On December 18, 2017, the California Franchise Tax Board (FTB) will hold a public meeting starting at 10:00 a.m. (PST) at which any individual may present statements or arguments, orally or in writing, relevant to the FTB's recently issued notice of its intention to adopt proposed amendments to Cal. Code Regs. Sec. 25137-1 (Apportionment and Allocation of Partnership Income) and Cal. Code Regs. Sec. 17951-4 (Income from a Business, Trade or Profession), likely affecting law firms.

Background

The California Franchise Tax Board (FTB) will hear testimony on proposed amendments to Cal. Code Regs. Sec. 25137-1, applicable to corporations owning an interest in a partnership conducting business within and outside California, and Cal. Code Regs. Sect. 17951-4, applicable to individuals who are nonresident or part-year residents of California for tax purposes and own interests in partnerships that conduct business within and outside of California. The FTB intends to establish appropriate rules for determining the apportionment and allocation rules for partnership income and also for nonresident individuals receiving income from a partnership.

Although previous amendments of these regulations brought to light additional factual scenarios involving partnerships that conduct business within and outside California, these additional scenarios are not adequately addressed by the current version of the regulations, prompting the FTB to propose further amending the regulations.

The notice of proposed rulemaking, the initial statement of reasons for the proposed action, and the language of the proposed regulations are included here for reference and available on the FTB's website.

Monitoring developments

EY will continue to monitor any subsequent FTB notices and will alert law firms accordingly. EY contacts listed below are available for individuals who would like to participate in the FTB hearing or have questions.

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