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Changes to 2009 Forms

Updates to the 100S Booklet on 03/12/2014 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on:

  1. Page 4, Column 3, Nonconformity list, Bullet 5
  2. Page 17, Column 2, Line 10b.

Previous Version

  1. Note: new text added.
  2. Note: new text added.

Revised Version

  1. The change in the percentage of the gain exclusion for the sale of qualified small business stock acquired after February 17, 2009 and before January 1, 2011.
  2. f. Eligible gain from the sale or exchange of qualified small business stock (defined in R&TC Section 18152.5). Also report on an attachment to Schedule K and Schedule K-1 (100S) the name of the corporation that issued the stock and the adjusted basis of that stock.

    The exclusion allowed under R&TC Section 18152.5 for small business stock is not allowed for an S corporation but is allowed for the shareholder.

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012.

Impact

This revision may decrease the tax liability for taxpayers who did not report a QSBS exclusion or deferral for taxable years beginning on or after January 1, 2008.

Back to Tax Form Changes for 2009


Updates to the 100S Booklet on 02/20/2013 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on:

  1. Page 3, What’s New/Tax Law Changes, Columns 1 and 2, Qualified Small Business Stock paragraph 4
  2. Page 17, Line 10b, Column 2, item f
  3. Page 51, California Tax Forms and Publications, 817 California Corporation Tax Forms and Instructions, 5th form
  4. Page 30, Tangible Property Expense Worksheet, Line 2 and Line 3

Previous Version

  1. Qualified Small Business Stock – California law does not conform to federal law in regards to the increase in the percentage (from 50% to 75%) of the gain exclusion for the sale of qualified small business stock acquired after February 17, 2009, and before January 1, 2011. Current California law allows an exclusion of 50% of any gain from the sale or exchange of qualified small business stock held for more than 5 years.
  2. Eligible gain from the sale or exchange of qualified small business stock (defined in R&TC Section 18152.5). Also report on an attachment to Schedule K and Schedule K-1 (100S) the name of the corporation that issued the stock and the adjusted basis of that stock.

    The exclusion allowed under R&TC Section 18152.5 for small business stock is not allowed for an S corporation but is allowed for the shareholder.
  3. FTB 3565, Small Business Stock Questionnaire
  4. Text below:
Tangible Property Expense Worksheet
1 Maximum dollar limitation for California.... 1 25,000
2 Total cost of Section 179 property placed in service.... 2 200,000
3 Threshold cost of section 179 property before reduction in limitation.... 3
4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0-.... 4

Revised Version

  1. Note: text deleted.
  2. Note: text deleted.
  3. Note: text deleted.
  4. Text below:
Tangible Property Expense Worksheet
1 Maximum dollar limitation for California.... 1 25,000
2 Total cost of Section 179 property placed in service.... 2
3 Threshold cost of Section 179 property before reduction in limitation.... 3 200,000
4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0-.... 4

Reason for the changes

Items 1 - 3
The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

Item 4
The threshold cost is on the incorrect line.

Impact

Items 1 - 3
This revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

Item 4
This revision may cause a reduction in the IRC Section 179 expense deduction which will results in an increase in the net income and an increase in the tax liability.

Back to Tax Form Changes for 2009


Updates to the instructions on the 100S Booklet on 08/24/2010––California S Corporation Franchise or Income Tax Booklet

We replaced text on the 100S Booklet’s instructions on:

  1. Page 3, Column 2, Backup Withholding paragraph
  2. Page 4, Column 1, 3rd bullet
  3. Page 4, Column 1, 7th bullet
  4. Page 4, Column 2, under CA law conforms to federal law…..

Previous Version

  1. Backup Withholding – For taxable years beginning on or after January 1, 2010, California tax law requires backup withholding at a rate of 7% on reportable payments. Interest, dividends, and any release of loan funds made by a financial institution in the normal course of business are excluded from California backup withholding. For additional information on California backup withholding, go to ftb.ca.gov and search for backup withholding.

  2. A controlled foreign corporation (CFC) must include in a water’s-edge combined report a portion of its income based on the ratio of its Subpart F income bears to the current year earnings and profits, and its U.S. source income, regardless of whether the CFC is a California taxpayer.

  3. For taxable years beginning on or after January 1, 2009, buyers will be required to withhold on each installment sale payment if the sale of California real property is structured as an installment sale.

  4. N/A: We are adding additional language because of the Conformity Act of 2010 (SB 401).

Revised Version

  1. Backup Withholding - Beginning on or after January 1, 2010, with certain limited exceptions, payers that are required to withhold and remit backup withholding to the Internal Revenue Service (IRS) are also required to withhold and remit to the Franchise Tax Board (FTB). The California backup withholding rate is 7% of the payment. For California purposes, dividends, interests, and any financial institutions release of loan funds made in the normal course of business are exempt from backup withholding.

