STATE OF CALIFORNIA

Contents
FRANCHISE TAX BOARD
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FTB Publication 1060
Newly Formed or Qualified Corporations . . . . . . . . . . . 2

Guide for S Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Imposition of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Corporations Minimum Franchise Tax . . . . . . . . . . . . . . . . . . . . . . . . . 3

Starting Apportionment of Income . . . . . . . . . . . . . . . . . . . . . . . 3

Steps to Take . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business in Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

California Installment Due Dates and Amounts of

Estimated Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Where to Get FTB Forms and Publications . . . . . . . . . . 6

Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

General Toll-Free Phone Service . . . . . . . . . . . . . . . . . . 7

To Get Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

General Information
This guide is intended to help you file your corporation’s
first:
• California Corporation Franchise or Income Tax Return
(Form 100) or
• California S Corporation Franchise or Income Tax
Return (Form 100S) or
California Tax Forms on the Internet!
• Current year California forms, instructions, and • Bank and Corporation Estimated Tax Payment Voucher
publications. (Form 100-ES).
• Prior year California forms and instructions.
• Frequently used forms that may be filled in electronically,
printed out for submission, and saved for record keeping.
• Answers to frequently asked tax questions. It will help you:
Access the FTB Website at • understand the basis of the tax;
www.ftb.ca.gov • request forms and instructions;
• file tax returns correctly; and
California Tax Forms on CD-ROM! • avoid unnecessary penalties and interest.
Order FTB Pub. 1097, California Income Tax Forms on
CD-ROM, and get:
• Current year California and federal forms, instructions,
and publications. Water’s-Edge Filers – For information regarding filing a
• Prior year California forms and instructions. Water’s-Edge return in California, see Form 100W –
• Frequently used forms that may be filled in electronically,
printed out for submission, and saved for record keeping.
California Franchise or Income Tax Return –
To order the CD-ROM, call
Water’s-Edge Filers
(916) 845-7070
 On April 15, 2002, Corporation A makes an estimated tax
Definitions payment of $800. On its return for taxable year ending
December 31, 2001, it shows a $4,000 loss and an $800
Corporation — An entity incorporated or qualified
tax liability. Since the corporation made an $800
through the Secretary of State and/or doing business in
California. For purposes of this guide, the term estimated tax payment, it will show zero on the “Tax Due”
corporation does not include banks. Financial line of the Form 100. An estimated tax penalty is not due.
corporations are not considered to be banks and are Example 2: Corporation B incorporated in California on
included in the term corporation. For more information on January 11, 2001. Corporation B selected a calendar
corporations, call the Secretary of State, Business year end.
Filings, at (916) 657-5448, or visit their website at:
www.ss.ca.gov. Corporation B did not make an estimate tax payment on
April 15, 2001. For taxable year ending December 31,
Calendar Year — A period of 12 months ending on
2001, it shows $6,300 of income. When the corporation
December 31.
files its tax return on March 15, 2002, it owed $557
Fiscal Year — A period of 12 months ending on the last
($6,300 x 8.84%) of tax, which it paid with the return.
day of any month other than December.
Since Corporation B did not make any estimated tax
Accounting Period — Calendar year or fiscal year used payments, an estimated tax penalty is due based on the
as the accounting period for which the corporation’s net
tax of $557.
income is computed.
On April 15, 2002, the corporation makes an estimated
Taxable Year — Calendar year or fiscal year for which
the tax is due. tax payment of $800. On its tax return for taxable year
ending December 31, 2002, it shows a $14,000 loss and
Doing Business — Actively engaging in any transaction
a $800 tax liability. Since the corporation made an $800
for the purpose of financial gain or profit.
estimated tax payment, it will show zero on the “Tax Due”
line of Form 100S. An estimated tax penalty is not due.

