On November 4, 2016, the Franchise Tax Board (FTB) in Notice 2016-04 announced a reduction of the automatic paperless return filing extension period for corporations and other taxpayers subject to the Corporation Tax Law to six months (from seven months), effective for filing returns for tax years beginning on or after January 1, 2016.¹

Background

On September 14, 2016, Governor Brown signed AB 1775 changing the due dates for filing California tax returns for most partnerships, corporations and limited liability companies effective for tax years beginning in and after 2016. The FTB issued Notice 2016-04 to provide guidance on modifications to the automatic paperless extension for Corporation Tax Law purposes. The FTB has the authority to determine the extension period for filing corporate returns, which by statute cannot exceed seven months. Since 1992,² the FTB has allowed corporations an additional seven-month period to timely file. In Notice 2016-04, however, the FTB reduced the return filing extension period for corporations and other taxpayers subject to the Corporation Tax Law to six months.

Return due dates

Effective for tax years beginning on and after January 1, 2016, the California tax return due dates for calendar-year taxpayers* are changed as follows:

 *Adjust dues dates for fiscal year taxpayers accordingly.

**The change of original due date for June 30 fiscal year corporations will remain the 15th day of the third month until 2026. FTB Notice 2016-04 specifically retained the seven-month extension period for corporations with a June 30 fiscal year until 2026.

AB 1775 makes corresponding changes to the payment due dates for taxes and fees due by the original return due date.

Implications

Historically, most California tax returns had extended due dates as of the 15th day of the 10th month after the close of the tax year, or one month following the federal extended due dates.

For tax years beginning in and after 2016, the federal and California original due dates will be the same as the federal due dates. For tax years beginning in and after 2016 but before January 1, 2026, the California extended due dates for some business entity returns will be the same as federal; for other business entity returns, the California extended due dates will continue to be one month following the federal extended due dates. Caution is needed when determining the extended due date for the type of return filed - autopilot will not always work.

Unlike federal reporting rules, California also requires single member LLCs (SMLLCs) to file their own returns. The California filing requirements for SMLLCs are unique. Rather than impose the same return due date, including extensions, for all SMLLCs, each SMLLC must follow the return due date of its single owner (as established under AB 1775).

CAUTION: Tax return preparers must consider the type of taxpayer owning the SMLLC in order to determine the correct due date for filing the SMLLC returns and the last day to pay the California LLC tax and the LLC fee for the SMLLC. Remember, the LLC fee paid during the tax year may be a reasonable estimate, but the full fee must be paid by the original due date of the LLC return.

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ENDNOTES

¹ This Alert replaces Tax Alert 2016-1617, dated September 23, 2016.

² FTB Notice 92-11 (March 23, 1992) provided a seven-month extension of time to file for corporations, beginning with corporate returns due in 1993.