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June 2009 - LLC Fee Refunds Based on the Ventas Decision

Ventas Finance I, LLC (Ventas) was a foreign LLC that registered with the California Secretary of State and earned income within and outside California. In Ventas Finance I, LLC v. FTB, the California Court of Appeal, First Appellate District, held that former Revenue and Taxation Code section 17942 was unconstitutional as applied to Ventasbecause the LLC fee was based on Ventas’ total income from all sources and was not limited to income derived from, or attributable to, California.

Because the decision in Ventas is now final, action can be taken on claims for refund filed by LLCs with substantially the same factual situation (i.e., LLCs that earned income within and outside of California). The FTB Notice 2009-04 describes how FTB will process LLC fee claims for refund as a result of Ventas. FTB will process claims for refund using the Default Method, unless an LLC informs FTB by August 20, 2009, that it wishes to use the Alternative Method, described below.

  1. Default Method: FTB will use the LLC's Schedule R, Apportionment and Allocation of Income, filed with Form 568, Limited Liability Company Return of Income. LLCs that did not attach a Schedule R to the originally filed Form 568 must submit a Schedule R. FTB will calculate the revised LLC fee and the refund amount, if any. 
  2. Alternative Method: The LLC must complete and submit the LLC Income Worksheet from the 2008 Form 568, Limited Liability Company Tax Booklet, with the respective information for each tax year that a claim for refund is filed. Based on the information provided by the LLC, FTB will then calculate the revised LLC fee and the refund amount, if any. 

If you want to use the Default Method to calculate your refund, but did not attach a Schedule R, or you choose to have the refund calculated using the Alternative Method, you must provide the following information:  

  1. The LLC's name, address, including the name and phone number of the managing member or designated contact person.
  2. The LLC's Secretary of State file number or Franchise Tax Board temporary LLC number (for unregistered entities) and Federal Employer Identification Number.
  3. Tax years involved.
  4. The LLC must choose either "(a)" or "(b)":
    1. For the Default Method: a completed Schedule R, if the LLC did not attach a Schedule R to the original Form 568 filed for each tax year that a claim for refund is filed.
    2. For the Alternative Method: a completed 2008 LLC Income Worksheet with the respective information for each tax year that a claim for refund is filed.

If you have not filed a claim for refund, but want to and the statute of limitation remains open, you may include the above-mentioned information in a letter along with the statement, "This letter constitutes a claim for refund for (taxpayer's name) – Income Earned Within and Outside California.” Any claim for refund must be signed by a representative with a power of attorney or signed by the LLC's managing member. For more information, you may refer to FTB Notice 2009-04.

Fax all information to FTB at: 916.845.9796

Or, you may mail this information to:

ABS 389 MS F340
C/O FTB Notice 2009-04
Franchise Tax Board
PO Box 942867
Sacramento CA  94267-8888

Courier Service Delivery or Private Courier Mail:

ABS 389 MS F340
Franchise Tax Board
C/O FTB Notice 2009–04
Sacramento CA  95827