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Correction to the Revised Texas Franchise Tax Notice

We determined that the following statement on page four of the FTB Notice 2009-06, relating to California treatment of the Revised Texas Franchise Tax, was in error:

Texas allows a corporation to make an election to be treated as an S corporation. Therefore to claim the OSTC for the RTFT, the taxpayer must be a shareholder of an S corporation that elected S corporation treatment in Texas.

Specifically, S corporation status is not a matter of state law in Texas; instead, all corporations are generally treated the same. Therefore, the language quoted above from FTB Notice 2009-06 is being replaced in the FTB Notice 2010-02 with the following language:

Texas does not allow a corporation to make an election to be treated as an S corporation for state purposes. Therefore, a shareholder of a corporation that is an S corporation under Chapter 4.5 of Part 11 of the California Revenue and Taxation Code is generally allowed to treat his or her pro rata share of net income taxes (as defined under section 18001(b)) paid to Texas by the corporation as if those taxes had been paid by the shareholder.

As a result, FTB Notice 2010-02 supersedes FTB Notice 2009-06, which is withdrawn.

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