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Instructions for Form 100W - FormSend

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Small Business StockFor taxable years beginning on or afterJanuary 1, 1996, corporations that issue stockintended to be qualified small business stockpursuant to R&TC Section 18152.5 arerequired to attach <strong>for</strong>m FTB 3565, SmallBusiness Stock Questionnaire, to <strong>Form</strong> <strong>100W</strong>.Classification of Certain Business Trusts andCertain Foreign Single Member LimitedLiability Companies (LLCs)Normally, the classification of a business entityshould be the same <strong>for</strong> Cali<strong>for</strong>nia purposes asit is <strong>for</strong> federal purposes. However, anexception may apply <strong>for</strong> certain eligiblebusiness entities (business trusts and singlemember LLCs) existing prior to January 1,1997, that were taxed as corporations <strong>for</strong>Cali<strong>for</strong>nia purposes under <strong>for</strong>mer R&TCSection 23038. For taxable years beginning onor after January 1, 1997, a business trust or apreviously existing <strong>for</strong>eign single member LLCmay make an irrevocable election to beclassified the same as federal <strong>for</strong> Cali<strong>for</strong>niapurposes. To make the election the businesstrust or the single member LLC must havebeen classified as a corporation underCali<strong>for</strong>nia law, but classified as a partnership(<strong>for</strong> a business trust) or elected to be treatedas a disregarded entity (<strong>for</strong> single memberLLC) <strong>for</strong> federal tax purposes <strong>for</strong> taxable yearsbeginning be<strong>for</strong>e January 1, 1997. If thiselection is not made, the existing eligiblebusiness entity will continue to be classifiedand taxed as a corporation <strong>for</strong> Cali<strong>for</strong>niapurposes. Get <strong>for</strong>m FTB 3574, Special Election<strong>for</strong> Business Trusts and Certain Foreign SingleMember LLCs, <strong>for</strong> more in<strong>for</strong>mation.General In<strong>for</strong>mationA Franchise or Income TaxCorporation franchise taxEntities subject to the corporation minimumfranchise tax include all corporations (e.g.LLCs electing to be taxed as corporations) thatare:• Incorporated or organized in Cali<strong>for</strong>nia;• Qualified or registered to do business inCali<strong>for</strong>nia; or• Doing business in Cali<strong>for</strong>nia, whether ornot incorporated, organized, qualified, orregistered under Cali<strong>for</strong>nia law.The measured franchise tax is imposed oncorporations doing business in Cali<strong>for</strong>nia andis measured by the income of the currenttaxable year <strong>for</strong> the privilege of doing businessin that taxable year.The term “doing business” means activelyengaging in any transaction <strong>for</strong> the purpose offinancial gain or profit.The minimum franchise tax must be paidwhether the corporation is active, inactive, notdoing business in Cali<strong>for</strong>nia, or operates at aloss.Note: A corporation incorporated in Cali<strong>for</strong>nia,but not doing business in this state, is notsubject to the measured franchise tax. In thecase of a corporation incorporated in Cali<strong>for</strong>niaor qualified with the Cali<strong>for</strong>nia Secretary ofState (SOS), but not doing business in thisstate, careful attention should be given to theterm “doing business.” It is not necessary thatthe corporation conducts business or engagesin transactions within the state on a regularbasis. Even an isolated transaction during theyear may be enough to cause the corporationto be “doing business.”Also, when a corporation is either a generalpartner of a partnership or a member of anLLC that is "doing business" in Cali<strong>for</strong>nia, thecorporation is considered to be "doingbusiness" in Cali<strong>for</strong>nia.Corporation income taxThe corporation income tax is imposed on allcorporations that derive income from sourceswithin Cali<strong>for</strong>nia but are not doing business inCali<strong>for</strong>nia.For purposes of the corporation income tax,the term “corporation” generally includes:• Associations;• Massachusetts or business trusts;• REITs;• LLCs electing to be taxed as corporationsother than those subject to the corporatefranchise tax; and• Other business entities, including partnerships,electing to be taxed as corporations.Get FTB Pub. 1063, Cali<strong>for</strong>nia Corporation TaxLaw — A Guide <strong>for</strong> Corporations, <strong>for</strong> morein<strong>for</strong>mation.B Tax RatesThe tax rates below apply to corporationssubject to either the corporation franchise taxor the corporation income tax.• Corporations other than banks and financialcorporations . . . . . . . . . . . . . . . . . . 8.84%• Banks and financial corporations . 10.84%C Minimum Franchise TaxAll corporations subject to the franchise tax,including banks, financial corporations,corporate general partners of partnerships, andcorporate members of LLCs doing business inCali<strong>for</strong>nia, must file <strong>Form</strong> 100 or <strong>Form</strong> <strong>100W</strong>and pay at least the minimum franchise tax asrequired by law. The minimum franchise tax,as indicated below, must be paid whether thecorporation is active, inactive, operates at aloss, or files a return <strong>for</strong> a short period of lessthan 12 months.