California Form 3574 Draft - Special Election For Business Trusts And Certain Foreign Single Member Llcs - 2016 Page 3

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2016 Instructions for Form FTB 3574
Special Election for Business Trusts and Certain Foreign Single Member LLCs
General Information
C Effective Date of Election
Generally, the election will take effect on the date entered on form
A Purpose
FTB 3574, line 2. If no date is entered, the effective date will be the
Use form FTB 3574, Special Election for Business Trusts and Certain
date the form is filed. The effective date specified can be no more
Foreign Single Member LLCs, to make an irrevocable election to be
than 12 months after the date on which the election is filed, and no
classified the same as federal for California tax purposes.
more than 90 calendar days prior to the date on which the election
is filed.
If the entity is a business trust or a previously existing foreign single
member limited liability company (SMLLC) and the entity meets one
If an effective date is selected which is more than 12 months after
of the conditions below, the entity is eligible for the election (Cal.
the filing date, the election will take effect 12 months after the
Code Regs., tit. 18 section 23038):
date the election was filed. If a date is chosen which is more than
90 calendar days prior to the date on which the election is filed, the
1. The entity is a business trust that was classified as a corporation
election will take effect 90 days before the date it is filed.
under California law, but was classified as a partnership for
federal tax purposes for taxable years beginning before
D Consent Statement and Signatures
January 1, 1997.
2. The entity is a previously existing foreign SMLLC that was
Form FTB 3574 must be signed by one of the following:
classified as a corporation under California law for taxable years
1. Each member of the electing entity who is a co-owner at the time
beginning before January 1, 1997, but became a disregarded
the election is filed.
entity for federal tax purposes for taxable years beginning on or
2. Any officer, manager, or member of the electing entity who
after January 1, 1997.
represents to having such authority under penalties of perjury.
Revenue and Taxation Code Section 23038 (b)(2)(C) provides
For an election to be effective for any period prior to the time it is
that this election does not apply to an entity for which within the
filed, each person who is an owner of an interest in the eligible entity
60-month period before January 1, 1997, all of the following were
between the date the election is to be effective and the date it is filed
true:
must also sign the election, even if the person was not an owner at
• The entity did not derive income from sources within California.
the time the election is filed.
• The entity was not doing business within California.
If you need a continuation sheet, use a second form FTB 3574 and
• The entity had no owner who was a resident of California.
attach it to the completed first copy.
Unless the business trust or previously existing foreign SMLLC
makes this irrevocable election to be classified or disregarded, the
E Where to File
entity will continue to be classified as a corporation for California tax
Complete and mail form FTB 3574 to:
purposes and must file Form 100, California Corporation Franchise
or Income Tax Return. See Cal. Code Regs., tit. 18
C-CORPORATION PROGRAM
section 23038(a)-(b), for more information.
FRANCHISE TAX BOARD
PO BOX 1673
B Check-the-Box Regulations
SACRAMENTO CA 95812-1673
California generally conforms to the federal entity classification
Also, attach a copy of this election to the last return filed for the
regulations (commonly known as “check-the-box” regulations).
existing entity and the first return of the new entity.
These regulations allow certain unincorporated entities to choose tax
F Important Information
treatment as a partnership, a corporation, or as a disregarded entity
(SB 1234, Stats. 1997, Ch. 608).
For taxable years beginning on or after January 1, 1997, if an
Generally, any elections made for federal purposes, under the federal
entity taxable as a corporation for California purposes elects to be
“check-the-box” regulations, are binding for California purposes,
classified as a partnership or disregarded entity in the same manner
and no separate state elections are allowed. However, there is an
as the entity is classified or disregarded for federal tax purposes,
exception in the case of certain eligible business entities. This
the entity must treat the change of classification as a liquidation
exception applies to business trusts and previously existing foreign
of a corporation. This may cause a short period tax return filing
SMLLCs. The entity should file the appropriate California return.
requirement. The corporation and its shareholders must also
recognize the tax consequences of such a dissolution.
An “eligible entity” may choose its classification. An “eligible entity”
is a business entity that is not a trust, a corporation organized under
For conversions on or after January 1, 2003, if an entity taxable
any federal or state statute, a foreign entity specifically listed as a
as a C corporation or S corporation converts to an LLC and elects
per se corporation, or other special business entities. Other special
to be a partnership or a disregarded entity, the entity must treat
business entities under the Internal Revenue Code include publicly
the conversion as a liquidation of a corporation. This may cause a
traded partnerships, real estate mortgage investment conduits,
short period tax return filing requirement. The corporation and its
financial asset securitization investment trusts, or regulated
shareholders must also recognize the tax consequences of such
investment companies. An eligible entity with two or more owners
dissolution.
will be a partnership for tax purposes unless it elects to be taxed as a
corporation. An eligible entity with a single owner will be disregarded
for tax purposes. If the separate existence of an entity is disregarded,
its activities are treated as activities of the owner and are reported on
the appropriate California return.
FTB 3574 Instructions 2016 Page 1

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