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Blank California 100S Form

The California 100S form is the official tax return for S corporations operating in California. This form is essential for reporting franchise or income taxes, and it includes various schedules to detail income, deductions, and credits. Understanding the 100S form is crucial for compliance and ensuring accurate tax filings.

Outline

The California 100S form serves as a vital document for S corporations operating within the state, enabling them to fulfill their franchise or income tax obligations. This form includes several essential schedules, each designed to capture different aspects of the corporation's financial activities. Schedule B focuses on depreciation and amortization, allowing corporations to report their asset depreciation accurately. Schedule C details available tax credits, while Schedule D addresses capital gains and losses, including built-in gains. Additionally, Schedule H provides information on dividend income deductions, and Schedule QS is dedicated to Qualified Subchapter S Subsidiary (QSub) information. A key component of the 100S form is Schedule K-1, which outlines each shareholder's share of income, deductions, and credits, ensuring transparency and compliance among shareholders. The form also accommodates extensions and net operating loss computations through FTB 3539 and FTB 3805Q, respectively. Understanding these components is crucial for S corporations to navigate their tax responsibilities effectively and take advantage of available benefits.

Sample - California 100S Form

100S

California

Forms & Instructions

2018

S Corporation

Tax Booklet

This booklet contains:

Form 100S, California S Corporation

Franchise or Income Tax Return

Schedule B (100S), S Corporation

Depreciation and Amortization

Schedule C (100S), S Corporation Tax

Credits

Schedule D (100S), S Corporation Capital

Gains and Losses and Built-In Gains

Schedule H (100S), S Corporation

Dividend Income Deduction

Schedule QS, Qualiﬁed Subchapter

S Subsidiary (QSub) Information

Schedule K-1 (100S), Shareholder’s

Share of Income, Deductions, Credits, etc.

FTB 3539, Payment for Automatic

Extension for Corporations and Exempt

Organizations

FTB 3805Q, Net Operating Loss (NOL)

Computation and NOL and Disaster Loss

Limitations — Corporations

Members of the Franchise Tax Board

Betty T. Yee, Chair

George Runner, Member

Keely Bosler, Member

For more information regarding e-ﬁle, go to

ftb.ca.gov and search for business eﬁle.

Table of Contents

Instructions for Form 100S ................................................................. 3

What’s New/Tax Law Changes .............................................................. 3

General Information A, Franchise or Income Tax ............................................... 6

General Information B, Tax Rate and Minimum Franchise Tax .................................... 7

Instructions for Schedule K and Schedule K-1 (100S) ............................................21

Form 100S, California S Corporation Franchise or Income Tax Return ...............................27

Schedule B (100S), S Corporation Depreciation and Amortization..................................33

Schedule C (100S), S Corporation Tax Credits .................................................35

Credit Chart............................................................................36

Schedule D (100S), S Corporation Capital Gains and Losses and Built-in Gains.......................37

Instructions for Schedule D (100S)...........................................................38

Schedule H (100S), S Corporation Dividend Income Deduction ....................................39

Instructions for Schedule H (100S)...........................................................40

Schedule QS, Qualiﬁed Subchapter S Subsidiary (QSub) Information ...............................41

Schedule K-1 (100S), Shareholder’s Share of Income, Deductions, Credits, etc........................43

Schedule K Federal/State Line References ..................................................46

Shareholder’s Instructions for Schedule K-1 (100S) .............................................47

FTB 3539, Payment for Automatic Extension for Corporations and Exempt Organizations ................53

FTB 3805Q, Net Operating Loss (NOL) Computation and NOL and Disaster

Loss Limitations — Corporations ..........................................................57

Instructions for form FTB 3805Q ............................................................59

Principal Business Activity Codes .........................................................65

How to Get California Tax Information ........................................................69

Page 2 Form 100S Booklet 2018

Business e-ﬁle

Business e-ﬁle is available for the following returns:

• Form 100, California Corporation Franchise or Income Tax Return, including

combined reports

• Form 100S, California S Corporation Franchise or Income Tax Return

• Form 100W, California Corporation Franchise or Income Tax Return –

Water’s-Edge Filers, including combined reports

• Form 100X, Amended Corporation Franchise or Income Tax Return

• Form 199, California Exempt Organization Annual Information Return

• Form 565, Partnership Return of Income

• Form 568, Limited Liability Company Return of Income

For more information, go to ftb.ca.gov and search for business eﬁle.

Form 100S Booklet 2018 Page 3

2018 Instructions for Form 100S

California S Corporation Franchise or Income Tax Return

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

In general, for taxable years beginning on or

after January 1, 2015, California law conforms

to the Internal Revenue Code (IRC) as of

January 1, 2015. However, there are continuing

differences between California and federal

law. When California conforms to federal tax

law changes, we do not always adopt all of

the changes made at the federal level. For

more information, go to ftb.ca.gov and search

for conformity. Additional information can

be found in FTB Pub. 1001, Supplemental

Guidelines to California Adjustments, the

instructions for California Schedule CA (540 or

540NR), and the Business Entity tax booklets.

The instructions provided with California tax

forms are a summary of California tax law

and are only intended to aid taxpayers in

preparing their state income tax returns. We

include information that is most useful to the

greatest number of taxpayers in the limited

space available. It is not possible to include

all requirements of the California Revenue

and Taxation Code (R&TC) in the instructions.

Taxpayers should not consider the instructions

as authoritative law.

What’s New/Tax Law Changes

Federal Tax Reform – The Tax Cuts and Jobs

Act (TCJA), signed into law on December 22,

2017, made changes to the IRC. In general,

the California R&TC does not conform to

the changes. California taxpayers continue

to follow the IRC as of the speciﬁed date of

January 1, 2015, with modiﬁcations.

Deferred Foreign Income – Under IRC

Section 965, if the S corporation owns (directly

or indirectly) certain foreign corporations, it

may have to include certain deferred foreign

income on its income tax return. California

does not conform. If the S corporation

reported IRC Section 965 inclusions and

deductions on Form 1120S, U.S. Income Tax

Return for an S Corporation, Schedule K for

federal purposes, write “IRC 965” at the top of

Form 100S, California S Corporation Franchise

or Income Tax Return.

Global Intangible Low-Taxed Income (GILTI) -

Under IRC Section 951A, if the S corporation

is a U.S. shareholder of a controlled foreign

corporation, the S corporation must include

GILTI in its income. California does not

conform.

Depreciation Limitations - The TCJA amended

IRC Section 280F relating to depreciation

limitations on luxury automobiles. California

does not conform to the federal amendments

under the TCJA. For more information, get

Schedule B (100S), S Corporation Depreciation

and Amortization.

Net Operating Losses (NOLs) – The TCJA

made changes to the rules for NOLs. California

law does not conform to those changes.

California taxpayers continue to compute

NOLs in conformity to federal rules as of

the speciﬁed date of January 1, 2015, with

modiﬁcations. For more information, see

General Information Section X, Net Operating

Loss.

Capital Assets – The TCJA amended IRC

Section 1221 excluding a patent, invention,

model or design (whether or not patented),

and a secret formula or process held by the

taxpayer who created the property (and certain

other taxpayers) from the deﬁnition of a capital

asset. California does not conform to this

amendment under the TCJA. For California

purposes, IRC Section 1221 as of January 1,

2015, applies.

Qualiﬁed Opportunity Zone Funds – The

TCJA established Opportunity Zones.

IRC Sections 1400Z-1 and 1400Z-2 provide

a temporary deferral of inclusion of gross

income for capital gains reinvested in a

qualiﬁed opportunity fund, and exclude

capital gains from the sale or exchange of an

investment in such funds. California does not

conform to the deferral and exclusion of

capital gains reinvested or invested in federal

opportunity zone funds and has no similar

provisions.

Like-Kind Exchanges – The TCJA amended

IRC Section 1031 limiting its application to

real property that is not primarily held for sale.

Additionally, under the TCJA, exchanges of

personal property and intangible property do

not qualify for non-recognition of gain or loss

as like-kind exchanges. California does not

conform to the amendments under the TCJA.

For California purposes, IRC Section 1031 as

of January 1, 2015, applies.

New Employment Credit – The sunset date

for the New Employment Credit is extended

until taxable years beginning before January 1,

2026. For more information, go to ftb.ca.gov

and search for nec or get form FTB 3554, New

Employment Credit.

California Competes Credit – The sunset

date for the California Competes Tax Credit is

extended until taxable years beginning before

January 1, 2030. For more information, go

to the GO-Biz website at business.ca.gov or

ftb.ca.gov and search for ca competes or

get form FTB 3531, California Competes Tax

Credit.