• Domestic qualified inactive gold orquicksilver mining corporations . . . . . . $25• All other corporations subject tofranchise tax (see GeneralIn<strong>for</strong>mation A, Franchise orIncome Tax, <strong>for</strong> definitions) . . . . . . . . $800A combined group filing a single return mustpay at least the minimum franchise tax <strong>for</strong>each corporation in the group that is subject tofranchise tax.Note: For corporations that incorporate orqualify through the Cali<strong>for</strong>nia SOS to dobusiness in Cali<strong>for</strong>nia on or after January 1,2000, the prepayment of the minimumfranchise tax to the Cali<strong>for</strong>nia SOS is no longerrequired. For the first taxable year thecorporation will compute its tax liability bymultiplying its state net income by theappropriate tax rate and will not be subject tothe minimum franchise tax. The corporationwill become subject to minimum franchise taxbeginning in its second taxable year. This doesnot apply to corporations that are not qualifiedby the Cali<strong>for</strong>nia SOS, or reorganize solely toavoid payment of their minimum franchise tax.There is no minimum franchise tax <strong>for</strong>:• Credit unions;• Corporations that derive income fromsources within Cali<strong>for</strong>nia but are subject toincome tax only because they are not“doing business” in Cali<strong>for</strong>nia, and are notincorporated or qualified under the laws ofCali<strong>for</strong>nia. For more in<strong>for</strong>mation regarding“doing business,” get FTB Pub. 1050,Application and Interpretation of PublicLaw 86-272; FTB Pub. 1060, Guide <strong>for</strong>Corporations Starting Business in Cali<strong>for</strong>nia;or FTB Pub 1063, Cali<strong>for</strong>nia CorporationTax Law — A Guide <strong>for</strong> Corporations;• Corporations that are not incorporatedunder the laws of Cali<strong>for</strong>nia; whose soleactivities in this state are engaging inconvention and trade show activities <strong>for</strong>seven or fewer days during the taxableyear; and that do not derive more than$10,000 of gross income reportable toCali<strong>for</strong>nia during the taxable year. Thesecorporations are not “doing business” inCali<strong>for</strong>nia. For more in<strong>for</strong>mation, get FTBPub. 1060, Guide <strong>for</strong> Corporations StartingBusiness in Cali<strong>for</strong>nia; or FTB Pub 1063,Cali<strong>for</strong>nia Corporation Tax Law — A Guide<strong>for</strong> Corporations; and• Newly <strong>for</strong>med or qualified corporationsfiling an initial return <strong>for</strong> taxable yearsbeginning on or after January 1, 2000.D Accounting Period/MethodThe taxable year of a corporation must not bedifferent from the taxable year used <strong>for</strong> federalpurposes, unless initiated or approved by theFTB (R&TC Section 24632).A change in accounting method requiresconsent from the FTB. However, a corporationthat obtains federal approval to change itsaccounting method, or that is permitted orrequired by federal law to change itsaccounting method without prior approval anddoes so, is deemed to have the FTB’s approvalif: (1) the corporation files a timely <strong>Form</strong> <strong>100W</strong>consistent with the change <strong>for</strong> the first year thechange becomes effective <strong>for</strong> federal purposes;and (2) the change is consistent with Cali<strong>for</strong>nialaw. A copy of federal <strong>Form</strong> 3115, Application<strong>for</strong> Change in Accounting Method, and a copyof the federal consent to the change must beattached to <strong>Form</strong> <strong>100W</strong> <strong>for</strong> the first year thechange becomes effective. Get FTB Notice2000-8 <strong>for</strong> more in<strong>for</strong>mation. The FTB maymodify a requested change if the change woulddistort income <strong>for</strong> Cali<strong>for</strong>nia purposes.Note: Cali<strong>for</strong>nia is not following the automaticconsent procedure <strong>for</strong> a change of accountingmethod involving previously unclaimedallowable depreciation or amortization prescribedby Federal Revenue Procedure 96-31.Get FTB Notice 6-3 <strong>for</strong> more in<strong>for</strong>mation.E When to FileFile <strong>Form</strong> <strong>100W</strong> on or be<strong>for</strong>e the 15th day ofthe 3rd month after the close of the taxableyear unless the return is <strong>for</strong> a short-period asrequired under R&TC Section 24634.Generally, the due date of a short-period returnis the same as the due date of the federalshort-period return. See R&TCSection 18601(c) <strong>for</strong> the due date of ashort-period return. See GeneralIn<strong>for</strong>mation O, Dissolution/Withdrawal, and P,Ceasing Business, <strong>for</strong> in<strong>for</strong>mation on finalreturns.A corporation that converts to another type ofentity, such as a limited liability company or<strong>Form</strong> <strong>100W</strong> Booklet 2004 Page 5

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