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General Information: Registration & Reporting Requirements

Page updated on October 17, 2012

Disclosure and Reporting Requirements: The information presented covers the disclosure and reporting requirements for both investors and material advisors of reportable transactions, including listed transactions. It contains the additional information required by the Franchise Tax Board under Revenue and Taxation Code (R&TC) Section 18628(b)(2).


Reportable Transaction Disclosure Requirements (R&TC Section 18407)

Who Must Report

  • California taxpayers participating in reportable transactions must disclose certain information with their income tax return in accordance with provisions prescribed under R&TC Section 18407 and IRC Section 6011. Treasury Regulation Section 1.6011-4 amended July 31, 2007, describes the categories of reportable transactions, including listed transactions, which taxpayers must disclose.
  • Transactions Entered Beginning August 3, 2007

    Treasury Regulation Section 1.6011-4 describes five categories of reportable transactions, including listed transactions, which taxpayers must disclose. The reportable transaction regulations generally apply to transactions entered into on or after August 3, 2007, except that they apply to transactions of interest, a new category of reportable transaction, entered into on or after November 2, 2006. Proposed Regulation 1.6011-4(b)(7) adds patented transactions to the list of reportable transactions and when final will apply to transactions entered into on or after September 26, 2007.

    Transactions required to be disclosed beginning January 6, 2006

    Internal Revenue Service Notice 2006-6, Notification of Removal of the Transaction with a Significant Book-Tax Difference Category of Reportable Transaction under Section 1.6011.4, provides that the significant book-tax difference category of reportable transactions is no longer required to be disclosed under Treasury Regulation Section 1.6011-4. Taxpayers are not required to file a disclosure statement solely because the transaction has a significant book-tax difference under Section 1.6011-4(b)(6). California is following IRS Notice 2006-6. For more information, see Frequently Asked Questions, Reporting Requirements, question number 3.

    If the transaction meets one of the other five categories of reportable transactions defined under Treasury Regulation Section 1.6011-4, taxpayers must complete IRS Form 8886. The timing of filing and other rules for IRS Form 8886 reporting still apply.

    Transactions Entered On or After February 28, 2003 and Before August 3, 2007

    Treasury Regulation Section 1.6011-4 describes six categories of reportable transactions, including listed transactions, which taxpayers must disclose.

  • California listed transactions entered into prior to September 2, 2003 are not required to be disclosed under the provisions of R&TC Section 18407 unless the transaction meets one of the other five categories of reportable transactions as defined under Treasury Regulation Section 1.6011-4.

How to Report

  • For tax years beginning on or after January 1, 2005, taxpayers with taxable income of more than $200,000 provide a copy of IRS Form 8886, Reportable Transaction Disclosure Statement, to disclose the transaction. Attach the disclosure statement to the taxpayer's tax return or information return (including amended return) for each taxable year the taxpayer participates in a reportable transaction (see IRC Section 6011, Treasury Regulation Sections 1.6011-4(d) and (e)).

    Taxpayers must also file a separate IRS Form 8886 for the first time the reportable transaction is disclosed. Mail a duplicate copy of IRS Form 8886 to the address listed below.

    Transactions entered into beginning August 3, 2007 that become a listed transaction or a federal transaction of interest after the tax return is filed.

    If the transaction becomes a listed transaction or a federal transaction of interest (TOI) after the return (including amended return) is filed reflecting the taxpayer's participation in the listed transaction or TOI and before the end of the period of limitations for assessment of tax for any taxable year in which the taxpayer participated in the listed transaction or TOI, then the disclosure statement must be filed, regardless of whether the taxpayer participated in the transaction in the year the transaction became a listed transaction or TOI, with the ATSU within 90 calendar days after the date on which the transaction became a listed transaction or TOI. If the IRS determines the time for disclosure of a listed transaction or federal TOI in published guidance identifying the transaction, the taxpayer must also provide the disclosure statement to the FTB at the same time. Treasury Regulation Section 1.6011-4(e)(2).

  • Complete IRS Form 8886 on a California-only basis if the taxpayer has a filing requirement under California law but not under federal law. File the form with the taxpayer's California tax return or information return (including amended return) for each taxable year the taxpayer participates in a reportable transaction. Taxpayers must also file a separate IRS Form 8886 for the first time the reportable transaction is disclosed. Mail a duplicate copy of IRS Form 8886 to the address listed below.

