FTB Notice 2000-8
STATE OF CALIFORNIA
B. TIMOTHY GAGE
November 7, 2000
FTB NOTICE 2000-8
[As Corrected by FTB NOTICE 2001-2 of February 1, 2001]
SUBJECT: Requests for Changes in Accounting Periods or Methods
The purpose of this notice is to provide guidance to taxpayers on the manner in which a change of accounting period or method request is to be filed with the Franchise Tax Board.
Subdivision (f) of Revenue and Taxation Code sections 17024.5 and 23051.5 states that whenever a taxpayer is allowed or required to file an application or seek consent, the rules set forth in subdivision (e) of those sections shall apply to that application or consent.
Paragraph (1) of subdivision (e) of Revenue and Taxation Code sections 17024.5 and 23051.5 states that a "proper election filed with the Internal Revenue Service in accordance with the Internal Revenue Code or regulations issued by 'the secretary' shall be deemed to be a proper election for purposes of this part," unless otherwise provided in the Revenue and Taxation Code or regulations issued by the Franchise Tax Board.
Paragraph (2) of subdivision (e) of Revenue and Taxation Code sections 17024.5 and 23051.5 states that a "copy of that election shall be furnished to the Franchise Tax Board upon request."
Paragraph (3) of subdivision (e) of Revenue and Taxation Code sections 17024.5 and 23051.5 states that to "obtain treatment other than that elected for federal purposes, a separate election shall be filed" with the Franchise Tax Board at the time and in the manner which may be required by the Franchise Tax Board.
For combined report purposes, the taxpayer members of the combined report group may elect to determine the total separate net income of each member of the group under accounting methods and other elections as authorized by Division 2, Part 11 of the Revenue and Taxation Code. (Cal. Code Regs., tit. 18, §25106.5-3, subd. (a).) If some or all the members of a combined report group elect to file a group return, then the key corporation acts as agent for the electing members. (Cal. Code Regs., tit. 18, §25106.5, subd. (b)(14).) References in this notice to a "taxpayer" refer also to the taxpayer members of a combined report group who are eligible to determine the total separate net income of non-California taxpayer members and to key corporations, where appropriate.
If a taxpayer submits a request to change an accounting period or method for federal tax purposes and the Internal Revenue Service approves the request, the change will apply for California purposes without any action by the taxpayer, as long as California has conformed to the underlying law which is being applied, the authority for granting the request is within the Franchise Tax Board's authority, and the Franchise Tax Board has not announced that it will not follow the federal procedure being relied upon. Requests submitted to the Internal Revenue Service for a change to an accounting period or method that is not permitted under California law will not be allowed for California tax purposes.
If a California taxpayer 1) cannot rely on a federally approved request for permission to change an accounting period or method, 2) desires to obtain a change different from the federal change, or 3) desires a change for California tax purposes only, a federal Form 3115, Application for Change in Accounting Method, or federal Form 1128, Application to Adopt, Change, or Retain a Tax Year, should be completed and submitted to the Franchise Tax Board by the due date specified in California law or, if none is specified, by the due date for a federal change request if a federal change request had been submitted to the Internal Revenue Service for that change. The federal forms must be completed using appropriate California tax information and not with federal tax information, except that the Federal Employer Identification Number (FEIN) should be used in the FEIN field. The California Corporate Number (CCN) must also be included on the top of the first page of the form. Due account should be made for differences in federal and California law. For example, Line 18 of the federal Form 3115 refers to a "User Fee." California does not charge a user fee for submitting the change request. Any references on the forms and in the forms' instructions to the Internal Revenue Code should be read as referring to the Internal Revenue Code, as applicable for California purposes, or the specific Revenue and Taxation Code section, if any, that conforms to that federal provision.
A cover letter must be attached to the front of the federal Form 3115 or Form 1128, clearly indicating that a "Change in Accounting Period" or a "Change in Accounting Method" is being requested. The name of the taxpayer requesting the change and the taxpayer's California Corporate Number must be included in the cover letter.
The appropriate federal form and cover letter should be sent to:
Franchise Tax Board
Change in Accounting Periods and Methods Coordinator
P.O. Box 1998
Sacramento, CA 95812
The Franchise Tax Board will acknowledge receipt of the request within 30 days. After the request has been reviewed, the Franchise Tax Board's Change in Accounting Periods and Methods Coordinator will notify the requestor, in writing, whether the request for an accounting period or method change has been approved or denied.
This notice does not supercede any notice that announced non-application of a particular federal revenue procedure.
The principal author of this notice is Debra S. Petersen of the Franchise Tax Board, Legal Branch. For further information regarding this notice, contact Debra Petersen at the Franchise Tax Board, Legal Branch, P. O. Box 1720, Rancho Cordova, CA 95741-1720, (916) 845-6305.
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