Conformity – For updates regarding the

federal acts, go to ftb.ca.gov and search for

conformity.

Important Information

y The Franchise Tax Board (FTB) offers

e-ﬁling for the following entities:

y Corporations ﬁling Form 100S and

certain accompanying forms and

schedules.

y Corporations ﬁling Form 100X,

Amended Corporation Franchise or

Income Tax Return.

Check with the software providers to see if

they support business e-ﬁling.

y For taxable years beginning on or after

January 1, 2014, California law requires

any business entity that ﬁles an original or

amended tax return that is prepared using

tax preparation software to electronically

ﬁle (e-ﬁle) their tax return with the FTB.

For more information, go to ftb.ca.gov and

search for business eﬁle.

y For taxable years beginning on or after

January 1, 2016, the extension period

for ﬁling an S corporation tax return

has changed from seven months to six

months. Get FTB Notice 2016-04 for more

information.

y Corporations can make payments

online using Web Pay for Businesses.

Corporations can make an immediate

payment or schedule payments up to a year

in advance. Go to ftb.ca.gov/pay.

y Corporations can use a Discover,

MasterCard, Visa, or American Express

Card to pay business taxes. Go to

ofﬁcialpayments.com. Ofﬁcial Payments

Corp. charges a convenience fee for using

this service.

y Corporations can make an estimated tax or

extension payment using tax preparation

software. Check with the software provider

to determine if they support Electronic

Funds Withdrawal (EFW) for estimated tax

or extension payments.

y If the S corporation made purchases from

out-of-state or Internet sellers and owes

California use tax, the S corporation may

report and pay the tax on the S Corporation

Franchise or Income Tax Return.

For taxable years beginning on or after

January 1, 2015, if an S corporation

includes use tax on its income tax return,

payments and credits will be applied to use

tax ﬁrst, then towards franchise or income

tax, interest, and penalties. For more

information, see General Information EE,

California Use Tax, and Speciﬁc Line

Instructions.

y If the S corporation was involved in a

reportable transaction, including a listed

transaction, the S corporation may have

a disclosure requirement. Attach federal

Form 8886, Reportable Transaction

Disclosure Statement, to the back of the

California return along with any other

supporting schedules. If this is the ﬁrst

time the reportable transaction is disclosed

on the return, send a duplicate copy of

federal Form 8886 to the address below:

TAX SHELTER FILING

ATSU 398 MS: F385

FRANCHISE TAX BOARD

PO BOX 1673

SACRAMENTO CA 95812-9900

Page 4 Form 100S Booklet 2018

The FTB may impose penalties if

the S corporation fails to ﬁle federal

Form 8886, Form 8918, Material Advisor

Disclosure Statement, or any other required

information. A material advisor is required

to provide a reportable transaction number

to all taxpayers and material advisors

for whom the material advisor acts as a

material advisor. For more information, go

to ftb.ca.gov and search for disclosure

obligation.

y California taxpayers whose taxable year

begins on or after June 30, 2016, and who

are required to ﬁle the federal forms listed

below with the Internal Revenue Service

(IRS), must also attach copies of these

forms to the California tax return:

y Federal Form 8975, Country-by-Country

Report

y Federal Schedule A (8975), Tax

Jurisdiction and Constituent Entity

Information

For additional information, refer to the

Instructions for Form 8975, Revenue

Procedure 2017-23, 2017-7 Internal

Revenue Bulletin 915, and see General

Information M, Penalties, and General

Information V, Information Returns.

y An S corporation that expects a net

operating loss (NOL) in the 2019 taxable

year, can ﬁle form FTB 3593, Extension of

Time for Payment of Taxes by a Corporation

Expecting a Net Operating Loss Carryback,

to extend the time for payment of taxes

for the immediately preceding 2018

taxable year. This includes extending the

time for payment of a tax deﬁciency. The

payment of tax that can be postponed

cannot exceed the expected overpayment

from the carryback of the NOL. For more

information, get form FTB 3593.

y For taxable years beginning on

or after January 1, 2014, the IRS

allows corporations with at least $10

million but less than $50 million in

total assets at tax year end to ﬁle

Schedule M-1 (Form 1120S), Reconciliation

of Income (Loss) per Books With

Income (Loss) per Return, in place of

Schedule M-3 (Form 1120S), Net Income

(Loss) Reconciliation for S Corporations

With Total Assets of $10 Million or More,

Parts II and III. However, Schedule M-3

(Form 1120S), Part I, is required for these

corporations. For California purposes,

the S corporation must complete the

California Schedule M-1. For more

information, see the instructions for

Schedule M-1, Reconciliation of Income

(Loss) per Books With Income (Loss) per

Return, in this booklet.

y For taxable years beginning on or after

January 1, 2014, California requires

taxpayers who exchange property

located in California for like-kind property

located outside of California, under

IRC Section 1031, to ﬁle an annual

information return with the FTB. For more

information, get form FTB 3840, California

Like-Kind Exchanges, or go to ftb.ca.gov

and search for like kind.

y For an NOL incurred in a taxable year

beginning on or after January 1, 2015,

the carryback amount is 100% of the

NOL. For more information, see General

Information X, Net Operating Loss or

form FTB 3805Q, Net Operating Loss (NOL)

Computation and NOL and Disaster Loss

Limitations – Corporations, included in this

booklet.

y R&TC Section 25128.7 requires all

business income of an apportioning trade

or business, other than an apportioning

trade or business under R&TC

Section 25128(b), to apportion its business

income to California using the single-sales

factor formula. For more information, get

Schedule R, Apportionment and Allocation

of Income, or go to ftb.ca.gov and search

for single sales factor.

y R&TC Section 25136 requires all taxpayers

to assign sales, other than sales of

tangible personal property, using market

assignment. For more information, get

Schedule R or go to ftb.ca.gov and search

for market assignment.

y Beginning on or after January 1, 2012,

a type of corporation called a “beneﬁt

corporation” can be formed with the

purpose of creating general public

beneﬁt, provided certain requirements

are met. An existing corporation can

become a “beneﬁt corporation”, if certain

procedures are followed. In addition,

a “beneﬁt corporation” can be created

through a merger or reorganization, if

certain requirements are met. For more

information, see the Corporations Code,

commencing with Section 14600.

y Beginning on or after January 1, 2012,

a type of corporation called a “ﬂexible

purpose corporation” could be formed,

provided certain requirements were met. An

existing corporation could merge or convert

into a “ﬂexible purpose corporation”, upon

completion of certain requirements. A

“ﬂexible purpose corporation” must have

a special purpose, which may include but

is not limited to, charitable and public

purpose activities that could be carried out

by a nonproﬁt public beneﬁt corporation.

For more information, see the Corporations

Code, commencing with Section 2500.

y Effective January 1, 2015, all references

to “ﬂexible purpose corporations” in

the Corporations Code are changed to

“social purpose corporations,” although

the requirements are substantially the

same as prior law. Any ﬂexible purpose

corporation formed before January 1,

2015, may elect to amend its articles of

incorporation to change its status to a

“social purpose corporation.” If a ﬂexible

purpose corporation formed prior to

January 1, 2015, does not amend its

articles of incorporation to change its

status, any reference to “social purpose

corporation” in the Corporation Code is

deemed a reference to a “ﬂexible purpose

corporation.” For more information, see

the Corporations Code commencing with

Section 2500.

y R&TC Section 24343.2:

y Disallows the deduction for payments

made to a club that restricts

membership or the use of its services

or facilities on the basis of ancestry or

any characteristic listed or deﬁned in

Section 11135 of the Government Code.

y Excludes genetic information from

the characteristics listed or deﬁned in

Section 11135 of the Government Code.

y “Gross receipts” means the gross amounts

realized (the sum of money and the fair

market value of other property or services

received) on:

y The sale or exchange of property,

y The performance of services, or

y The use of property or capital (including

rents, royalties, interest, and dividends)

in a transaction that produces business

income, in which the income, gain,

or loss is recognized (or would be

recognized if the transaction were in the

United States) under the IRC.

Amounts realized on the sale or exchange

of property shall not be reduced by the

cost of goods sold or the basis of property

sold. For a complete deﬁnition of “gross

receipts,” refer to R&TC Section 25120(f).

y R&TC Section 25135(b) adopts the

Finnigan rule in assigning sales from

tangible personal property.

For more information regarding

“gross receipts” or “Finnigan rule,” get

Schedule R or go to ftb.ca.gov and search

for corporation law changes.

y For taxable years beginning on or

after January 1, 2007, interest and

dividends from intangible assets held in

connection with a treasury function of

the taxpayer’s unitary business, as well

as the gross receipts and any overall

net gain from the maturity, redemption,

sale, exchange, or other disposition of

these assets, are excluded from the sales

factor. This exclusion encompasses the

use of futures contracts and options

contracts to hedge foreign currency

ﬂuctuations. See Cal. Code Regs., tit. 18

section 25137(c)(1)(D) for more

information. For taxable years beginning

on or after January 1, 2011, see R&TC

Section 25120(f).

y Group nonresident returns may include:

y Less than two nonresident individuals.

y Nonresident individuals with more than

$1 million of California taxable income.

An additional 1% tax will be assessed on

nonresident individuals who have California

taxable income over $1 million. Get FTB

Pub. 1067, Guidelines for Filing a Group

Form 540NR, for more information.

Form 100S Booklet 2018 Page 5

y In general, the water’s-edge rules provide

for an election out of worldwide combined

reporting. By electing water’s-edge,

a California taxpayer elects into a

complex blend of state and federal tax

concepts. See General Information T,

Water’s Edge Reporting; refer to R&TC

Sections 25110 and 25113; and get

Form 100W, Corporation Tax Booklet –

Water’s-Edge Filers, for more information.

y A C corporation is taxed on its earnings

at regular corporate tax rates and the

shareholders are then taxed on these

earnings when they are distributed as

dividends. For more information, get

Form 100, Corporation Tax Booklet.

y S corporations are required to report

withholding payments from the

S corporation that are allocated to all

shareholders, as well as payments withheld

on nonresident shareholders. Report these

withholding amounts on Schedule K-1

(100S), Shareholder’s Share of Income,

Deductions, Credits, etc., and Schedule K

(100S), S Corporation Shareholder’s Shares

of Income, Deductions, Credits, etc.

y Use form FTB 3725, Assets Transferred

from Corporation to Insurance Company,

to report assets transferred from a parent

corporation to an insurance company. Get

form FTB 3725 for more information.

y California follows the revised federal

instructions (with some exceptions) for

reporting the sale, exchange or disposition

of an asset for which an IRC Section 179

expense deduction was claimed in prior

years by a partnership, limited liability

company, or S corporation.

S corporations should follow the

instructions in federal Form 4797, Sales

of Business Property, with the exception

that the amount of gain on property

subject to the IRC Section 179 recapture

must be included in the S corporation’s

taxable income for California purposes.

See General Information FF, Property

Subject To IRC Section 179 Recapture, and

Speciﬁc Line Instructions for Form 100S,

line 4, for more information.

Shareholders should follow federal

reporting requirements as detailed in

federal Form 1120S, U.S. Income Tax

Return for an S Corporation, and federal

Form 4797 instructions.

y A shareholder’s pro-rata share of

S corporation income is treated like a

partner’s distributive share of partnership

income. The items of income are

characterized as if realized directly

from the source from which realized by

the corporation, then they are sourced

according to the rule for each type of

income. Valentino v. Franchise Tax Board

(2001) 87 Cal. App. 4th 1284. Income from

California sources is subject to California

tax.

y In general, R&TC Section 17024.5 and

Section 23051.5 state that federal elections

made before a taxpayer becomes a

California taxpayer are binding for California

tax purposes.

y With certain limited exceptions, payers that

are required to withhold and remit backup

withholding to the IRS are also required to

withhold and remit to the FTB on income

sourced to California. If the S corporation

(payee) has backup withholding, the

S corporation (payee) must contact the FTB

to provide a valid taxpayer identiﬁcation

number, before ﬁling the tax return. Failure

to provide a valid taxpayer identiﬁcation

number may result in a denial of the backup

withholding credit. For more information,

go to ftb.ca.gov and search for backup

withholding.

y R&TC Section 18662 requires buyers to

withhold income taxes when purchasing

California real property from corporate

sellers with no permanent place of business

in California immediately after the transfer.

Get FTB Pub. 1016, Real Estate Withholding

Guidelines, for more information.

Sellers of California real estate must

attach a copy of Form 593, Real Estate

Withholding Tax Statement, to their tax

return as proof of withholding.

If the corporation needs to verify

withholding payments, the corporation may

call Withholding Services and Compliance

at 916.845.4900 or 888.792.4900.

y For transactions that require withholding,

a seller of California real estate may elect

an alternative to withholding 3 1/3% of

the total sales price. The seller may elect

an alternative withholding amount based

on the maximum tax rate for individuals,

corporations, or banks and ﬁnancial

corporations, as applied to the gain on

the sale. The seller is required to certify

under penalty of perjury the alternative

withholding amount to the FTB. For more

information, get FTB Pub. 1016.

California law conforms to federal law for the

following:

y IRC Section 1245(b)(8) relating to

amortizable Section 197 intangibles

property disposed on or after January 1,

2010.

y The qualiﬁcation requirements of

S corporations and their shareholders.

y Disallowing the deduction for club

membership fees and employee

remuneration in excess of $1 million.

y Disallowing the deduction for lobbying

expenses.

y Tax-exempt organizations may be

shareholders in an S corporation.

y Family farm corporations with income

over $25 million may defer tax on income

that was a result of changes in accounting

methods required of these corporations.

For calendar year taxpayers, the suspense

account for these deferrals must be

recaptured starting with taxable years

beginning on or after January 1, 1998. For

ﬁscal year taxpayers, the suspense account

must be recaptured starting in taxable years

beginning after June 8, 1997, if the ﬁscal

year taxpayer’s taxable year ends on or after

December 31, 1997.

y For purposes of inventory accounting,

an adjustment for shrinkage, based on

an estimate, may be made. Taxpayers

can voluntarily change their method of

accounting if the method currently being

used does not utilize estimates of inventory

shrinkage and the taxpayer now would like

to use that method.

y Required recognition of gain on certain

appreciated ﬁnancial positions in personal

property.

y Securities traders and commodities

traders are allowed to elect to use the

mark-to-market accounting similar to

what is currently required for securities

dealers. Commodities would include only

commodities of a kind that are dealt within

the organized commodities exchange. An

election to use the mark-to-market method

for federal purposes is considered an

election for state purposes and a separate

election is not allowed.

y Limitation on exception for investment

companies under IRC Section 351.

y If an Employee Stock Ownership Plan

(ESOP) is an S corporation shareholder,

items of income or loss of the S

corporation that pass through to the ESOP

are not treated as unrelated business

taxable income (UBTI). Previously, such

items were treated as UBTI.

y S corporations that establish and maintain

ESOPs are not required to give participants

the right to demand distributions in

the form of employer securities, if the

participants have the right to receive such

distributions in cash.

y An IRC Section 338 election, relating

to stock purchases treated as asset

acquisitions, is treated as an election for

state purposes. A separate election for state

purposes is not allowed.

y Expansion of deduction for certain interest

and premiums paid for company-owned life

insurance.

y Modiﬁcation of holding period applicable to

dividends received deduction.

y Repeal of special installment sales rule

for manufacturers of tangible personal

property.

y Payment of estimated tax for closely held

real estate investment trusts (REIT) and

income and services provided by REIT

subsidiaries.

y Reducing the compensation deduction

for certain employers from $1 million

to $500,000; and making certain parachute

payments nondeductible.

California law does not conform to federal

law for the following:

The Federal TCJA of December 22, 2017, made

changes to the IRC. In general, the California

R&TC does not conform to the changes.

California taxpayers continue to follow the IRC

as of the speciﬁed date of January 1, 2015,

Page 6 Form 100S Booklet 2018

with modiﬁcations. The following is a non-

exhaustive list of the TCJA changes:

y The change in method of accounting

treatment of S corporation conversions

to C corporations.

y The expansion of the range of

companies that may use the cash

method of accounting.

y The amendments to IRC Section 1031,

which limits like-kind exchanges to

real property that is not primarily

held for sale, and excludes

exchanges of personal property and

intangible property as qualifying for

nonrecognition of gain or loss.

y The expanded deﬁnition of

IRC Section 179 property for certain

depreciable tangible personal property

related to furnishing lodging and for

qualiﬁed real property for improvements

to nonresidential real property.

y The change to IRC Section 163(j) which

limits business interest deduction

to 30%.

y The modiﬁcations to the NOL provisions.

y The deferral and exclusion of capital

gains reinvested or invested in qualiﬁed

opportunity zone funds.

y The exclusion of a patent, invention,

model or design, and secret formula or

process from the deﬁnition of capital

asset.

y The federal modiﬁcations to depreciation

limitations on luxury automobiles

(IRC Section 280F).

y IRC Section 951A, relating to global

intangible low-taxed income.

y IRC Section 965, relating to treatment of

deferred foreign income.

y IRC Section 382(n) relating to special rule

for certain ownership changes.

y The enhanced IRC Section 179 expensing

election.

y The ﬁrst-year depreciation deduction

allowed for new luxury autos or certain

passenger automobiles acquired and placed

in service in 2010 through 2018.

y The qualiﬁed small business stock

deferral and gain exclusions under IRC

Section 1045 and IRC Section 1202.

y The IRS Notice 2008-83 relating to

the treatment of deductions under IRC

Section 382(h) following an ownership

change.

y IRC Section 168(k) relating to the bonus

depreciation deduction for certain assets.

y The decreased holding period for built-in

gains.

y The decreased estimated tax payments for

certain small businesses.

y The treatment of the loss from the sale

or exchange of certain preferred stock (of

Fannie Mae or Freddie Mac).

y The percentage depletion deduction, which

may not exceed 65% of the taxpayer’s

taxable income, is restricted to 100% of the

net income derived from the oil or gas well

property.

y Exclusion from gross income of certain

federal subsidies for prescription drug

plans under IRC Section 139A.

y Certain environmental remediation

expenditures that would otherwise be

chargeable to capital accounts may be

expensed and taken as a deduction in the

year the expense was paid or incurred.

y Deduction for corporate donation

of scientiﬁc property and computer

technology.

y Decreased capital gains tax rate.

y Certain special tax rules relating to ESOPs

will not apply with respect to S corporation

stock held by the ESOP. These include

rules relating to certain contributions to

ESOPs, the deduction for dividends paid

on employer securities, and the rollover

of gain on the sale of stock to an ESOP.

See IRC Sections 404(a)(9) and 404(k) for

more information.

y The treatment of Subpart F income.

The above lists are not intended to be

all-inclusive of the federal and state

conformities and differences. For more

information, refer to the R&TC.

Records Maintenance Requirements

Any taxpayer ﬁling on a water’s-edge or

worldwide basis is required to keep and

maintain records and make the following

available upon request:

y Any records needed to determine the

correct treatment of items reported on the

worldwide or water’s-edge combined report

for purposes of determining the income

attributable to California.

y Any records needed to determine the

treatment of items as nonbusiness or

business income.

y Any records needed to determine the

apportionment factor.

y Documents and information needed to

determine the attribution of income to

the U.S. or foreign jurisdictions under

Section 482, Sections under Subchapter N

of Chapter 1, or other similar provisions of

the IRC.

See R&TC Section 19141.6 and the related

regulations for more information. An

S corporation may be required to authorize

an agent, through a Power of Attorney (POA),

to act on its behalf in response to requests

for information or records pursuant to R&TC

Section 19504. For more information, go to

ftb.ca.gov/poa.

The penalty for not maintaining the above

required records is $10,000 for each taxable

year for which the failure applies. In addition,

if the failure continues for more than 90 days

after the FTB notiﬁes the S corporation of the

failure, a penalty of $10,000 may be assessed

for each additional 30 day period of continued

failure. See General Information M, Penalties,

for more information.

General Information

Form 100S is used if a corporation has

elected to be a small business corporation

(S corporation).

All federal S corporations subject to California

laws must ﬁle Form 100S and pay the greater

of the minimum franchise tax or the 1.5%

income or franchise tax. The tax rate for

ﬁnancial S corporations is 3.5%.

The taxable income of the S corporation is

calculated two different ways for two different

purposes. First, it is calculated in the same

manner as for C corporations, with certain

modiﬁcations, for purposes of computing

the 1.5% income or franchise tax. Second, it

is calculated using federal rules for the pass

through of income and deductions, etc. for

purposes of pass through to the shareholders.

A corporation that makes a valid election to

be treated as an S corporation is not allowed

to be included in a combined report of a

unitary group, except as provided by R&TC

Section 23801(d)(1).

When Completing the Form 100S

y Use black or blue ink on the tax return sent

to the FTB.

y Print name and address (in CAPITAL

LETTERS).

y When a domestic S corporation ﬁles

the ﬁrst California tax return, the ﬁscal

year beginning date must be the date the

S corporation is incorporated.

y Round cents to the nearest whole dollar.

For example, round $50.50 up to $51 or

round $25.49 down to $25.

y Enter all types of payments (overpayment

from prior year, estimated tax, nonresident

tax, etc.) made for the 2018 taxable year on

the applicable line.

y When making a payment with a check or

money order, enclose but do not staple the

payment to the front of the tax return.

y Assemble the corporation return in the

following order: Form 100S, Schedule R,

(if required), supporting schedules, a copy

of federal return (if required), and form

FTB 5806, Underpayment of Estimated Tax

by Corporations, (if required). Do not use

staples or other permanent bindings to

assemble the tax return.

A Franchise or Income Tax

Corporation Franchise Tax

Entities subject to the corporation minimum

franchise tax include all S corporations that

meet any of the following:

y Incorporated or organized in California.

y Qualiﬁed or registered to do business in

California.

y Doing business in California, whether or

not incorporated, organized, qualiﬁed, or

registered under California law.

The minimum franchise tax must be paid by

corporations incorporated in California or

qualiﬁed or registered under California law

whether the S corporation is active, inactive,

Form 100S Booklet 2018 Page 7

not doing business, or operates at a loss. See

General Information B, Tax Rate and Minimum

Franchise Tax, for more information.

The measured franchise tax is imposed on

S corporations doing business in California

and is measured by the income of the current

taxable year for the privilege of doing business

in that taxable year.

A taxpayer is “doing business” if it actively

engages in any transaction for the purpose

of ﬁnancial or pecuniary gain or proﬁt in

California or if any of the following conditions

is satisﬁed:

y The taxpayer is organized or commercially

domiciled in California.

y The sales, as deﬁned in R&TC

Section 25120(e) or (f), of the taxpayer in

California, including sales by the taxpayer’s

agents and independent contractors,

exceed the lesser of $583,867 or 25% of

the taxpayer’s total sales.

y The real property and tangible personal

property of the taxpayer in California

exceed the lesser of $58,387 or 25% of the

taxpayer’s total real property and tangible

personal property.

y The amount paid in California by the

taxpayer for compensation, as deﬁned

in R&TC Section 25120(c), exceeds the

lesser of $58,387 or 25% of the total

compensation paid by the taxpayer.

In determining the amount of the taxpayer’s

sales, property, and payroll for doing business

purposes, include the taxpayer’s pro rata

share of amounts from partnerships and

S corporations. All S corporations complete

Schedule K-1 (100S), Table 2, Item C to

report the shareholder’s distributive share

of property, payroll and sales total within

California. For more information, see R&TC

Section 23101 or go to ftb.ca.gov and search

for doing business.

An S corporation incorporated in California, but

not doing business in this state, is not subject

to the measured franchise tax. However,

careful attention should be given to the term

“doing business.” It is not necessary that the

S corporation conducts business or engages in

transactions within the state on a regular basis.

Even an isolated transaction during the taxable

year may be enough to cause the S corporation

to be “doing business.”

Also, when an S corporation is either a general

partner of a partnership or a member of a

Limited Liability Company (LLC) that is “doing

business” in California, the S corporation is

also considered to be “doing business” in

California.

Corporation Income Tax

The corporation income tax is imposed on

all S corporations that derive income from

sources within California but are not doing

business in California.

For purposes of the corporation income

tax, the term “corporation” is not limited to

incorporated entities, but also includes the

following:

y Associations.

y Massachusetts or business trusts.

y Real estate investment trusts.

y Other business entities classiﬁed as

associations under Cal. Code Regs., tit. 18

sections 23038(b)-1 through 23038(b)-3.

B Tax Rate and Minimum

Franchise Tax

The following tax rates apply to S corporations

subject to either the corporation franchise tax

or the corporation income tax.

y S corporations ..................1.5%

y Financial S corporations ...........3.5%

y Built-in gains and excess net passive

income .......................8.84%

See R&TC Section 23186, General

Information J, Built-In Gains, and General

Information S, Excess Net Passive Investment

Income, for more information.

Minimum Franchise Tax

All S corporations subject to the corporation

franchise tax and any S corporation doing

business in California must ﬁle Form 100S

and pay at least the minimum franchise tax

as required by law. The minimum franchise

tax is $800 and must be paid whether the

S corporation is active, inactive, operates at a

loss, or ﬁles a return for a short period of less

than 12 months.

A corporation that incorporated or qualiﬁed

through the California Secretary of State

(SOS) to do business in California is not

subject to the minimum franchise tax for its

ﬁrst taxable year and will compute its tax

liability by multiplying its state net income

by the appropriate tax rate. The corporation

will become subject to minimum franchise

tax beginning in its second taxable year.

This does not apply to qualiﬁed Subchapter

S subsidiaries or corporations that are not

qualiﬁed by the California SOS, or reorganize

solely to avoid payment of the minimum

franchise tax.

There is no minimum franchise tax for the

following entities:

y Corporations that are not incorporated

in California, not qualiﬁed under the

laws of California, and are not doing

business in California even though

they derive income from California

sources. However, if corporations meet

the sale, property, or payroll threshold

for “doing business” under R&TC

Section 23101(b), corporations may be

subject to the minimum franchise tax.

For more information regarding “doing

business,” see General Information A,

Franchise or Income Tax; refer to R&TC

Section 23101(b); get FTB Pub. 1050,

Application and Interpretation of Public

Law 86-272; or FTB Pub. 1060, Guide

for Corporations Starting Business in

California.

y Corporations with no income other than

qualiﬁed health care service plan income

that is excluded from gross income under

R&TC Section 24330 for the taxable year.

y Credit unions.

y Exempt homeowners’ associations.

y Exempt political organizations.

y Qualiﬁed non-proﬁt farm cooperative

associations.

y Exempt organizations.

y Corporations that are not incorporated

under the laws of California; whose sole

activities in California are engaging in

convention and trade show activities for

seven or fewer days during the taxable

year; and do not derive more than

$10,000 of gross income reportable to

California during the taxable year. These

S corporations are not “doing business” in

California. For more information, get FTB

Pub. 1060.

y Newly formed or qualiﬁed corporations

ﬁling an initial return.

Alternative Minimum Tax

S corporations are not subject to the alternative

minimum tax.

C Elections and Terminations

Elections

Corporations that elect federal S corporation

status and have a California ﬁling requirement

are deemed to have made a California

S election effective on the same date as the

federal S election.

Terminations

Terminating the taxpayer’s federal S election

simultaneously terminates its California

S election.

If the taxpayer terminates its S corporation

status, short-period returns are required for the

S corporation short year and the C corporation

short year, if applicable.

D Accounting Period and

Method

The taxable year of the S corporation must

not be different from the taxable year used for

federal purposes, unless initiated or approved

by the FTB (R&TC Section 24632).

A change in accounting method requires

consent from the FTB. However, an

S corporation that obtains federal approval

to change its accounting method, or that is

permitted or required by federal law to make a

change in its accounting method without prior

approval, and does so, is deemed to have the

FTB’s approval if: (1) the S corporation ﬁles a

timely Form 100S consistent with the change

for the ﬁrst taxable year the change is effective

for federal purposes; and (2) the change

is consistent with California law. A copy of

federal Form 3115, Application for Change in

Accounting Method, and a copy of the federal

consent to the change must be attached to

Form 100S for the ﬁrst taxable year the change

becomes effective. Get FTB Notice 2000-8

for more information. The FTB may modify

requested changes if the adjustments would

distort income for California purposes.

Page 8 Form 100S Booklet 2018

California follows the provisions of Revenue

Procedure 2016-29, which updates the

procedures for a change of accounting method

involving previously unclaimed, but allowable

depreciation or amortization deductions.

E When to File

File Form 100S by the 15th day of the 3rd

month after the close of the taxable year unless

the return is for a short-period as required

under R&TC Section 24634. Generally, the due

date of a short-period return is the same as the

due date of the federal short-period return. See

R&TC Section 18601(c) for the due date of the

short-period return.

When the due date falls on a weekend or

holiday, the deadline to ﬁle and pay without

penalty is extended to the next business day.

For information on ﬁnal returns, see General

Information O, Dissolution/Withdrawal, and

General Information P, Ceasing Business.

If an S corporation converts during its

taxable year to an LLC or limited partnership

(LP) under state law, then generally two

short-period California returns must be ﬁled

(one short-period return for the S corporation

and another short-period return for the LLC or

LP).

The corporate status and taxable year of the

LLC or LP will not terminate and only a single

return Form 100S is required if:

y the LLC or LP ﬁles a federal election to be

classiﬁed as an association taxable as an

S corporation effective as of the conversion

date,

y the conversion otherwise qualiﬁes

as a reorganization under IRC

Section 368(a)(1)(F), and

y the LLC or LP satisﬁes the statutory

requirements to be an S corporation.

F Extension of Time to File

If an S corporation cannot ﬁle its California tax

return by the 15th day of the 3rd month after

the close of the taxable year, it may ﬁle on or

before the 15th day of the 9th month without

ﬁling a written request for an extension. Get

FTB Notice 2016-04 for more information.

If the S corporation is suspended on or after

the original due date, the automatic extension

will not apply.

An automatic extension does not extend the

time for payment. The full amount of tax must

be paid by the original due date of Form 100S.

If there is an unpaid tax liability on the original

due date, complete form FTB 3539, Payment

for Automatic Extension for Corporations and

Exempt Organizations, included in this booklet,

and send it with the payment by the original

due date of the Form 100S.

If the S corporation expects an NOL in the

2019 taxable year, it can ﬁle form FTB 3593

to extend the time for payment of tax for the

immediately preceding 2018 taxable year. Get

form FTB 3593 for more information.

When the due date falls on a weekend or

holiday, the deadline to ﬁle and pay without

penalty is extended to the next business day.

If the S corporation must pay its tax liability

electronically, all payments must be remitted

by Electronic Fund Transfer (EFT), EFW, Web

Pay, or credit card to avoid penalties. Do not

send form FTB 3539.

G Electronic Payments

Electronic Funds Transfer

Corporations or exempt organizations remitting

an estimated tax payment or extension

payment in excess of $20,000 or having a total

tax liability in excess of $80,000 must remit

all payments through EFT. Once a corporation

meets the threshold, all subsequent payments

regardless of amount, tax type, or taxable

year must be remitted electronically to avoid

the 10% non-compliance penalty. The ﬁrst

payment that would trigger the mandatory

EFT requirement does not have to be made

electronically. Corporations required to remit

payments electronically may use EFW, Web

Pay, or credit card and be considered in

compliance with that requirement. The FTB

notiﬁes corporations or exempt organizations

that are subject to this requirement. Those

that do not meet these requirements may

participate on a voluntary basis. If the

corporation pays electronically, complete the

form FTB 3539 worksheet for its records.

Do not mail the payment voucher. For more

information, go to ftb.ca.gov and search for eft

or call 916.845.4025.

Electronic Funds Withdrawal

S corporations can make an estimated tax

or extension payment using tax preparation

software. Check with the software provider to

determine if they support EFW for estimated

tax or extension payments.

Web Pay

Corporations can make payments online using

Web Pay for Businesses. Corporations can make

an immediate payment or schedule payments up

to a year in advance. Go to ftb.ca.gov/pay.

Credit Card

Corporations can use Discover, MasterCard,

Visa or American Express Card to pay business

taxes. Go to ofﬁcialpayments.com. Ofﬁcial

Payments Corp. charges a convenience fee for

using this service. Do not ﬁle form FTB 3539.

H Where to File

Payments

If a tax is due and the corporation is not

required to make the payment electronically

(by EFT, EFW, Web Pay, or credit card):

y Mail Form 100S with payment to:

FRANCHISE TAX BOARD

PO BOX 942857

SACRAMENTO CA 94257-0501

y e-Filed returns: Mail form FTB 3586,

Payment Voucher for Corporations and

Exempt Organizations e-ﬁled Returns, with

payment to:

FRANCHISE TAX BOARD

PO BOX 942857

SACRAMENTO CA 94257-0531

Using black or blue ink, make the check or

money order payable to the “Franchise Tax

Board.” Write the California corporation

number and “2018 Form 100S” on the check

or money order.

Make all checks or money orders payable in

U.S. dollars and drawn against a U.S. ﬁnancial

institution.

Do not attach a copy of the return with the

balance due payment if the S corporation

already ﬁled/e-ﬁled a return for the same

taxable year.

Refunds

y Mail Form 100S requesting a refund to:

FRANCHISE TAX BOARD

PO BOX 942857

SACRAMENTO CA 94257-0500

Return Without Payment or Paid

Electronically

y Mail Form 100S without a payment or paid

by EFT, EFW, Web Pay, or credit card to:

FRANCHISE TAX BOARD

PO BOX 942857

SACRAMENTO CA 94257-0500

Private Delivery Services

California law conforms to federal law

regarding the use of certain designated private

delivery services to meet the “timely mailing

as timely ﬁling/paying” rule for tax returns

and payments. See the instructions for federal

Form 1120S for a list of designated delivery

services. If a private delivery service is used,

address the return to:

FRANCHISE TAX BOARD

SACRAMENTO CA 95827

Private delivery services cannot deliver items

to PO boxes. If using one of these services to

mail any item to the FTB, do not use an FTB

PO box.

I Net Income Computation

The computation of net income from trade

or business activities generally follows the

determination of taxable income as provided

in the IRC. However, there are differences that

must be taken into account when completing

Form 100S. There are two ways to complete

Form 100S, the federal reconciliation method

or the California computation method.

1. Federal Reconciliation Method

a. Transfer the information from the federal

Form 1120S, Page 1, to Form 100S,

Side 4, Schedule F, Computation of

Trade or Business Income, and attach

a copy of the federal return with all

supporting schedules.

b. Enter the amount of federal ordinary

income (loss) from trade or business

Form 100S Booklet 2018 Page 9

activities before any NOL and special

deductions on Form 100S, Side 1,

line 1.

c. Enter the state adjustments (including

any adjustments necessary to report

items not included in ordinary trade or

business income or loss) on Form 100S,

Side 1 and Side 2, line 2 through

line 13, to arrive at net income (loss)

after state adjustments, Form 100S,

Side 2, line 14.

2. Schedule F – California Computation

Method

If the S corporation has no federal ﬁling

requirement, or if the S corporation

maintains separate records for state

purposes, complete Form 100S, Side 4,

Schedule F, to determine state ordinary

income. If ordinary income is computed

under California laws, generally no state

adjustments are necessary. Transfer

the amount from Schedule F, line 22,

to Form 100S, Side 1, line 1. Complete

Form 100S, Side 1 and Side 2, line 2

through line 13, only if applicable.

See Speciﬁc Line Instructions for more

information.

Regardless of the net income computation

method used, the S corporation must attach

any form, schedule, or supporting document

referred to on the return, schedules, or forms

ﬁled with the FTB.

Substitution of Federal Schedules

S corporations may not substitute federal

schedules for California schedules.

J Built-In Gains

When a C corporation elects to be an

S corporation, certain items of gain or loss

recognized in S corporation years are subject

to the C corporation 8.84% tax rate instead

of the S corporation 1.5% tax rate (ﬁnancial

S corporations add 2%).

Built-In Gains Under Current IRC

Section 1374

For those S corporations that made the initial

federal S election after December 31, 1986,

certain income items reported by the

S corporation are taxed at 8.84% (or the

ﬁnancial C corporation tax rate). This

provision applies for a period of ten years

following the C corporation’s election to

become an S corporation. The amount of

built-in gain that is taxed at 8.84% (or the

ﬁnancial C corporation tax rate) is the excess

of recognized built-in gains over recognized

built-in losses, limited by taxable income as

determined under IRC Section 1374(d)(2)(A).

The following items are treated as built-in gains

subject to this tax:

y Accounts receivable of cash basis taxpayers

from C corporation years.

y Long-term contract deferred income from

C corporation years.

y Deferred income from installment sales

made in C corporation years.

y Recapture of depreciation from

C corporation years.

y Income from unreplaced last-in, ﬁrst-out

(LIFO) inventory from C corporation years.

y Any other income item that is attributable to

C corporation years.

These are just a few of the examples. This list

is not intended to be all inclusive.

For Apportioning Corporations Only:

All recognized built-in gains and all recognized

built-in losses are apportioned and allocated

to California according to the current year

Schedule R.

K Estimated Tax

Every S corporation must pay estimated tax

using Form 100-ES, Corporation Estimated

Tax.

Corporations are required to pay the following

percentages of the estimated tax liability during

the taxable year:

y 30% for the ﬁrst required installment

y 40% for the second required installment

y No estimated tax payment is required for

the third installment

y 30% for the fourth required installment

For exceptions and prior year’s information, get

Form 100-ES.

Estimated tax is generally due and payable in

four installments as follows:

y The 1st payment is due on the 15th day

of the 4th month of the taxable year. This

payment may not be less than the minimum

franchise tax plus QSub annual tax, if

applicable.

y The 2nd, 3rd, and 4th installments are due

and payable on the 15th day of the 6th,

9th, and 12th months, respectively, of the

taxable year.

If no amount is due, do not mail Form 100-ES.

California law conforms to the federal

expanded annualization periods for the

computation of estimate payments. The

applicable percentage for estimate basis is

100%.

Get the instructions for Form 100-ES for more

information.

If the corporation must pay its tax liability

electronically, all estimate payments due must

be remitted by EFT, EFW, Web Pay, or credit

card to avoid the EFT penalty. See General

Information G, Electronic Payments, for more

information.

L New/Commencing

S Corporations

An S corporation is required to pay measured

tax instead of minimum tax for the ﬁrst

taxable year if the corporation incorporated

or registered through the California SOS. For

more information, see General Information B,

Tax Rate and Minimum Franchise Tax, or get

FTB Pub. 1060.

M Penalties

Failure to File a Timely Return

Any corporation that fails to ﬁle Form 100S on

or before the extended due date is assessed a

delinquent ﬁling penalty. The delinquent ﬁling

penalty is computed at 5% of the tax due,

after allowing for timely payments, for every

month that the return is late, up to a maximum

of 25%. If the S corporation does not ﬁle its

return by the extended due date, the automatic

extension will not apply and the late ﬁling

penalty will be assessed from the original due

date of the return. See R&TC Sections 19131

and 23772 for more information.

Unless failure is due to reasonable cause,

a penalty will be assessed against the

S corporation if it is required to ﬁle an

S corporation return and one of the following

occurs:

y The S corporation fails to ﬁle the tax return

by the due date, including extensions.

y The S corporation ﬁles a return that fails

to show all of the information required

pursuant to R&TC Section 18601.

The amount of the penalty for each month, or

part of a month (for a maximum of 12 months)

that the failure continues, is $18 multiplied

by the total number of shareholders in the

S corporation during any part of the taxable

year for which the return is due. See R&TC

Section 19172.5 for more information.

Failure to Pay Total Tax by the Due Date

Any S corporation that fails to pay the total tax

shown on Form 100S by the original due date

is assessed a penalty. The penalty is 5% of

the unpaid tax, plus 0.5% for each month, or

part of the month (not to exceed 40 months)

the tax remains unpaid. This penalty may not

exceed 25% of the unpaid tax. See R&TC

Section 19132 for more information.

The FTB may waive the late payment penalty

based on reasonable cause. Reasonable cause

is presumed when 90% of the tax shown

on the return, but not less than minimum

franchise tax if applicable, is paid by the

original due date of the return. However, the

imposition of interest is mandatory.

Corporations that meet the requirements for

ﬁling form FTB 3593 may extend the time for

payment of taxes and are not subject to late

payment penalties. For more information, get

form FTB 3593.

If an S corporation is subject to both the

penalty for failure to ﬁle a timely return and the

penalty for failure to pay the total tax by the

due date, a combination of the two penalties

may be assessed, but the total will not

exceed 25% of the unpaid tax.

Underpayment of Estimated Tax

Any S corporation that fails to pay, pays late,

or underpays an installment of estimated tax is

assessed a penalty. The penalty is a percentage

of the underpayment of estimated tax for the

period from the date the installment was due

until the date it is paid, or until the original due

Page 10 Form 100S Booklet 2018

date of the tax return, which ever is earlier. Get

form FTB 5806 to determine both the amount

of underpayment and the amount of penalty.

The underpayment of estimated tax penalty

shall not apply to the extent the underpayment

of an installment was created or increased by

any provision of law that is chaptered during

and operative for the taxable year of the

underpayment.

See R&TC Sections 19142, 19144, 19145,

19147 through 19151, and 19161 for more

information.

If the S corporation uses Exception B or

Exception C on form FTB 5806 to compute

or eliminate any of the required installments,

form FTB 5806 must be attached to the back

of Form 100S (after all schedules and federal

return) and the box on Form 100S, Side 2,

line 42b, should be checked.

Large Corporate Understatement Penalty

(LCUP)

Corporations are subject to the LCUP for the

understatement of tax if that understatement

exceeds the greater of:

y $1 million, or

y 20% of the tax shown on an original or

amended return ﬁled on or before the

original or extended due date of the return

for the taxable year.

The amount of the penalty is equal to 20%

of the understatement of tax. See R&TC

Section 19138 for exceptions to the LCUP. For

more information, go to ftb.ca.gov and search

for lcup.

EFT Penalty

If the S corporation must pay its tax liability

electronically, all payments must be remitted

by EFT, EFW, Web Pay or credit card to

avoid the penalty. The penalty is 10% of the

amount not paid electronically. See R&TC

Section 19011 and General Information G,

Electronic Payments, for more information.

Information Reporting Penalties

U.S. corporations that have an ownership

interest (directly or indirectly) in a foreign

corporation and were required to ﬁle

federal Form 5471, Information Return

of U.S. Persons With Respect to Certain

Foreign Corporations; or federal Form 8975,

Country-by-Country Report, and accompanying

Schedule A (8975), Tax Jurisdiction and

Constituent Entity Information with the federal

return, must attach a copy(ies) to the California

return. The penalty for failure to include a copy

of federal Form(s) 5471, or federal Form 8975

and accompanying Schedule A (8975), as

required, is $1,000 per required form for each

year the failure occurs. The penalty will not

be assessed if the copy of the information

required to be ﬁled with the IRS was not

attached to the taxpayer’s original return and

the taxpayer provides a copy of the form(s)

within 90 days of request from the FTB and

the taxpayer agrees to attach a copy(ies) of

federal Form 5471 or federal Form 8975 and

accompanying Schedule A (8975) to all original

returns ﬁled for subsequent years. See R&TC

Section 19141.2 for more information.

Note: Foreign insurance companies that ﬁle

as domestic companies are exempt from the

requirement of ﬁling federal Form 8975 and

accompanying Schedule A (8975).

Certain domestic corporations that are 25% or

more foreign-owned and foreign corporations

engaged in a U.S. trade or business must

attach a copy(ies) of the federal Form(s) 5472,

Information Return of a 25% Foreign-Owned

U.S. Corporation or a Foreign Corporation

Engaged in a U.S. Trade or Business, to

Form 100S. The penalty for failing to include

a copy of federal Form(s) 5472, as required,

is $10,000 per required form for each year the

failure occurs. See R&TC Section 19141.5 for

more information.

If the S corporation does not ﬁle its

Form 100S by the due date or extended due

date, whichever is later, copy(ies) of federal

Form(s) 5472 must still be ﬁled on time or the

penalty will be imposed. Attach a cover letter

to the copy(ies) indicating the taxpayer’s name,

California corporation number, and taxable

year. Mail to the same address used for returns

without payments. See General Information H,

Where to File, for more information. When

the S corporation ﬁles Form 100S, also attach

copy(ies) of the federal Form(s) 5472.

Record Maintenance Penalty

The penalty for failure to maintain certain

records is $10,000 for each taxable year for

which the failure applies. In addition, if the

failure continues for more than 90 days after

the FTB notiﬁes the S corporation of the

failure, in general, a penalty of $10,000 may

be assessed for each additional 30-day period

of continued failure. There is no maximum

amount of penalty that may be assessed.

See Records Maintenance Requirements on

page 6 for a discussion of the records required

to be maintained. See R&TC Section 19141.6

and the related regulations for more information.

Accuracy and Fraud Related Penalties

California conforms to IRC Sections 6662

through 6665 that authorize the imposition of

an accuracy-related penalty equal to 20% of

the related underpayment and the imposition

of a fraud penalty equal to 75% of the related

underpayment. See R&TC Section 19164 for

more information.

California Secretary of State (SOS) Penalty

The California Corporations Code requires

the FTB to assess a penalty for failure to ﬁle

an annual Statement of Information with the

California SOS. For more information, see

R&TC Section 19141, or contact:

SECRETARY OF STATE

STATEMENT OF INFORMATION UNIT

ATTENTION: PENALTIES

PO BOX 944230

SACRAMENTO CA 94244-2300

Telephone: 916.657.5448

Other Penalties

Other penalties may be imposed for a

payment returned for insufﬁcient funds,

foreign corporations operating while forfeited

or without qualifying to do business in

California, and domestic corporations

operating while suspended in California. See

R&TC Sections 19134 and 19135 for more

information.

N Interest

Interest is due and payable on any tax due if

not paid by the original due date of Form 100S.

Interest is also due on some penalties. The

automatic extension of time to ﬁle Form 100S

does not stop interest from accruing. California

follows federal rules for the calculation

of interest. Get FTB Pub. 1138, Business

Entity Refund/Billing Information, for more

information.

O Dissolution/Withdrawal

The S corporation must ﬁll in the applicable

box on Form 100S, Side 1, Question A1,

if dissolving, merging, or withdrawing.

Enter the date the S corporation ﬁled/will

ﬁle the documents for dissolution with the

California SOS.

The franchise tax for the period in which the

S corporation formally dissolves or withdraws

is measured by the income of the taxable year

in which it ceased doing business in California,

unless such income has already been taxed

at the rate prescribed for the taxable year of

dissolution or withdrawal.

An S corporation that is a successor to a

corporation that commenced doing business

in California before January 1, 1972, is allowed

a credit that may be refunded in the year of

dissolution or withdrawal. The amount of the

refundable credit is the difference between the

minimum franchise tax for the corporation’s

ﬁrst full 12 months of doing business and the

total tax paid for the same period.

To claim this credit, enter the amount on

Form 100S, Side 2, line 33. To the left of

line 33, write “Dissolving/ Withdrawing”

or include it according to your software’s

instructions.

The tax return for the ﬁnal taxable period is due

on or before the 15th day of the 3rd full month

after the month during which the S corporation

withdrew or stops doing business in California.

Corporations are subject to income tax or

franchise tax for the ﬁnal taxable period.

Corporations that ﬁle a ﬁnal franchise tax

return must pay at least the minimum franchise

tax as speciﬁed in R&TC Section 23153.

The minimum franchise tax will not be

assessed after the taxable year for which the

ﬁnal tax return is ﬁled, if a corporation meets

all of the following requirements:

y The corporation ﬁles a timely ﬁnal franchise

tax return for the preceding taxable year,

including extension. The corporation must

be in good standing to have an extension

to ﬁle.

y The corporation did not do business in

California after the ﬁnal taxable year.

Click for PDF

Form Information

Fact Name	Details
Governing Law	The California 100S form is governed by the California Revenue and Taxation Code (R&TC).
Purpose	This form is used for California S Corporations to report franchise or income tax.
Form Components	The 100S form includes various schedules such as Schedule B, Schedule C, and Schedule D.
Filing Requirement	California S Corporations must file the 100S form annually if they have income.
Tax Rate	The minimum franchise tax for S Corporations is $800, regardless of income.
Extension of Time	Corporations can file for an automatic extension using form FTB 3539.
Net Operating Losses	California does not conform to federal changes regarding net operating losses (NOLs) made by the TCJA.
Online Filing	Corporations can e-file the 100S form and related schedules through the FTB website.
Use Tax Reporting	S Corporations must report California use tax on their income tax return if applicable.
Shareholder Reporting	Schedule K-1 (100S) reports each shareholder’s share of income, deductions, and credits.

Detailed Guide for Filling Out California 100S

Completing the California 100S form is an essential step for S corporations to report their income and taxes to the state. The process requires attention to detail and accurate information to ensure compliance with California tax laws. Follow these steps carefully to fill out the form correctly.

Obtain the California 100S form from the Franchise Tax Board's website or through your tax preparation software.
Fill in the corporation's name and address at the top of the form.
Enter the corporation's federal employer identification number (EIN).
Indicate the tax year for which you are filing the return.
Provide the total income amount on Line 1.
Complete Schedule B to report depreciation and amortization, if applicable.
Fill out Schedule C to claim any tax credits the corporation is eligible for.
Complete Schedule D to report capital gains and losses.
Fill in Schedule H if the corporation has dividend income deductions.
Report any additional income or deductions on the appropriate lines of the form.
Calculate the total tax owed and enter it on the designated line.
Sign and date the form at the bottom, certifying that the information provided is accurate.
Submit the completed form by the due date, either electronically or by mail, along with any required schedules and payments.

Obtain Answers on California 100S

What is the California 100S form?

The California 100S form is the official tax return used by S corporations to report their income, deductions, and credits to the California Franchise Tax Board (FTB). This form is specifically designed for S corporations operating in California and must be filed annually.
Who is required to file Form 100S?

Any corporation that has elected to be treated as an S corporation for federal tax purposes and operates in California must file Form 100S. This includes both domestic and foreign corporations that meet the requirements set by the state.
What are the key schedules included with Form 100S?

Form 100S includes several schedules that help in reporting various types of income and deductions. Key schedules include:
- Schedule B: S Corporation Depreciation and Amortization
- Schedule C: S Corporation Tax Credits
- Schedule D: S Corporation Capital Gains and Losses
- Schedule H: S Corporation Dividend Income Deduction
- Schedule K-1: Shareholder’s Share of Income, Deductions, Credits, etc.
What is the due date for filing Form 100S?

