $80,000 must remit all of their payments through EFT. Once a corporation meets the threshold, all subsequent payments regardless of amount, tax type, or taxable year must be remitted electronically to avoid the 10% non-compliance EFT penalty. The FTB notifies corporations or exempt organizations that are subject to this requirement. Those that do not meet these requirements and wish to participate on a voluntary basis may do so. If the corporation is an EFT taxpayer, complete the form FTB 3539 worksheet for its records. DO NOT SEND THE PAYMENT FORM. For more information, go to our website at ftb.ca.gov and search for eft, call 916.845.4025, or get FTB Pub. 3817, Electronic Funds Transfer Program Information Guide.


The revised Internet version is available for download as of 01/22/2009.

Revision Details: Schedule K-1’s (100S) instructions have reference to the federal Form 4684, Casualties and Thefts. At the time we finalized the Schedule K-1 (100S) (12/15/2008), the only available version of the federal Form 4684 was dated 6/05/08 (draft) without any major changes. The federal did not finalize its form until 01/09/09.

The 2008 federal Form 4684 has six new lines. Therefore, we are revising the Schedule K-1 (100S) instructions to include the correct federal line references.

  • Page 39 of the 100S Booklet and page 3 of the Schedule K-1 (100S) Instructions: column 2, bullet 2

Previously read:

Net gain (loss) from involuntary conversions due to casualty or theft. The S corporation will give you a schedule that shows the California amounts to be entered on federal Form 4684, Casualties and Thefts, line 34, column (b)(i), column (b)(ii), and column (c).

Revised to:

Net gain (loss) from involuntary conversions due to casualty or theft. The S corporation will give you a schedule that shows the California amounts to be entered on federal Form 4684, Casualties and Thefts, line 40, column (b)(i), column (b)(ii), and column (c).

The incorrect line reference to federal Form 4684 may cause confusion and may cause the taxpayer to underreport/overreport its income, which would result in an incorrect tax liability.

This revision to the instructions will provide correct line references, which would help the taxpayer to correctly report its tax liability.

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