What Constitutes a Valid “Filing?”
A frequent question we received is “What constitutes a valid ‘filing’ if the business entity is filing solely for purposes of reporting the minimum/annual tax?” In most cases this is a business entity that is relying on a federal provision, Public Law (PL) 86-272, that preempts states including California from taxing entities. For more information on PL 86-272 “protected activities,” see FTB Publication 1050, Application and Interpretation of Public Law 86-272. Other times this question is coming from a nonregistered foreign corporation, limited liability company (LLC), or limited partnership that owns an interest in another pass-through entity doing business in California.
Often the question is “How can a taxpayer designate the return filing as only ‘minimum tax’ due and ‘PL 86-272 protected’ without it being considered an incomplete return for processing and/or filing enforcement purposes?” or “If a taxpayer meets the requirements of doing business under California Revenue and Taxation Code (R&TC) Section 23101, but is protected by PL 86-272, what is the minimum amount of information required to be reported on the tax return for purposes of reporting and remitting $800 minimum tax due?”
A business entity is required to file the appropriate form (California Form 100, 568, or 565) if it is doing business within California, and pay the appropriate tax and fee. Within each form booklet we provide instructions. Each business entity is required to fill out the necessary form including all pertinent schedules and tax forms as instructed.
Partnerships, LLCs, and S corporations are also required to fill out a California Schedule K-1 for each partner/members/shareholder. For purposes of reporting the information from Column (e) of the California Schedule K-1, the entity must complete Schedule R, to determine the entity’s income from California sources.
If the activities of the business entity are protected under PL 86-272, taxpayers should provide that information on Schedule R. It is best to attach a statement explaining why the apportioning percentage and the business income are zero.
Remember your clients can save time and resources by going paperless, We offer e-filing for corporations, partnerships, and LLCs filing Forms 100, 100S, 100W, 100X, 565, or 568, plus certain accompanying forms and schedules. In July 2012, we began accepting Form 199, California Exempt Organization Annual Information Return, for taxable year beginning on or after January 1, 2011.
For more information about our business e-file program, refer to FTB Publication 1346B, Business e-file Guide for Software Developers and Transmitters, or go to ftb.ca.gov and search for business e-file.
Through the Paperless Schedule K-1 (565 or 568) Program, partnerships LLCs not classified as corporations, or their representatives, can file hundreds of Schedule K-1s (565 or 568) by CD or diskette instead of sending paper schedules with our Form FTB 3604, Transmittal of Paperless Schedule K-1 (565 or 568) on CD or diskette.For more information this program refer to our Paperless Schedules K-1 (565 or 568) Frequently Asked Questions, go to ftb.ca.gov search for K-1 program.