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FTB creates new return for water's-edge filers

A new tax return, Form 100W, has been developed for corporations that are computing their income under a water's-edge election.

A corporation that is a member of a unitary group of commonly-owned corporations is generally required to determine its California source income under the combined reporting method. The combined reporting group will include all of the corporation's worldwide unitary affiliates unless the corporation makes a water's-edge election to generally limit the group to those affiliates that operate in the United States.

In the past, corporations that made a water's-edge election filed the same Form 100 Corporation Franchise or Income Tax Return as other corporations, but attached a Form 2426 Water's-Edge Coversheet to the face of the return.

Beginning with the 2000 tax return, corporations (other than S corporations) making a water's-edge election or filing under a prior year's water's-edge election should no longer file the Form 100 return.

Instead, water's-edge electing corporations will file Form 100W, California Corporation Franchise or Income Tax Return — Water's-Edge Filers.

The Form 2426 coversheet no longer needs to be attached to the face of the return. (The new Form 100W should not be filed by S corporations. S corporations that have made a water's-edge election should continue to file the Form 100S and check the box on the face of the return to identify it as water's-edge.)

The new form will make it easier for taxpayers that want to make a water's-edge election to comply with the election requirements. It will also ensure that the water's-edge returns are properly processed.

The new Form 100W booklet was mailed at the end of December to corporations that filed under a water's-edge election last year. If you are making a new water's-edge election beginning in 2000 or did not receive a copy of the booklet in the mail, you can order the Form 100W by calling (800) 338-0505 or writing to Tax Forms Request Unit, Franchise Tax Board, P.O. Box 307, Rancho Cordova, CA 95741-0307.

The Form 100W can also be downloaded from the FTB website at (

It's not too late to order 2000 California Package X

Haven't ordered your 2000 California Package X yet? There's still time.

There are three versions of the 2000 Package X to choose from. The bound and loose-leaf paper versions cost $14 plus sales tax. The best value, however, is the CD-ROM for Windows version. It also costs $14 (plus sales tax) and comes with:

• 2000 California Package X forms
• 2000 Internal Revenue Service Package X forms
• Many fillable forms
• California Package X forms for the four previous years
• Information on electronic filing (e-file)

The CD-ROM (for Windows version) also has a search feature so that you can locate references to special words or terms in both the tax forms and instructions. And in March, you will receive a second disk with updated forms.

You should be able to use the CD-ROM if you have:

• A 486DX or Pentium computer with a processor speed of 33 megahertz or faster.
• Microsoft Windows "95," "98," "2000" or NT 4.0 (or later versions).
• Eight megabytes of RAM (main memory).

• Double speed or greater CD-ROM drive capable of reading ISO 9660 format.
• VGA, SVGA or higher resolution color video display/adapter.
• PostScript Windows-compatible printer or Hewlett-Packard LaserJet III and above with one megabyte of user RAM.

To order your Package X, contact the Tax News/Package X Helpdesk at (916) 845-7070.

Note: California residents ordering Package X must add sales tax to their total based on their county of residence.

January/February 2001

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