United States

California: FTB Issues Post-Gillette Guidance

Nov 07, 2016
From KPMG TaxWatch

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On November 1, 2016, the Franchise Tax Board (FTB) issued guidance (Notice 2016-03) addressing how the FTB intends to handle the Multistate Tax Compact (Compact) election cases in light of the U.S. Supreme Court’s recent denial of cert in Gillette. Recall, the FTB had been holding Compact election returns pending resolution of the Gillette litigation. Now that the Gillette litigation has concluded, the FTB will start processing refund claims based on the Compact election. Taxpayers should expect to receive a formal notice in response to their claims for refund at some point over the next several months. The FTB will place administrative protests that include the Compact election issue into active status and resume working these cases, as well as processing audits involving the Compact election. In addition, the FTB will work with the State Board of Equalization to return administrative appeals involving the Compact election issue to active status before the Board. To stop the accrual of interest, the FTB reminds taxpayers that they can make tax deposits or may pay proposed deficiency assessments. Not surprisingly, the Notice states that penalties will be imposed as appropriate on a case-by-case basis. Presumably, this includes the Large Corporate Understatement Penalty (LCUP) that applies if the understatement of tax on the original return exceeds the greater of $1 million or 20 percent of the tax reported. The FTB indicated at a recent meeting that it will assess the penalty in all cases where it applies. Please contact Gina Rodriquez at 916-551-3132 with questions.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.