Newly Formed or Qualified

Corporations S Corporations
The tax on your corporation’s first return is computed by California has adopted most of the federal provisions for
multiplying your corporation’s California net income by its S corporations. However, there is an S corporation tax at
appropriate tax rate. There is no minimum tax if you the corporate level in addition to the individual tax on
incorporated or qualified to do business in California on pass-through income. A federal S corporation doing
or after January 1, 2000. The tax on your second and business in California or having California source income
subsequent year tax returns is subject to the greater of is subject to California tax as an S corporation unless it
the minimum franchise tax or your corporation’s made a timely California C corporation election. The
California net income multiplied by its appropriate tax corporation must file Form 100 and pay at least the
rate. minimum franchise tax (if applicable) or S Corporation
Estimated tax: To avoid incurring an estimated tax tax of 1.5%.
penalty for the second taxable year, your corporation
must make estimated tax payments equal to 100% of the
tax liability shown on the return for the second taxable
year. Prior year’s exception (Exception A) does not apply Imposition of Tax
to the first tax return and you cannot use it to reduce or
A franchise tax is imposed on businesses treated as a
eliminate the estimated tax penalty. However, you may
corporation in California. This includes:
base your corporation’s estimated tax payments on
annualization to reduce or eliminate the estimated tax • All California domestic corporations.
penalty. For more information regarding the estimated tax • Foreign corporations that qualified to conduct business
computation, see the instructions for FTB Form 100ES – in California through the Secretary of State.
Corporation Estimated Tax. • Foreign corporations that conduct business in
Example 1: Corporation A incorporated with the California but are not qualified through the Secretary
California Secretary of State on February 21, 2001. of State.
Corporation A selects a calendar year end. For more information regarding qualifying to conduct
For the taxable year February 21 to December 31, 2001, business in California, call the Secretary of State,
Corporation A operated at a $3,000 loss. When Business Filings, at (916) 657-5448, or visit their website
Corporation A files its tax return on March 15, 2002, it will at: www.ss.ca.gov
owe NO tax.

Page 2 FTB Pub. 1060 (REV. 04-2001)

The franchise tax is computed by multiplying the
corporation’s current year taxable income by the
Steps To Take
appropriate tax rate. Except in certain instances, the tax
A newly formed corporation in California is required to
the corporation is required to pay cannot be less than the
take the following actions:
minimum franchise tax.

Convention and Trade Shows Step 1 — Election of Annual Accounting

Period and Method
Corporations that are not incorporated under the laws of
California and whose sole activities in this state during a If you form a new corporation or qualify an existing
taxable year are engaging in convention and trade show corporation you must notify the Franchise Tax Board of its
activities may not be subject to the $800 minimum accounting period as soon as possible. In your first tax
franchise tax. return, the corporation may adopt any taxable year that
meets the requirements of the law. Franchise Tax Board
See Form 100 Booklet or Form 100S Booklet for more
approval is not required. However, the corporation’s
information.
taxable year end must not be different from the tax year
used for federal purposes, unless initiated or approved by
Corporation Income Tax the Franchise Tax Board. In addition, the first accounting
The corporation income tax is imposed on all period cannot end more than 12 months after the date of
corporations that derive income from sources within incorporation or qualification in California. If the first
California but are not doing business in California. accounting period is 15 days or less, it may be
For purposes of filing a corporation income tax return, disregarded provided the corporation was not doing
the term corporation is not limited to incorporated business in, and received no income from, sources within
entities, but also includes: this state. For a portion of a month to be disregarded
under this rule, the corporation’s Articles of Incorporation
• associations;
would have to be filed in the case of:
• Massachusetts trusts;
• a 28-day month — on the 14th day or after
• business trusts; and
• a 29-day month — on the 15th day or after
• real estate investment trusts.
• a 30-day month — on the 16th day or after
See Form 100 Booklet or Form 100S Booklet for more
• a 31-day month — on the 17th day or after
information.
Example: Corporation ABC incorporated with the
Secretary of State on October 10, 2001.
It elected a fiscal year ending October 31, as its
Minimum Franchise Tax accounting period. Therefore, on or before
January 15, 2002, a corporation franchise tax return is
Except for newly incorporated or qualified corporations, due for the short period taxable year ending
and unless otherwise exempted by law, all corporations October 10, 2001 to October 31, 2001.
incorporated, qualified to do business, or doing business A change in accounting period or method requires
in California are subject to an annual minimum franchise consent from the Franchise Tax Board. However, a
tax. The minimum tax is $800 per year, except for certain corporation that obtains federal approval to change its
inactive gold mining corporations and quicksilver mining accounting period or method, or that is permitted or
corporations that pay a minimum franchise tax of $25 per required by federal law to make a change in its
year. accounting period or method without prior approval and
Except for newly incorporated or qualified corporations, if does so, is deemed to have the Franchise Tax Board’s
the corporation is inactive or operates at a loss during approval. See Form 100 Booklet, Form 100S Booklet, or
any taxable year, whether or not a full 12 months, its tax FTB Notice 2000-8 for additional information.
for the taxable year is the minimum tax.
Step 2 — Paying Estimated Tax
One or more payments of estimated tax are required
annually from every corporation, unless exempt by law.
Apportionment of Income These payments should be made using Form 100-ES,
Corporations with business income attributable to Corporation Estimated Tax. However, if the corporation
sources both within and outside California are required to has an estimated tax liability of $20,000 or total liability of
apportion such income. See Schedule R, Apportionment $80,000 it is required to make payments by Electronic
and Allocation of Income, for more information. Funds Transfer. See EFT requirement on page 4 for more
information.

