FTB Publication 1068 Exempt Organizations - Filing Requirements Revised: 12/2020

Purpose

Organizations that are tax-exempt in California may be required to satisfy the filing requirements provided in this publication.

References in these instructions are to the Internal Revenue Code (IRC) and to the California Revenue and Taxation Code (R&TC).

Organizations that are tax-exempt in California may be required to file one or more of the following:

Refer to the tables below for filing requirements. Then, refer to the next sections for specific filing instructions.

Use the following chart to determine the organization’s filing requirements for Form 199 or FTB 199N based on the gross receipts average.

Organizations eligible to file FTB 199N may choose to file a complete Form 199. Refer to Form 199 section for the definition of the gross receipts average.

Form 199, California Exempt Organization Annual Information Return

The gross receipts are reported on the Form 199 and FTB 199N. We define gross receipts as the total amounts the organization received from all sources during its annual account period - without subtracting any costs or expenses (includes costs of goods sold, costs of operations, or expenses to earn, raise, or collect such amounts).

Most organizations must file Form 199 if their gross receipts normally exceed the Form 199 filing threshold. Other organizations are required to file FTB 199N, or they do not have a requirement to file.

To determine your gross receipts average, use the following charts.

Tax year 2012 and to present gross receipts average of $50,000:

Tax year 2011 and prior gross receipts average of $25,000:

Private foundations must file a complete Form 199 regardless of the gross receipts amount received. However, private foundations may complete SIDE 1 of Form 199 and provide one of the following as substitute information for Part II:

1. A complete copy of federal Form 990-PF, with appropriate schedules.
2. A complete copy of the current report filed with the Registry of Charitable Trusts (including federal Form 990).

Nonexempt charitable trusts as defined in IRC Section 4947(a)(1) must file Form 199 regardless of the amount of gross receipts. A nonexempt charitable trust:

• Is not exempt from taxation under R&TC Section 23701d.
• Has all the unexpired interests devoted to charitable purposes described in IRC Section 170(c).
• Had a charitable contribution deduction allowed for all the unexpired interests under the R&TC.

As defined in IRC 4947(a)(2), a split-interest trust:

• Is not exempt from taxation under R&TC Section 23701d.
• Has some of the unexpired interests devoted to one or more charitable purposes as described in IRC Section 170(c).
• Has amounts in trust for which a charitable contributions deduction was allowed under the R&TC. Pooled income funds, IRC Section 642(c)(5); charitable remainder annuity trusts, IRC Section 664(d)(1); and remainder unitrusts, IRC Section 664(d)(2) are considered split-interest trusts for which the trustee must file Form 541-B, Charitable Remainder and Pooled Income Trusts, for the taxable year. For more information regarding the filing requirements for these types of trusts, go to ftb.ca.gov/Forms and search for 541-B to get Form FTB 541-B Instructions.

Simple trusts which received a letter from FTB granting tax-exempt status under R&TC Section 23701d are considered to be corporations for tax purposes. The trust may be required to file Form 199.

Religious or apostolic organizations described in R&TC Section 23701k must attach a completed Form 565, Partnership Return of Income, to Form 199.

Political or Legislative Activities by Section 23701d Organizations

The purpose of Form 3509, Political or Legislative Activities By Section 23701d Organizations, is to declare political or legislative activities carried out by a R&TC Section 23701d tax-exempt organization.

Who Must File

If during the taxable year, the organization:

• Participated or intervened in any political campaign on behalf of any elective public office.
• Contributed funds to support or oppose any individual public office candidate or any organizations formed to support or oppose a public office candidate.
• Attempted to influence any national, state, or local legislation or ballot measure.
• Filed a federal election Form 5768, Election/ Revocation of Election by an Eligible Section 501(c)(3) Organization to Make Expenditures to Influence Legislation.

Complete and attach Form 3509 to Form 199, and mail it to us.

Due Date

You must file Form 199 on or before the 15th day of the 5th month after the close of your organization’s tax year. For example, if your tax year ends on December 31, the due date is May 15. If the due date falls on a weekend or state holiday, file by the next regular business day.

Extension of Time to File

An extension allows you more time to file the return, not an extension of time to pay any fee that may be due.