  • e-filers
  • Taxpayers can file IRS Form 8886, Reportable Transaction Disclosure, with the California e-file return for tax years 2004 and later. E-filers must also file a separate IRS Form 8886 for the first time the reportable transaction is disclosed. The copy should show exactly the same information, word for word, provided with the electronically filed return. Mail a duplicate copy of IRS Form 8886 to the address listed below.

  • IRS Schedule M-3 (Form 1120), Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More

    For tax years beginning January 1, 2005, corporations with assets at the end of their tax year that equal or exceed $10M and who are required to file IRS Schedule M-3 with their federal return are also required to attach a copy of the Schedule M-3 to their California return.

  • For high net worth individuals and large entities that invested in a transaction after February 28, 2000, and before January 1, 2004, where that transaction becomes listed at any time:

    Provide a copy of IRS Form 8886, Reportable Transaction Disclosure Statement, to disclose the transaction. Attach the disclosure statement to the taxpayer's tax return or information return (including amended return) for each taxable year the taxpayer participates in a reportable transaction. A taxpayer can also amend the tax year in which the abusive tax transaction was claimed to disclose the transaction immediately upon the listing of the transaction.

  • Taxpayers must also file a separate IRS Form 8886 for the first time the reportable transaction is disclosed. Mail a duplicate copy of IRS Form 8886 to the address listed below.

Disclosing a reportable transaction for the first time, mail a duplicate copy of IRS Form 8886 to the following address:

    Tax Shelter Filing
    ATSU 398 MS F385
    Franchise Tax Board
    P.O. Box 1673
    Sacramento CA 95812-9900

    For Courier service delivery:

    Tax Shelter Filing
    Franchise Tax Board
    Sacramento CA 95827


Listed Transactions

Listed transactions identified by the IRS or the FTB must be published on the FTB's Website and in FTB notices or other published positions.

Penalty

There is a California penalty of up to $30,000 if a taxpayer fails to disclose a reportable or listed transaction on their return. For a description of this penalty, see Failure to Disclose Reportable and Listed Transactions Penalty.

Material Advisor Reporting Requirements (R&TC Section 18628)

R&TC Section 18628 conforms to IRC Section 6111 (relating to disclosure of reportable transactions), except as otherwise provided.

Who must file an information return

A material advisor must file a reportable transactions information return when the advisor meets any of the following criteria:

  • Is organized in California;
  • Does business in California;
  • Derives income from California sources; or
  • Provides any material aid, assistance or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, including listed transaction, to a taxpayer that is organized in California, does business in California, or derives income from California sources.

How to file an information return

Material advisors must file IRS Form 8918, Material Advisor Disclosure Statement, with the FTB in accordance with Treasury Regulation Section 301.6111-3(d) and the instructions to the form.

If a person filed IRS Form 8264 with the FTB under R&TC Section 18628 before the amendment made by AB 115 effective October 7, 2005, that person does not have to file as a material advisor an amended or duplicate Form 8918 for the same transaction. If the information is no longer accurate or if there is additional required information that was not available at the time the information was originally disclosed on the Form 8264, the material advisor must file a new Form 8918 with the FTB.

Mail IRS Form 8918, Material Advisor Disclosure Statement, to:

Tax Shelter Filing
ATSU 398 MS F385
Franchise Tax Board
P.O. Box 1673
Sacramento CA 95812-9900

For Courier service delivery:

Tax Shelter Filing
Franchise Tax Board
Sacramento CA 95827

When to file an information return

A material advisor must file IRS Form 8918 with the FTB as follows:

  • Provide a copy of Form 8918 on the same date the form is required to be filed with the IRS for reportable transactions. Material advisors must file Form 8918 by the last day of the month that follows the end of the calendar quarter in which the advisor became a material advisor with respect to a reportable transaction or in which the circumstances necessitating an amended disclosure statement occur.
  • Complete a Form 8918 on a California-only basis if there is a filing requirement under California law but not under federal law. File the form with the FTB by the last day of the month that follows the end of the calendar quarter in which the advisor became a material advisor with respect to a reportable transaction or in which the circumstances necessitating an amended disclosure statement occur.
  • For listed transactions, the Form 8918 is due by the later of:
    • 60 days after entering into the transaction, or
    • 60 days after the transaction becomes listed.