    If the corporation (payee) has backup withholding, the corporation (payee) must contact the FTB to provide a valid Taxpayer Identification Number, which is either the California corporation number or the federal employer identification number (FEIN), before filing the tax return. Failure to provide the California corporation number or FEIN may result in a denial of the backup withholding credit. For more information, go to ftb.ca.gov and search for backup withholding.


  2. N/A: Text deleted.

  3. For installment sales occurring on or after January 1, 2009, buyers will be required to withhold on each installment sale payment if the sale of California real property is structured as an installment sale.

  4. The federal grant tax treatment for specified energy property.

Reason for the changes

  1. ABX 4 18 was chaptered on July 28, 2009 and revised the law regarding backup withholding. We are revising the 2009 backup withholding paragraph to:

         (a) Correct the effective date of backup withholding to be "Beginning on or after January 1, 2010", instead of "For taxable years beginning on or after January 1, 2010".

         (b) Provides the corporation with additional instructions to follow to correctly report the backup withholding.

  2. We removed the CFC paragraph because this paragraph does not apply to S corporations that file Form 100S, and the CFC paragraph was as an FYI for corporations.

  3. AB 3078 was chaptered on September 28, 2008 and revised the law regarding installment sale. We are revising the 2009 installment sale paragraph to correct the effective date to be "For installment sales occurring on or after January 1, 2009", instead of "For taxable years beginning on or after January 1, 2009".

  4. The Conformity Act of 2010 (SB 401) placed California in conformity with federal law to exclude from gross income and alternative minimum taxable income any federal grant received for specified energy property.

Impact

  1. No tax impact. This revision will allow payers to perform backup withholding and payee to claim the withholding credit beginning on or after January 1, 2010, instead of for taxable years beginning on or after January 1, 2010.

  2. N/A (Non technical revision)

  3. No tax impact. This revision will allow buyers to withhold for installment sales occurring beginning on or after January 1, 2009, instead of for taxable years beginning on or after January 1, 2009.

  4. If a taxpayer excluded the federal specified energy property grant from the gross income for federal purposes and included it in the gross income for CA purposes, the taxpayer will overstate its CA gross income. This revision will allow a taxpayer to exclude the federal grant amount from CA gross income; thus, will reduce the tax liability.

Updates to the 100S Booklet on 03/24/2010 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on the 100S Booklet on:

  1. Page 3, column 1, What’s New/Tax Law Changes, new paragraph
  2. Page 3, column 3, Important Information, 3rd bulleted item

Previous Version

  1. N/A (We will add a new paragraph under What’s New section.)

  2. For taxable years beginning on or after January 1, 2008, and before January 1, 2010, business tax credits can only offset 50% of the tax if the S corporation’s taxable income is $500,000 or more. Corporations with taxable income less than $500,000 are not subject to the credit limitation. For the purpose of this limitation, taxable income means net income for state purposes line 16 (net of any adjustments on line 17), of Form 100S, California S Corporation Franchise or Income Tax Return. The limitation is equal to 50% of the tax before the application of any credits. Exception: The New Jobs Credits is not subject to the 50% business tax credit limitation.

    Business tax credits disallowed due to the 50% limitation may be carried over. The carryover period for disallowed credits are extended by the number of taxable years the credits were not allowed.

Revised Version

  1. Charitable Contributions for 2010 Haiti Disaster – California law conforms to the federal law which allows a 2009 charitable contribution deduction for cash contributions made after January 11, 2010, and before March 1, 2010, for the relief of victims in areas affected by the earthquake in Haiti on January 12, 2010. Corporations may claim the deduction on the 2009 or 2010 California tax return. Corporations may choose to claim the deduction in different taxable years for federal and California purposes.

  2. For taxable years beginning on or after January 1, 2008, and before January 1, 2010, business tax credits can only offset 50% of the tax if the S corporation’s taxable income is $500,000 or more. For more information, see Specific Line Instructions, Line 24a through line 25, Tax credits.

Reason for the changes

  1. On March 15, 2010, California passed AB 347 which conforms to the new federal law that allows an S corporation to deduct the 2010 cash contributions for Haiti relief on the 2009 or 2010 California tax return.

  2. We revised the existing credit limitation paragraph to allow room for the What’s New paragraph regarding cash charitable contributions for the 2010 Haiti earthquake. The previous version of the credit limitation paragraph is currently listed under Specific Line Instructions, for Line 24a through Line 25, Tax credits.

Impact

  1. If an S corporation chooses to claim the cash contribution deduction on 2009 taxable year, it may reduce the 2009 tax liability.

  2. There is no tax impact.

Back to Tax Form Changes for 2009