Goodbye California annual $800 fee
- For 2019 tax filing and forward, you don’t have to pay the $800 annual partnership tax.
- Applies to entities that are disregarded for federal purposes (aka on owner).
- In addition, the business tax return is also eliminated.
- Submit a claim for refund to get your money back!
A limited partnership that is disregarded for federal income tax purposes pursuant to federal eligible entity classification regulations (a Federal DLP), aka a LLC that has just one owner, is not subject to the California annual limited partnership minimum tax of $800 and the requirement to file a California partnership return. This was released by the California Franchise Tax Board (FTB) which is the body that oversees income tax compliance in California. The update came in FTB Legal Ruling 2019-02 and guidance was issued in FTB Notice 2019-06 – This is the source of truth for this article!
To prove you qualify:
A limited partnership should submit the following documentation to establish that it is disregarded for federal income tax purposes:
- The certificate of limited partnership, partnership agreement, organizational chart of ownership, and federal income tax returns of the partners for the particular tax year or years in question; or
- A declaration signed under penalty of perjury by the general partner of the limited partnership. The declaration must clearly identify the general partner and must state that the limited partnership entity was disregarded for federal income tax purposes during the respective tax years. If the disregarded limited partnership’s general partner under local law is a limited liability company (LLC), then the manager (or, if there is no manager, the authorized member of the general partner LLC) must sign the declaration.
New claims for refund based on FTB Legal Ruling 2019-02. If a limited partnership wants to file a new claim for refund based on FTB Legal Ruling 2019-02, the general partner of the limited partnership should fax or mail FTB Notice 2019-06, along with items (1) or (2) to the FTB. Refund claims may only be filed for tax years for which the statute of limitations remain open.