CA LLC FEES

[JRS]

LLC case — Supreme Court declines review

The U.S. Supreme Court has declined to review the Ventas case pertaining to LLC fees paid by LLCs with income from both California and non-California sources. (Ventas Finance I, LLC v. FTB (August 11, 2008) 165 Cal.App.4th 1207; Cal. Sup. Ct. petn. den. on November 12, 2008, Case No. S166870)

This means that the California Court of Appeals decision is final... almost. The case will be remanded back to the Superior Court, with instructions for the court to properly calculate the fee based on California-source income for years prior to 2007.

According to the FTB, they will issue a notice sometime in the next few weeks with instructions on when and how to obtain refunds for LLCs that have income inside and outside the state of California and have filed protective claims for refunds.

For now, you should file a claim for refund for any LLC that had income outside the state of California in a year prior to 2007. The statute of limitations is four years, so for a calendar year LLC, you must file a claim for refund for a timely filed 2004 return prior to April 15, 2009.

[BCinSC]

Thanks for the inforamtion. Any idea how this affects 2007 returns? My client just received a notice from CA adjusting the fee on the 2007 return to reflect calculation based on all income, not just CA income.

[JRS]

I don't have any LLC, but I received the notice from a tax site I use for Ca tax laws. Maybe you can search it and find your answers.

http://www.caltax.com/Pages/home.aspx

[BulldogTom]

Thanks for the inforamtion. Any idea how this affects 2007 returns? My client just received a notice from CA adjusting the fee on the 2007 return to reflect calculation based on all income, not just CA income.

This is exactly what this case is about. The Independent Republic of California has decided that all income from every state is subject to the CA LLC Fee for every LLC registered in CA. There have been several court cases challenging this fee, and the courts are siding with the taxpayers, in part. CA appealed to the S.C. when they lost at the lower level. Since the S.C. is not going to hear the case, it looks like CA will have to back down.

Your client will need to watch this carefully to see how he is going to have to apportion his income for the purposes of the CA LLC fee.

Tom

Lodi, CA