FTB Pub. 1060 (REV. 04-2001) Page 3

The percentage of tax required to be paid for each Delinquent Payment Penalty
installment is shown in the Installment Due Dates and If you do not send the total amount due shown on your
Amounts of Estimate Tax on the next page. However, the entity’s return by the original due date, we impose a 5
amount of the first installment cannot be less than the percent penalty on the unpaid tax. We also impose a
minimum franchise tax. For newly incorporated or penalty of 0.5 percent of the unpaid tax for each month or
qualified corporations, see page 2. part of a month it remains unpaid. The maximum penalty
The estimated tax payments will be credited against the is 25 percent of the unpaid tax. We charge the penalty
total tax shown on the tax return, as measured by income even if there is an extension of time to file a return.
reported on the return. Any balance of tax due will incur (R&TC Section 19132)
an estimated tax penalty. Any overpayment of tax,
together with interest, will be refunded or applied to other Underpayment of Estimated Tax
balances due. Interest is not paid on refunds made within
We impose a penalty if your corporation does not pay,
90 days of the return due date or the date the return is
pays late, or underpays an installment of estimated tax.
filed, whichever is later. Refer to Form 100-ES, for
The penalty is a percentage of the underpayment. You
specific instructions.
can use our Underpayment of Estimated Tax by
Corporations (form FTB 5806) to determine both the
Step 3 — Filing Returns amount of underpayment and the amount of penalty.
Each corporation must file a corporation franchise or Note: If your corporation uses Exception B or Exception
income tax return (Form 100 or Form 100S) by the 15th C for any of the four installments, you must attach the
day of the third month after the close of the taxable year. completed form FTB 5806 to your Form 100, Form 100S,
(Exception: a return for a farmers’ cooperative or Form 109. (R&TC Sections 19142-19161)
association, described in Section 24404 of the Revenue
and Taxation Code, is due on the 15th day of the ninth EFT Requirement
month after the close of its taxable year.) Special rules
Once a corporation remits an estimated tax or extension
exist for short period returns. See Form FTB 100 Booklet
payment in excess of $20,000 or has a total tax liability in
and 100S Booklet for more information.
excess of $80,000 in any taxable year beginning on or
Note: California allows an additional seven-month filing after January 1, 1995, it must make all future payments,
extension beyond the original due date of the tax return. regardless of the taxable year or amount, through an
The extension is automatic; no action is required on the electronic funds transfer. Payments made by other means
part of the corporation. This does not extend the due will result in a penalty of 10 percent of the amount paid.
date for the payment of tax. For more information regarding this requirement, see our
Electronic Funds Transfer Information Guide (FTB
Pub. 3817), access our Website at www.ftb.ca.gov, or
call us at (800) 852-2753. (R&TC Section 19011)
Penalties
Delinquent Return Penalty
If you do not file your entity’s income tax return by the
original due date, we impose a penalty of 5 percent of the
tax due, after applying any payments and credits made
on or before the due date, for each month or part of a
month the return is late. The maximum penalty is 25
percent. (R&TC Section 19131)