We will grant an automatic six-month extension to file a return if both of the following conditions exist:

• Your organization is not suspended on the original due date.
• You file your organization’s return on or before the extended due date.

Filing Fee

For returns due on or after 01/01/2021, no filing fee is required.

For returns due prior to 01/01/2021, refer to the following information.

Generally, if you file Form 199, you pay a fee with the return. The amount depends upon when you file, and when you make your payment. (R&TC Section 23772)

Exceptions

The filing fee does not apply to the following organizations exempt under R&TC Section 23701d:

Delinquent Form 199 Penalty

We impose a penalty if you do not file your organization’s Form 199 by the extended due date regardless of whether you pay the fee. The penalty is $5 per month or part of a month the Form 199 is late. The maximum penalty is $40. We impose the penalty from the original due date of the return. (R&TC Section 23772)

Organizations exempt from the filing fee are not exempt from this penalty.

If your organization is a private foundation and you have not filed a timely Form 199, we may request you file the return within a specific time frame. If you do not file the return, we may impose on you (as the individual responsible for filing) a penalty of $5 for each month (or part of a month) that you do not file. The maximum penalty is $25 and is in addition to the penalty for filing Form 199 late. (R&TC Section 23772)

FTB 199N, California e-Postcard

California requires small tax-exempt organizations to electronically file an annual informational notice with us. We do not offer a paper form. (R&TC Section 23772)

You cannot file the California e-Postcard for a tax year prior to 2010. If you need to file for a tax year prior to 2010, you must file Form 199.

There is no cost to file the California e-Postcard. If your average gross receipts threshold is greater than the allowable threshold, we may send you a bill.

Who Must File

Organizations with gross receipts that are normally equal to or less than the threshold are not required to file Form 199 but are required to electronically file the California e-Postcard. Organizations that meet the requirement to file the California e-Postcard may choose to file a complete Form 199.

Organizations Not Permitted to File the California e-Postcard

The following organizations cannot file the California e‑Postcard but must file Form 199 instead:

• Tax-exempt organizations with annual gross receipts normally greater than the Form 199 filing the threshold.
• Private foundations.
• Nonexempt charitable trusts described in IRC Section 4947(a)(1).

Due Date

You must file the California e-Postcard on or before the 15th day of the 5th month after the close of your organization’s tax year. For example, if your tax year ends on December 31, the due date is May 15. If the due date falls on a weekend or state holiday, file by the next regular business day.

Extension of Time to File

There is no extension of time to file.

Form 109, California Exempt Organization Business Income Tax Return

Generally, exempt organizations must file Form 109 when they have income in excess of $1,000 from a trade or business that is unrelated to its exempt purposes - even if the profits are used for exempt purposes. California and federal laws are generally the same with regard to unrelated business income tax.

For additional information regarding unrelated business income tax, refer to Internal Revenue Service Publication 598, Tax on Unrelated Business Income of Exempt Organizations.

Tax Rates

The rate at which tax is computed depends upon how the organization was created.

• An incorporated organization or unincorporated association computes its tax using the general corporation tax rate.
• A trust computes its tax using the trust rate. The trust rate is the same rate used by single individuals on their personal income tax returns. If the trust’s taxable year is a fiscal year, use the rate for the calendar year in which the fiscal year began. (Example: If the fiscal year began July 1, 2009, use the rate for 2009.)

Due Date

The due date for Form 109 depends upon how the organization was created.

• An incorporated organization, unincorporated association, or trust (other than a pension trust) must file on or before the 15th day of the 5th month after the close of its taxable year. For example, if the taxable year ends on December 31, the tax return is due on May 15.
• A pension trust must file on or before the 15th day of the 4th month after the close of its taxable year. For example, if the taxable year ends on December 31, the tax return is due on April 15.

If the due date falls on a weekend or state holiday, file by the next regular business day.

Extension of Time to File

An extension allows you more time to file the return, not an extension of time to pay any tax that may be due. We will grant an automatic six-month extension to file a return if both of the following conditions exist:

• Your organization is not suspended on the original due date.
• You file your organization’s return on or before the extended due date.

