California – FTB to Adjust LLC Accounts for Incorrectly Assessed Penalties


SALT Report 2104 – The California Franchise Tax Board announced that their Business Entity Tax System has been updated to adjust certain LLC accounts that had late payment, demand, and delinquent penalties assessed within the same tax year.

Revenue & Taxation Code §19132 (3)(b) mandates that the late payment penalty cannot be assessed if the total amount of the delinquent and demand penalties is equal to, or greater than, the late payment penalty.   However, for tax years 2008, 2009, and 2010, certain LLC’s that did not file timely returns were assessed a late payment penalty in addition to the demand and delinquent penalties. Therefore, the FTB is in the process of adjusting those LLC accounts that were incorrectly assessed a late payment penalty.

The FTB warns that although the BETS has been updated it will not show the LLC’s adjusted balance until a transaction takes place.  Because of this, the BETS now has a forecast function that LLC’s can use to view their adjusted balance.

The FTB expects to complete all account adjustments within six-months; however certain adjustments may take longer as they will need to be resolved on a case-by-case basis.

For Further Information

California Franchise Tax Board – Public Service Bulletin 12-38