Penalty Amount

There is a California penalty of $50,000 if a material advisor fails to file a reportable transactions information return. If a material advisor fails to file an information return for a listed transaction, the California penalty is the greater of $200,000 or 50% (75% in the case of intentional failure or act) of the material advisor's gross income for aid, assistance, or advice provided with respect to the transaction before the date the information return that includes the transaction is filed. For a description of this penalty, see Failure to File Information Return Penalty.

List Maintenance Requirements (R&TC Section 18648)

R&TC Section 18648 conforms to IRC Section 6112, except as otherwise provided.

Who must maintain

A material advisor who is required to maintain a list of advisees for federal purposes (under IRC Section 6112) must also maintain that list for the FTB if the material advisor meets any of the following criteria:

  • Is organized in California;
  • Does business in California;
  • Derives income from California sources; or
  • Provides any material aid, assistance or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, including listed transaction, to a taxpayer that is organized in California, does business in California, or derives income from California sources.

How to report

All material advisors must maintain a list of advisees in the same manner as required under IRC Section 6112, including the information described in IRS Form 8918 Instructions under the heading "Requirement to Keep Lists." For reportable transactions, material advisors must provide a list of advisees to the FTB upon request.

If the material advisor is organized in California, does business in California, or derives income from a California source, R&TC Section 18648 requires the material advisor to maintain a list of all advisee's regardless of the advisee's physical address.

For federal and California listed transactions, material advisors must provide the list of advisees within the timeframes listed below to the following address:

Tax Shelter Filing
ATSU 398 MS F385
Franchise Tax Board
P.O. Box 1673
Sacramento CA 95812-9900

For Courier service delivery:

Tax Shelter Filing
Franchise Tax Board
Sacramento CA 95827

Penalty Amount


If a material advisor fails to maintain and provide a list of advisees, there is a $10,000 penalty per day for each day after the 20th day of FTB's written request to make the list available. If the failure to provide an advisee list involves a listed transaction, the California penalty is the greater of $100,000 or 50% of the gross income derived from the activity. For a description of this penalty see Failure to Maintain Advisee List Penalty.

Licensed Attorneys

Licensed attorneys, who are material advisors due solely to the practice of law, are not required to maintain a list of investors if a transaction was entered into before January 1, 2004. This applies only to an attorney offering advice in an attorney-client relationship where:

  • Legal advice, of any kind, is sought from a professional legal adviser in his or her capacity as a professional legal adviser.
  • Communications are made in confidence and relate to that purpose.
  • Communications are made or received by the client.

Additional List Maintenance Requirements for Listed Transactions

IRS Listed Transactions

Who must provide list

A material advisor of an IRS listed transaction must automatically provide the list of advisees to the FTB if both the following requirements apply:

  1. The transaction is entered into on or after February 28, 2000.
  2. The material advisor meets any of the following criteria:
    a. Is organized in California;
    b. Does business in California;
    c. Derives income from California sources; or
    d. Provides any material aid, assistance or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, including listed transaction, to a taxpayer that is organized in California, does business in California, or derives income from California sources.

When to provide list

The FTB must receive the list the later of:

  • 60 days after the investor enters into the transaction.
  • 60 days after the transaction becomes listed.

California Listed Transaction

Who must provide list

A material advisor of transactions identified by the FTB as listed transactions for California income or franchise tax purposes must also provide the list of advisees to the FTB if both the following requirements apply:

  1. The transaction is entered into on or after September 2, 2003.
  2. The material advisor meets any of the following criteria:
    a. Is organized in California;
    b. Does business in California;
    c. Derives income from California sources; or
    d. Provides any material aid, assistance or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, including listed transaction, to a taxpayer that is organized in California, does business in California, or derives income from California sources.

When to provide list

The FTB must receive the list by the later of:

  • 60 days after the investor enters into the transaction.
  • 60 days after the transaction becomes listed.