California – Hearing on Proposed Changes to Sales Factor Regulation

SALT Report 1971 – The California Franchise Tax Board announced they will hold a public hearing on February 6, 2013, at 1:00 p.m., regarding the proposed amendment of regulation 25106.5. The regulation states that taxpayers who have business activities both in and out of California are required to determine the amount of income attributed to activities in California through the application of a four-factor (property, payroll, and double-weighted sales), a three-factor (property, payroll, and single-weighted sales), or a single sales factor (sales factor only) apportionment formula.

The proposed amendments to regulation 25106.5 include the following:

  • Subsection (b) of existing Regulation section 25106.5 defines terms that apply to all regulations adopted under RTC section 25106.5, which relate to California combined reporting rules. Three new definitions are added so that terms used in the proposed amendments are defined.
  • Proposed subsection (b )(20) defines the term “California apportionment percentage” to mean the fraction used to apportion the total group combined report business income to California.
  • Proposed subsection (b )(21) defines the term “intrastate apportionment” to mean the method by which the California source total group combined report business income is assigned to each of the taxpayer members of the combined reporting group.
  • Proposed subsection (b)(22) defines the term “intrastate apportionment percentage” to mean the percentage applied by a specific taxpayer member to the California source total group combined report business income to determine that member’s share of the group’s California source apportioned income.

Interested parties can submit written or oral comments concerning the proposed regulatory changes. If you are interested in making oral comments at the hearing the FTB requests that you also submit a written copy of your comments at the hearing. Written comments will be accepted until 5:00 p.m. on February 6, 2013.

Inquiries regarding the hearing should be directed to the Franchise Tax Board, Legal Division, P.O. Box 1720, Rancho Cordova, CA 95741-1720; phone (916) 845-3306; fax (916) 845-3648; e-mail Colleen.Berwick@ftb.ca.gov.

For Further Information:

California Franchise Tax Board – Notice