Penalties

• Delinquent Penalty: If you do not file your organization’s tax return by the extended due date, we impose a penalty of 5 percent of the tax due, after applying any payments and credits made on or before the original return due date, for each month or part of a month the return is late. The maximum penalty is 25 percent. We impose the penalty from the original due date of the return. (R&TC Section 19131)
• Demand to File Penalty: If we send you a demand to file your organization’s tax return and you do not file it, we impose a penalty of 25 percent of the tax liability before applying any payments or credits. Therefore, your organization may owe penalties and interest even if its tax return shows that a refund is due. This penalty is in addition to the 25 percent delinquent penalty. (R&TC Section 19133)
• Underpayment and Monthly Penalty: We impose a penalty if you do not pay the total amount due shown on your organization’s return by the original due date. The penalty is 5 percent on the unpaid tax, plus 0.5 percent on the unpaid tax for each month or part of a month it remains unpaid. The maximum penalty is 25 percent of the unpaid tax. (R&TC Section 19132)
• Underpayment of Estimated Tax Penalty: We impose a penalty if your organization does not pay, pays late, or underpays an estimated tax installment. We calculate the penalty on the unpaid amount from the due date of the estimated tax installment to the date we receive your payment or to the due date of the return, whichever is earlier. (R&TC Section 19142-19161)

Form 100, California Corporation Franchise or Income Tax Return

If your organization is a political organization exempt under R&TC Section 23701r, or a homeowners’ association exempt under R&TC Section 23701, and it has taxable income in excess of $100, your organization must file Form 100.

Tax Rate

Use the general corporate tax rate to compute the tax. Exempt organizations are not subject to the minimum tax.

Due Date

You must file Form 100 on or before the 15th day of the 4th month after the close of your organization’s taxable year. For example if its taxable year ends on December 31, the due date is April 15. If the due date falls on a weekend or state holiday, file by the next regular business day.

Extension of Time to File

An extension allows you more time to file the return, not an extension of time to pay any tax that may be due. We will grant an automatic six-month extension to file a return if both of the following conditions exist:

• Your organization is not suspended on the original due date.
• You file your organization’s return on or before the extended due date.

Penalties

The same penalties apply to Form 100 and Form 109 in this publication. However, political organizations are not subject to the penalty for underpayment of estimated tax.

Political Organizations

Taxable income includes all amounts received during the taxable year other than:

• Contributions of money or other property.
• Membership fees, dues, or assessments.
• Proceeds from political fundraising or entertainment events.
• Proceeds from the sale of certain political campaign materials.

Political organizations are not required to make estimated tax payments. Therefore, they are not subject to the penalty for underpayment of estimated tax. They are subject to all other penalties.

For more information about political organizations, refer to FTB Pub. 1075, Exempt Organizations - Guide for Political Organizations. Go to ftb.ca.gov/Forms and search for 1075.

Homeowners’ Associations

Taxable income:

• Does not include membership fees, dues, or assessments.

• May include (but not limited to) all income received during the taxable year from:

  • Interest
  • Rents
  • Sale of assets
  • Dividends
  • Laundry income
  • Nonmembers

For more information about homeowners’ associations, refer to FTB Pub. 1028, Guidelines for Homeowners’ Associations. Go to ftb.ca.gov/Forms and search for 1028.

Form 100-ES, Corporation Estimated Tax

Form 100-ES is used to figure and pay estimated tax. Estimated tax is the amount of tax the entity expects to owe for the taxable year.

One or more payments of estimated tax are required annually from:

• Exempt organization or trust with unrelated business income.
• Exempt homeowners’ association with non-exempt function income.

Estimated tax is payable in four installments. The installments are due and payable by the 15th day of the 4th, 6th, 9th, and 12th month of the taxable year. When the due date falls on a weekend or holiday, the deadline to file and pay without a penalty is extended to the next business day.

Get the instructions for Form 100-ES for more detailed information regarding the filing requirement.

Group Exemption and Group Filing

Group Exemption

A parent, state, district, or like organization with approved California group exemption status may seek state tax-exempt status for its California subordinates.

Subordinate organizations under a California group exemption ruling are required to file their own returns. With the exception of group filing as stated below.

Group Filing

A central parent, or like organization, must file their own return (Form 199 or FTB 199N) and the parent organization may file a group return for two or more subordinate organizations on Form 199 that:

• Are tax-exempt under a group exemption letter that is still in effect or obtained tax-exempt status on their own.
• Are affiliated with the central organization at the time its annual accounting period ends.
• Are subject to the central organization’s general supervision or control.
• Have the same taxable year-end.

