California Form 5806 - Underpayment Of Estimated Tax By Corporations - 2011 Page 4
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5Instructions for Form FTB 5806
Underpayment of Estimated Tax by Corporations
Important Information
Specific Line Instructions
•
Attach form FTB 5806 to the back of the return.
A second form FTB 5806, clearly marked “Second
For taxable years beginning on or after January 1,
Part I Figure the Underpayment
form FTB 5806”, may be used to show the
2010, corporations are required to pay the
computation of the penalty not related to the law
Generally, an underpayment is the difference
following percentages of the estimated tax liability
change.
between the amount due for each installment
during the taxable year:
of estimated tax and the amount actually paid
California does not conform to the change in timing
•
30% for the first required installment
or credited on or before the due date of that
of certain corporate estimated tax installment
•
40% for the second required installment
installment.
payments under the Federal Tax Increase
•
No estimated tax payment is required for the
Prevention and Reconciliation Act of 2005.
Line – Enter the total tax from Form 100, line 31;
third installment
Form 100W, line 31; Form 100S, line 30; or
•
30% for the fourth required installment
For taxable years beginning on or after
Form 109, line 14. Also include any add-on taxes
January 1, 2006, California conformed to federal
General Information
(except interest computed under the look-back
tax law in excluding the annual payments of
method for completed long-term contracts and
the LIFO recapture tax from the computation
See California Revenue and Taxation Code
the increase in tax for the deferral of installment
of “estimated tax.” Therefore, LIFO recapture
(R&TC) Section 19011, Section 19021 through
sale income) or credits recaptured from Form 100,
amounts are not included in the computation of an
Section 19027, and Section 19142 through
Form 100W, or Form 100S, Schedule J; or Form 109,
estimated tax underpayment penalty.
Section 19161 to determine the estimated tax
Schedule K.
requirement for California.
Purpose
Line 2 – Enter in column (a) through column (d) the
The term corporation, as used in form FTB 5806,
Use form FTB 5806 to determine if the corporation:
estimated tax installment due dates that correspond
Underpayment of Estimated Tax by Corporations,
to the 15th day of the 4th, 6th, 9th, and 12th months
and in these instructions, includes banks, financial
•
Paid the correct estimated tax.
of the taxable year.
corporations, regulated investment companies,
•
Is subject to the penalty for underpayment of
real estate investment trusts, exempt organizations
Line 3 – Short period filers. Use the table below to
estimated tax, and to figure the amount of the
*
with unrelated business taxable income in excess
determine the required percentage.
penalty.
of $1,000, exempt homeowners’ associations with
Newly formed or qualified corporations are not
Estimated tax is a corporation’s expected tax
non-exempt function taxable income in excess of
subject to the minimum franchise tax for the first
liability after credits.
$100, limited liability companies and partnerships
taxable year.
classified as corporations, and S corporations.
Newly Formed or Qualified Corporations: A
Line 4, column (a) – Enter 30% of the amount
corporation subject to the franchise tax must always
An S corporation that is a parent of a Qualified
on line 1. Do not enter an amount less than the
pay at least the required minimum franchise tax and
Subchapter S Subsidiary (QSub) is required
minimum franchise tax for the taxable year and any
any QSub annual tax if applicable, by the 15th day of
to pay an $800 annual tax for each QSub. The
QSub annual tax, if applicable.
the 4th month of the taxable year.
QSub annual tax is due and payable on the
Or, if the prior year’s tax was the minimum franchise
S corporation’s first estimate installment due date.
For corporations that incorporate or qualify to do
tax and the corporation is a regular corporation,
The QSub annual tax is subject to the estimated tax
business in California on or after January 1, 2000,
enter the minimum franchise tax.
rules and penalties.
the prepayment of the minimum franchise tax to
the California Secretary of State (SOS) is no longer
Exception:
If an S corporation acquires a QSub during the
required. For the first taxable year the corporation
taxable year, but after the due date of the first
The corporation can enter an amount less than
will compute its tax liability by multiplying its
estimate installment, then the QSub annual tax is
the minimum franchise tax if it is a newly formed
state net income by the appropriate tax rate and
due with the next required estimate installment
or qualified corporation, has been granted a tax
will not be subject to the minimum franchise tax.
after the acquisition of the QSub.
exemption by the Franchise Tax Board (FTB), or is
However, the corporation will be required to make
subject to income tax only under Chapter 3 of the
Tax, for purposes of estimates, includes alternative
estimated tax payments for its first taxable year.
California Corporation Tax Law (i.e., corporations
minimum tax, taxes from Schedule D (100S), excess
The estimated payments will be based on the
that are not doing business within California but
net passive income tax, QSub annual tax, and the
corporation’s expected tax liability after credits for
derive income from sources within California.)
minimum franchise tax. This definition differs from
its first taxable year. The corporation will become
federal law.
Line 4, column (b) – Enter 70% of the amount on
subject to minimum franchise tax beginning in its
line 1 minus the amount entered in column (a).
For taxable years beginning on or after January 1, 2005,
second taxable year.
the underpayment of estimated tax penalty shall not
Line 4, column (c) – Enter 70% of the amount on
Attach form FTB 5806 to the back of Form 100,
apply to the extent the underpayment of an installment
line 1 minus the total of the amounts entered on
California Corporation Franchise or Income Tax
was created or increased by any provision of law that is
line 4, column (a) and column (b).
Return; Form 100W, California Corporation Franchise
chaptered during and operative for the taxable year of
or Income Tax Return – Water’s-Edge Filers;
Line 4, column (d) – Enter 100% of the amount
the underpayment.
Form 100S, California S Corporation Franchise or
on line 1 minus the total of the amounts entered on
To request a waiver of underpayment of estimated
Income Tax Return; or Form 109, California Exempt
line 4, column (a), column (b), and column (c).
tax penalty:
Organization Business Income Tax Return, only if
Line 5a – The overpayment from a prior year return,
the corporation uses Exception B or Exception C in
•
Complete form FTB 5806 to compute the full
backup withholding, resident and nonresident
figuring or eliminating the estimate penalty. Be sure
penalty, which would normally be due.
withholding, and real estate withholding are credited
to check the applicable penalty box on the tax return.
•
Write the word ‘’Waiver,’’ in red, across the top of
as of the first estimate installment due date or the
Also see Specific Line Instructions, Part II, Exceptions
form FTB 5806.
date of payment, whichever is later.
to the Penalty.
•
Attach an explanation to form FTB 5806 that
For more information, get federal Rev. Rul. 99-40,
provides the specific law changes that caused the
Internal Revenue Code Section 6513 (b) (1)
underpayment, the computation and the amount
and (2), IRS Internal Revenue Manual 20.2.4.3
of penalty to be waived.
(03-01-2002) and FTB Notice 2003-1.
*
Accounting Period Less Than 2 Months (Short Period) Fiscal year corporations, adjust dates accordingly.
Number of
Percentage of Estimated Tax Due On or Before the 5th Day of
If taxable year (calendar year) begins:
Installments Due
April
June
September
December
January 1 through January 16
4
30%
70%
70%
100%
January 17 through March 16
3
60%
60%
100%
March 17 through June 15
2
70%
100%
June 16 through September 15
1
100%
September 16 through December 31
None
FTB 5806 Instructions 2011 Page
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