Page 4 FTB Pub. 1060 (REV. 04-2001)

Installment Due Dates and Amounts of Estimate Tax – Accounting Period of 12 months
Installment Due Date Amount Payable
25% of net income multiplied by the applicable
estimated tax rate, but not less than the minimum
1 15th day of the 4th month of the taxable year franchise tax, if applicable.
50% of net income multiplied by the applicable
2 15th day of the 6th month of the taxable year estimated tax rate less amount of prior payment.
75% of net income multiplied by the applicable
3 15th day of the 9th month of the taxable year estimated tax rate less amount of prior payment.
100% of net income multiplied by the applicable
4 15th day of the 12th month of the taxable year estimated tax rate less amount of prior payment.

Installment Due Dates and Amounts of Estimate Tax – Accounting Period Less Than
12 Months (First Year Only)
Fiscal year taxpayers should adjust dates accordingly
Number of Percentage of Estimated Tax Due On or Before the
Installments 15th Day of
If Taxable year (Calendar Year) begins: April June September December
January 1 through January 16 4 25% 50% 75% 100%
January 17 through March 16 3 331/3% 662/3% 100%
March 17 through June 15 2 50% 100%
June 16 through September 15 1 100%
September 16 through December 31 None

Notes which apply to the above tables:

For taxable years beginning on or after January 1, 1998, the applicable percentage for the estimated tax basis is 100%.
• To compute your tax payment, first multiply your estimated taxable income by the applicable rate as follows:
corporations, use 8.84%; S corporations, use 1.5%.
• Banks and financial corporations: corporation rate is 10.84% and for S corporation the rate is 3.5%. For a taxable year
ending in 1996 the rate for corporations was 11.3% and for S corporation the rate was 3.5%. Then apply the percent-
ages provided in the table above.
• Any installment may be paid before the timely filed date prescribed.
• Generally, an overpayment from the prior year may be credited to the first installment as of the first installment due date
or the date of payment, whichever is later. The overpayment from a delinquent filed prior year return is credited as of
the first estimate installment due date, the date of the payment or the date the delinquent return was filed, whichever is
later. For more information, refer to federal Rev. Rul. 84-58, 1984-1 C.B. 254, and Rev. Rul. 99-40.

FTB Pub. 1060 (REV. 04-2001) Page 5

 This booklet contains: Form 100S, California S
Where To Get Tax Forms and Corporation Franchise or Income Tax Return;
Publications Schedule QS, Qualified Subchapter S Subsidiary
(QSub) Information Worksheet; and the following
By Internet – You may download, view, and print 1994 forms which are also available separately:
through 2000 California income tax forms, instructions, 823 Schedule B (100S), S Corporation
and publications. Legal Notices and Rulings dated 96-1 Depreciation and Amortization
and later are also available. Go to our website at: Schedule C (100S), S Corporation Tax Credits
www.ftb.ca.gov Schedule H (100S), Dividend Income
Schedule D (100S), S Corporation Capital
By phone – To order 1999-2000 California tax forms:
Gains and Losses and Built-In Gains
• Refer to the list below and find the code number for the 825 Schedule K-1 (100S), Shareholder’s Share of
form you want to order. Income, Deductions, Credits, etc.
• Call (800) 338-0505. 826 FTB 3830, S Corporation’s List of
• Select business entity tax information. Shareholders and Consents
808 FTB 3539, Payment Voucher for Automatic
• Select order forms and publications.
Extension for Corporations and Exempt
• Enter the three-digit code shown to the left of the form Organizations
title when you are instructed to do so. 814 Form 109, Exempt Organization Business Income
Please allow two weeks to receive your order. If you live Tax Return
outside California, please allow three weeks to receive 818 Form 100-ES, Corporation Estimated Tax
your order. 813 Form 100X, Amended Corporation Franchise or
For prior year California tax forms, call our toll-free Income Tax Return
number listed under “General Toll-Free Phone Service.” 815 Form 199, Exempt Organization Annual Information
Return
In person – Many libraries and some quick print
819 Schedule R, Apportionment and Allocation of
businesses have forms and schedules for you to
Income
photocopy (a nominal fee may be required). Note:
812 FTB Pub. 1038, Instructions for Corporations
Employees at libraries, post offices, banks, and quick
Requesting a Tax Clearance Certificate
print businesses cannot provide tax information or
805 FTB Pub. 1038A, Instructions for Exempt
assistance.
Organizations Requesting a Tax Clearance
By mail – Write to: TAX FORMS REQUEST UNIT, Certificate
FRANCHISE TAX BOARD, PO BOX 307, RANCHO 809 FTB Pub. 1060, Guide for Corporations Starting
CORDOVA CA 95741-0307. Business in California
810 FTB Pub. 1061, Guidelines for Corporations Filing a
Combined Report
827 Form 100W, Water’s-Edge Booklet
California Tax Forms and 829 FTB 3564, Authorization of Agent Under Revenue
Publications and Taxation Code Section 19141.6
820 FTB Pub. 1068, Exempt Organizations
817 California Corporation Tax Forms and Instructions. Requirements for Filing Returns and Paying Filing
This booklet contains: Form 100, California Fees
Corporation Franchise or Income Tax Return; and 802 FTB 3500, Exemption Application
the following forms which are also available 803 FTB 3555, Request for Tax Clearance –
separately: Corporations
821 Schedule P (100), Alternative Minimum Tax 804 FTB 3557, Application for Revivor
and Credit Limitations — Corporations 811 FTB 3560, S Corporation Election or Termination/
822 FTB 3885, Corporation, Depreciation and Revocation
Amortization 806 FTB 5806, Underpayment of Estimated Tax by
807 FTB 3805Q, Net Operating Loss (NOL) Corporations
Computation and NOL and Disaster Loss 800 FTB Pub. 1028, Guidelines for Homeowners’
Limitations — Corporations Associations
808 FTB 3539, Payment Voucher for Automatic 801 FTB Pub. 1075, Exempt Organizations – Guide for
Extension for Corporations and Exempt Political Organizations
Organizations 832 FTB 3555A, Request for Tax Clearance Exempt
816 California S Corporation Tax Forms and Organizations
Instructions.

Page 6 FTB Pub. 1060 (REV. 04-2001)

Letters Other California State
If you write to us, be sure to include your California Agencies
corporation number or federal employer identification
number, your daytime and evening telephone numbers, Secretary of State
and a copy of the notice with your letter. Send your letter Incorporation/Qualification Information . . (916)657-5448
to: Website . . . . . . . . . . . . . . . . . . . . . . . . . www.ss.ca.gov
FRANCHISE TAX BOARD Board of Equalization
PO BOX 942857 Toll-Free Number . . . . . . . . . . . . . . . . . . (800) 400-7115
SACRAMENTO CA 94257-0540 Website . . . . . . . . . . . . . . . . . . . . . . . www.boe.ca.gov
We will respond to your letter within six weeks. In some Employment Development Department (State
cases, we may need to call you for additional information. Disability Insurance, Personal Income Tax Withholding
Do not attach correspondence to your tax return unless and Unemployment Insurance)
the correspondence relates to an item on the return.
From within the United States . . . . . . . . (888) 745-3886
From outside the United States . . . . . . . (916) 464-3502
Website . . . . . . . . . . . . . . . . . . . . . . . www.edd.ca.gov
General Toll-Free Phone
Service
Between January 2 – April 16, 2001, our general toll-
To Get Information
free phone service is available: If you need an answer to any of the following questions,
• Monday – Friday, 6 a.m. until midnight; and call (800) 338-0505, select business entity information
• Saturdays and holidays, 7 a.m. until 4 p.m. then general tax information, follow the recorded
instructions, and enter the three-digit code when
After April 16, 2001, our general toll-free phone service
instructed to do so.
is available:
Code Filing Assistance
• Monday – Friday, 7 a.m. until 8 p.m.
715 If my actual tax is less than the minimum
• Saturdays, 7 a.m. until 4 p.m.
franchise tax, what figure do I put on line 23 of
Note: We may modify these hours without notice to meet Form 100?
operational needs.
717 What are the current tax rates for corporations?
From within the United States . . . . . . . . (800) 852-5711
From outside the United States 718 How do I get an extension of time to file?
(not toll-free) . . . . . . . . . . . . . . . . . . . (916) 845-6500 722 When do I have to file a short-period return?
For federal tax questions, call the IRS at (800) 829-1040 734 Is my corporation subject to franchise tax or
income tax?
Assistance for persons with disabilities
The FTB complies with provisions of the Americans with S Corporations
Disabilities Act. Persons with hearing or speech 704 Is an S corporation subject to the minimum
impairment call: franchise tax?
From voice phone 705 Are S corporations required to file estimate
(California Relay Service) . . . . . . . . . (800) 735-2922 payments?
From TTY/TDD (Direct line to FTB 706 What forms do S corporations file?
customer service) . . . . . . . . . . . . . . . (800) 822-6268
707 The tax for my S corporation is less than the
For all other assistance or special minimum franchise tax. What figure do I put on
accommodations . . . . . . . . . . . . . . . . (800) 852-5711 line 22 of Form 100S?
708 Where do S corporations make adjustments for
Asistencia bilingue en espanol state and federal law differences on Schedule
Para obtener servicios en español y asistencia para
K-1 (100S) and where do nonresident
completar su declaración de impuestos/formularios,
shareholders find their California source income
llame al número de teléfono (anotado arriba) que le
on their Schedule K-1 (100S)?
corresponde.

FTB Pub. 1060 (REV. 04-2001) Page 7

 Exempt Organizations 721 How do I change my accounting period?
709 How do I get tax exempt status? 737 Where do I send my payment?
710 Does an exempt organization have to file 738 What is electronic funds transfer?
Form 199? 739 How do I get a copy of my state corporate tax
735 How can an exempt organization incorporate return?
without paying corporation fees and costs? 740 What requirements do I have to report municipal
736 I have exempt status. Do I need to file Form 100 bond interest paid by a state other than
or Form 109 in addition to Form 199? California?
750 How do I organize or register an LLC?
Minimum Tax and Estimate Tax
751 How do I cancel my registration of my LLC?
712 What is the minimum franchise tax?
752 What tax forms do I use to file as an LLC?
714 My corporation is not doing business; does it
have to pay the minimum franchise tax? 753 When is the annual tax payment due?
716 When are my estimate payments due? 754 What extension voucher do I use to pay the LLC
fee and/or member tax?
Billings and Miscellaneous Notices 755 Where does an LLC send its tax payments?
723 I received a bill for $250. What is this for? 756 As an LLC I never did any business or even
728 Why was my corporation suspended? opened a door, bank account, or anything. Why
729 Why is my subsidiary getting a request for a do I owe the $800 annual tax?
return when we file a combined report? 757 How are the LLC fees calculated?
758 If a corporation converted to an LLC during the
Tax Clearance
current year, is the corporation liable for tax as a
724 How do I dissolve my corporation? corporation and an LLC tax/fee in the same
725 What do I have to do to get a tax clearance? year?
726 How long will it take to get a tax clearance 759 If I have nonresident members and cannot get all
certificate? their signatures on the consent release form, can
727 My corporation was suspended/forfeited. Can I I still file the return?
still get a tax clearance?

Miscellaneous
700 Who do I need to contact to start a business?
701 I need a state ID number for my business. Who
do I contact?
702 Can you send me an employer’s tax guide?
703 How do I incorporate?
719 How do I properly identify my corporation when
dealing with the Franchise Tax Board?
720 How do I obtain information about changing my
corporation’s name?

Page 8 FTB Pub. 1060 (REV. 04-2001)