Exception: Private foundations cannot be included in a group return.

For detailed instruction about group filing, refer to Form 199, California Exempt Organization Annual Information Return. Go to ftb.ca.gov/Forms and search for Form 199.

Every year, each local organization must authorize the central organization in writing to include it in the group return and must declare, under penalty of perjury, that the authorization and the information it submits to be included in the group return are true and complete.

Subordinate Organizations

If a subordinate organization earns gross unrelated business income of more than $1,000 for the year, the subordinate must file its own Form 109. The subordinate will also be required to file its own Form 199 or FTB 199N. The parent cannot include the subordinate in the group return.

Consequences of Not Filing or Paying an Amount Due

Suspended/Forfeited

Once the corporation is suspended, it no longer has the protection of its corporate shield. That means, among other things:

• Its name is available to any other organization that wants to incorporate and use it.
• It cannot defend itself or file suit in court.
• The other party to the contract may void its contracts.
• We may revoke its tax-exempt status. Then, the organization is subject to the franchise tax provisions - including the requirement to pay at least the minimum tax each year.

If the organization incorporated somewhere other than California, and qualified to do business in California through the California Secretary of State (SOS), rather than being suspended, the organization’s status is "forfeited." The consequences of forfeiture are basically the same as they are for a suspended corporation.

Remedies

The primary requirements for the organization to be reinstated to good standing are:

Other Penalties and Interest

• Dishonored Payment Penalty: We impose a penalty if your organization’s financial institution does not honor a payment you make to us by check, money order, or electronic funds transfer. For a payment of $750 or more, the penalty is 2 percent of the payment amount. For a payment less than $750, the penalty is $15 or the payment amount; whichever is less. (R&TC Section 19134)
• Electronic Funds Transfer Requirement: Once a corporation remits an estimated tax or extension payment in excess of $20,000 or has a total tax liability in excess of $80,000, it must make all future payments, regardless of the taxable year or amount, through an electronic funds transfer. Payments made by other means will result in a penalty of 10 percent of the amount paid. For more information regarding this requirement, go to our website at ftb.ca.gov or call us at 916-845-4025. (R&TC Section 19011)
• Interest accrues on unpaid taxes from the original due date of the return until the date we receive payment. We also charge interest on penalties. (R&TC Section 19101)

Your Rights as a Taxpayer

Our goal is to make certain we protect your rights. We want you to have the highest confidence in the integrity, efficiency, and fairness of our state tax system. FTB 4058 California Taxpayers’ Bill of Rights (FTB 4058) includes information on state taxpayers’ rights and how to request written tax advice from us.

In keeping with the California Taxpayers’ Bill of Rights, taxpayers who have been unable to resolve their problems with us through regular channels may contact our Taxpayers’ Rights Advocate. Go to ftb.ca.gov and search for problems.

Connect With Us

Web:

ftb.ca.gov and search for charities

Phone:

Call 916-845-4171 from 7 a.m. to 4:30 p.m. weekdays, except state holidays

Mail:

State Of California
Exempt Organizations Unit MS F-120
Franchise Tax Board
PO Box 1286
Rancho Cordova CA 95741-1286

Forms and Publications on the Web

Request Forms by Phone

Phone: 800-338-0505
California Relay Service
711 or 800-735-2929 for persons with hearing or speaking limitations

When prompted, select business entity information, then select forms and publications, and enter the code for the form you need. (For prior year forms, call 800-852-5711.) Allow two weeks to receive your order.

Request Forms by Mail

Tax Forms Request Unit
Franchise Tax Board
PO Box 307
Sacramento CA 95741-0307

Correspondence

You may write to us if you want a written reply regarding a notice we sent you. If you write, include the following:

• Your Entity ID, California corporation number, or FEIN.
• Your daytime phone number.
• A copy of the notice.

Mail your inquiry to:

Exempt Organizations Unit MS F120
Franchise Tax Board
PO Box 1286
Rancho Cordova CA 95741-1286

We will respond to your letter within six weeks. In some cases, we may need to call you for additional information.

Do not attach correspondence to your return.

Assistance: Other Government Agencies

For more information about nontax issues, refer to the following list of contacts: