Instructions For Form Ftb 3574 - Special Election For Business Trusts And Certain Single Member Foreign Llcs - 1998

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Instructions for Form FTB 3574
Special Election for Business Trusts and Certain Single Member Foreign LLCs
General Information
case of certain eligible business entities. This exception
applies to business trusts and previously existing foreign
SMLLCs.
A Purpose
C Effective Date of Election
Use form FTB 3574 to make an irrevocable election to
be classified the same as federal for California tax pur-
Generally, the election will take effect on the date
poses. If the entity is a business trust or a previously
entered on form FTB 3754, line 2. If no date is entered,
existing foreign single member limited liability company
the effective date will be the date the form is filed. The
(SMLLC) and the entity meets one of the conditions
effective date specified can be no more than 12 months
below, the entity is eligible for the election (Cal. Code of
after the date on which the election is filed, and no
Reg. Section 23038):
more than 75 calendar days prior to the date on which
1. The entity is a business trust that was classified as a
the election is filed.
corporation under California law, but was classified
If a date is chosen which is more than 75 calendar days
as a partnership for federal tax purposes for taxable
prior to the date on which the election is filed, the elec-
years beginning before January 1, 1997; or
tion will take effect 75 days before the date it is filed. If
2. The entity is a previously existing foreign SMLLC
an effective date is selected which is more than 12
that was classified as a corporation under California
months after the filing date, the election will take effect
law but claimed to be a partnership for federal tax
12 months after the date the election was filed.
purposes for taxable years beginning before January
1, 1997.
D Consent Statement and Signatures
This election does not apply to an entity that:
Form FTB 3574 must be signed by:
Was properly classified as an association taxable as
1. Each member of the electing entity who is an owner
a corporation;
at the time the election is filed; or
Did not derive income from sources within California;
2. Any officer, manager or member of the electing
or
entity who represents to having such authority under
Had no owner who was a resident of California
penalties of perjury.
within the 60-month period before January 1, 1997
For an election to be effective for any period prior to the
(Revenue and Taxation Code Section
time it is filed, each person who is an owner of an inter-
23038(b)(2)(c)).
est in the eligible entity between the date the election is
Unless either the business trust or previously existing
to be effective and the date the election is filed and was
foreign SMLLC makes this irrevocable election to be
not an owner at the time the election is filed, must also
classified or disregarded, the same as it is for federal
sign the election.
tax purposes, the entity will continue to be classified as
If you need a continuation sheet, use a second form
a corporation for California tax purposes and must file
FTB 3574 and attach it to the completed first copy.
Form 100, California Corporation Franchise or Income
Tax Return. See Title 18 Cal. Code Reg. Section
E Where to File
23038(a)-(b) for more information.
Complete and mail the entire form FTB 3574 to:
B Check the Box Regulations
POST DISSOLUTION AUDIT
FRANCHISE TAX BOARD
California has generally conformed to the federal entity
PO BOX 1468
classification regulations (commonly known as ‘‘check-
SACRAMENTO CA 95812-1468
the-box’’ regulations) that allow certain unincorporated
entities to choose tax treatment as a partnership, a cor-
Also, attach a copy of this election to the last return
poration or as a disregarded entity (Stats. 1997, Ch.
filed for the existing entity and the first return of the new
608). The regulations replace the former system of ana-
entity.
lyzing 4 corporate characteristics to determine classifica-
F Important Information
tion for tax purposes. An ‘‘eligible entity’’ may choose its
classification. An ‘‘eligible entity’’ is defined as a busi-
If an entity taxable as a corporation for California pur-
ness entity that is not a trust, a corporation organized
poses elects to be classified as a partnership or disre-
under any federal or state statute, a foreign entity spe-
garded entity in the same manner as the entity is
cifically listed as a per se corporation, or other special
classified or disregarded for federal tax purposes, the
business entities under the Internal Revenue Code,
entity must treat the change of classification as a liqui-
such as publicly traded partnerships, real estate mort-
dation of a corporation. This may cause a short-period
gage investment conduits, financial asset securitization
filing requirement. The corporation must also recognize
investment trusts or regulated investment companies)
the tax consequences of such a dissolution.
may choose its classification. An eligible entity with two
or more owners 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, unless it elects to be taxed as a corporation.
Generally, any elections made for federal purposes
under the federal ‘‘check-the-box’’ regulations are bind-
ing for California purposes, and no separate state elec-
tions are allowed. However, there is an exception in the
Side 2
FTB 3574 1998

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