Form 100S is generally due on the 15th day of the third month after the end of the corporation's tax year. For corporations operating on a calendar year, this typically means the due date is March 15. Extensions may be requested, but the extension period is limited to six months.
What are the penalties for late filing?

If Form 100S is filed late, the FTB may impose penalties. The penalty for late filing can be significant, often calculated based on the amount of tax due. It is advisable to file on time or request an extension to avoid these penalties.
Can Form 100S be filed electronically?

Yes, Form 100S can be filed electronically through various tax preparation software approved by the FTB. Electronic filing is encouraged, especially since California law requires certain entities to e-file their tax returns.
What happens if an S corporation has a net operating loss (NOL)?

An S corporation that incurs a net operating loss can carry that loss forward to offset future taxable income. California has specific rules regarding the computation and use of NOLs, which may differ from federal regulations. It is essential to consult the instructions for Form 100S for detailed guidance.
What is Schedule K-1 and why is it important?

Schedule K-1 (100S) reports each shareholder's share of the S corporation's income, deductions, and credits. This schedule is crucial for shareholders as it provides the information needed to report their income on their personal tax returns. Each shareholder must receive a copy of their K-1 by the due date of the Form 100S.
Are there any tax credits available for S corporations in California?

Yes, S corporations may qualify for various tax credits in California. These include credits for hiring certain employees, investments in specific areas, and other incentives. Schedule C of Form 100S provides details on how to claim these credits.
Where can I find additional information about Form 100S?

Additional information about Form 100S, including instructions and updates, can be found on the California Franchise Tax Board's website at ftb.ca.gov. The site offers resources for both taxpayers and tax professionals.

Common mistakes

Filling out the California 100S form can be a daunting task, and mistakes can lead to delays or complications. One common error is failing to include all necessary schedules and forms. Each S corporation must submit not only the 100S form but also various schedules, such as Schedule K-1 and Schedule B. Omitting any of these can result in the return being considered incomplete, which may lead to penalties or the need for additional correspondence with the Franchise Tax Board.

Another frequent mistake involves incorrect calculations of income or deductions. Many individuals misinterpret the instructions, leading to inaccurate figures. It's essential to double-check calculations and ensure that all income sources and deductions are reported accurately. In some cases, taxpayers may overlook specific deductions that they qualify for, which could significantly affect their tax liability.

Providing incorrect or outdated information is yet another mistake. Taxpayers should ensure that their business information, including the entity's name, address, and federal employer identification number (EIN), is accurate and current. Using outdated information can complicate the processing of the return and may lead to issues with the IRS.

Moreover, many people neglect to sign and date the form. This may seem like a small detail, but an unsigned return is not considered valid and can delay processing. It's crucial to ensure that all required signatures are present before submitting the form.

Lastly, failing to keep copies of submitted documents is a mistake that can have long-term consequences. Keeping a record of the completed 100S form and any accompanying schedules is vital for future reference. If questions arise or if there are discrepancies, having these documents on hand can simplify the resolution process.

Documents used along the form

The California 100S form is essential for S Corporations filing their franchise or income tax returns in the state. However, there are several other forms and documents that are often used in conjunction with the 100S to ensure compliance with California tax regulations. Below is a list of these forms, along with a brief description of each.

Schedule B (100S): This schedule is used to report the depreciation and amortization of assets owned by the S Corporation. It helps in calculating the correct amount of depreciation that can be deducted from taxable income.
Schedule C (100S): This document details the tax credits available to the S Corporation. It allows the corporation to claim various credits that may reduce its overall tax liability.
Schedule D (100S): This schedule reports capital gains and losses from the sale of assets. It is crucial for determining the tax implications of any capital transactions the corporation has engaged in during the tax year.
Schedule H (100S): This form is used to claim a deduction for dividend income received by the S Corporation. It ensures that the corporation accurately reports its dividend income and the corresponding deductions.
Schedule QS: This schedule provides information on Qualified Subchapter S Subsidiaries (QSubs). It is important for S Corporations that own other corporations and want to report their income and deductions accurately.
Schedule K-1 (100S): This document reports each shareholder's share of income, deductions, and credits from the S Corporation. It is essential for shareholders to accurately report their individual tax liabilities.
FTB 3539: This form is used to request an automatic extension for filing corporate tax returns. It allows S Corporations to extend their filing deadline, providing additional time to prepare their returns.
FTB 3805Q: This form is utilized for calculating Net Operating Loss (NOL) and disaster loss limitations for corporations. It helps corporations determine how much of their losses can be carried forward or back to offset taxable income in other years.
Form 100: This is the standard California Corporation Franchise or Income Tax Return for C Corporations. While S Corporations primarily use Form 100S, they may also need to reference Form 100 for certain filings or compliance issues.
Form 1120S: This is the federal tax return for S Corporations. California S Corporations must often reference this form when completing their state tax returns, particularly for income and deductions.

These forms and documents are integral to the tax filing process for S Corporations in California. Properly completing and submitting them helps ensure compliance with state tax laws and can significantly impact the corporation's tax obligations.

Similar forms

Form 100: This is the California Corporation Franchise or Income Tax Return. Like Form 100S, it is used by corporations to report income and calculate taxes owed. However, it is specifically for C corporations, while Form 100S is for S corporations.
Form 100X: This form is the Amended Corporation Franchise or Income Tax Return. It allows corporations to correct errors made on previously filed returns, similar to how Form 100S can be amended for S corporations.
Form 199: This is the California Exempt Organization Annual Information Return. Both Form 199 and Form 100S serve to report financial information, but Form 199 is tailored for tax-exempt organizations, while Form 100S is for S corporations.
Form 565: This form is the Partnership Return of Income. Similar to Form 100S, it is used to report income and deductions, but specifically for partnerships instead of S corporations.
Form 568: This is the Limited Liability Company Return of Income. Like Form 100S, it reports income and deductions, but it is designed for limited liability companies rather than S corporations.
Schedule K-1 (100S): This schedule reports each shareholder's share of income, deductions, and credits. It parallels the K-1 forms used by partnerships and other entities to inform partners or members of their respective shares of income.

Dos and Don'ts

When filling out the California 100S form, it's essential to follow specific guidelines to ensure accuracy and compliance. Below is a list of what to do and what to avoid.

Do read the instructions carefully before starting.
Do ensure all information is accurate and complete.
Do use the latest version of the form to avoid outdated regulations.
Do double-check calculations to minimize errors.
Do keep copies of all submitted documents for your records.

Don't leave any required fields blank.
Don't submit the form without reviewing it for errors.
Don't ignore deadlines for filing and payments.
Don't use outdated tax information or references.

Misconceptions

Understanding the California 100S form can be challenging, and there are several misconceptions that can lead to confusion. Below is a list of common misconceptions about the California 100S form, along with explanations to clarify each point.

All S corporations must file the California 100S form. Not all S corporations are required to file. Only those doing business in California or having California source income must submit the form.
The California 100S form is the same as the federal Form 1120S. While both forms serve similar purposes, they are not identical. California has its own tax laws that may differ from federal regulations.
Filing the 100S form guarantees a refund. Filing does not guarantee a refund. The amount of tax owed or refunded depends on the corporation's income, deductions, and credits.
California conforms to all federal tax laws. This is not true. California does not conform to many federal tax changes, particularly those made after January 1, 2015.
All tax credits available federally are also available on the 100S form. Not all federal tax credits are applicable in California. Taxpayers must check for specific California credits.
There is no penalty for late filing if an extension is filed. An extension to file does not extend the time to pay taxes owed. Late payments may incur penalties and interest.
Only large S corporations need to worry about the 100S form. This misconception overlooks the fact that all S corporations, regardless of size, must comply with California tax filing requirements if applicable.
Once filed, the information on the 100S form cannot be amended. This is incorrect. If errors are discovered after filing, amendments can be made using Form 100X to correct the information.

Key takeaways

Understand the Purpose: The California 100S form is used by S corporations to report their income, deductions, and credits for state tax purposes.
Filing Requirements: S corporations must file Form 100S annually, even if they do not owe any tax. This ensures compliance with state tax regulations.
Electronic Filing: California requires many businesses to e-file their tax returns. Check if your tax preparation software supports this feature.
Important Schedules: Be aware of the various schedules that accompany Form 100S, such as Schedule K-1, which details each shareholder's share of income and deductions.
Tax Credits: Explore available tax credits on Schedule C. These credits can significantly reduce your tax liability.
Net Operating Losses: If your S corporation incurs a net operating loss, you may have options to carry it back or forward. Consult the relevant forms for details.
Deadline Awareness: The filing deadline for Form 100S is typically six months after the end of your corporation's tax year. Mark your calendar to avoid penalties.