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Article Author:

California Now Processing a Portion of Pre-2007 LLC Fees

What is the California LLC fee?

California imposes a fee of up to $11,790 on LLCs that are organized in California, are registered with the Secretary of State to transact business in California or are doing business in California. This fee was based on total gross receipts of the LLC, regardless of whether the LLC had income from California sources. Starting in 2007, California changed its law so the current LLC fee is based only on California receipts. Several court cases have recently challenged the pre-2007 calculation.

Ventas Finance I, LLC v. Franchise Tax Board

Ventas Finance I, LLC v. Franchise Tax Board is a recent court case that challenged the California LLC fee. The court ruled that the California LLC fee was unconstitutional for LLCs that have income inside and outside of California. California issued Ventas Finance a partial refund on the portion of the fee that was deemed unconstitutional (i.e. the fee charged on non-California gross receipts).

To learn more about the Ventas Finance case, please read the article "California Appellate Court Holds LLC Fee Unconstitutional."

What’s next?

In FTB Notices 2008-2 and 2009-4, the California Franchise Tax Board announced that it will begin processing refund claims for limited liability companies that paid a state LLC fee and had income from within and outside the state. Refunds will be given based on apportioned California amounts.

LLCs That Have Already Filed Refund Claims

An LLC that had business inside and outside of California and filed a refund claim, might now need to perfect that claim. If you are a Blackman Kallick client and had us file a claim for you, we will be contacting you.

LLCS That Have Not Filed Refund Claims Yet

If a protective claim has not already been filed, LLCs should consider filing a claim for a refund. The statute of limitations is four years, which means you should file a claim for a refund prior to April 15, 2010 for a 2005 return. Some 2004 returns may still be open for a refund claim.

Conclusion

We recommend filing refund claims for any LLC fees paid prior to 2007. To ensure that refunds are received without delay, protective claims already filed should be reviewed to make sure they meet all the requirements in Notices 2008-2 and 2009-4.

Unfortunately, because of its budget crisis, California may be issuing IOUs instead of cash refunds.

Please contact Blackman Kallick to inquire about previously filed claims and claims for open years as soon as possible.

For more information, please contact Tracy Lesnau at 312-980-3323, Deb Rood at 312-980-2995 or your Blackman Kallick representative.

 

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.