California Form 3565 - Small Business Stock Questionnaire - 2011 Page 2
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22011 Instructions for Form FTB 3565
Small Business Stock Questionnaire
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).
General Information
C When and Where to File
Question K – A domestic corporation is
defined in IRC Section 7701(a)(4) as any
In general, for taxable years beginning on or
A corporation is required to file form FTB 3565
corporation created or organized in the United
after January 1, 2010, California law conforms
along with Form 100, California Corporation
States or under the law of the United States or
to the Internal Revenue Code (IRC) as of
Franchise or Income Tax Return, or
of any State .
January 1, 2009 . However, there are continuing
Form 100W, California Corporation Franchise
Question O – A qualified trade or business is
differences between California and federal
or Income Tax Return — Water’s-Edge
any trade or business other than:
law . When California conforms to federal tax
Filers . Attach form FTB 3565 to Form 100
law changes, we do not always adopt all of
or Form 100W and file on or before the due
• Any trade or business involving the
the changes made at the federal level . For
date of the corporate tax return, including
performance of services in the fields of
more information, go to ftb.ca.gov and search
extension .
health, law, engineering, architecture,
for conformity . Additional information can
accounting, actuarial science, performing
Under authority granted in R&TC
be found in FTB Pub . 1001, Supplemental
arts, consulting, athletics, financial
Section 18152 .5, the Franchise Tax Board
Guidelines to California Adjustments, the
services, brokerage services, or any trade
(FTB) requires the corporation to provide
instructions for California Schedule CA (540 or
or business where the principal asset of the
a copy of any completed form FTB 3565 to
540NR), and the Business Entity tax booklets .
trade or business is the reputation or skill
each stockholder that acquired qualified small
of one or more of its employees .
The instructions provided with California tax
business stock as part of the stock issuance
• Any banking, insurance, financing, leasing,
forms are a summary of California tax law
reported on the completed form FTB 3565
investing, or similar business .
and are only intended to aid taxpayers in
during the current taxable year .
• Any farming business (including the
preparing their state income tax returns . We
Failure to file this form on or before the due
business of raising or harvesting trees) .
include information that is most useful to the
date of the corporation tax return, including
• Any business involving the production
greatest number of taxpayers in the limited
extension, may result in a penalty being
or extraction of products of a character
space available . It is not possible to include
assessed to the corporation pursuant to R&TC
with respect to which a percentage
all requirements of the California Revenue
Section 19133 .5 . The penalty amount is $50
depletion deduction is allowable under IRC
and Taxation Code (R&TC) in the tax booklets .
per failure to file unless the failure is due to
Section 613 or 613A .
Taxpayers should not consider the tax booklets
negligence or intentional disregard, then the
• Any business of operating a hotel, motel,
as authoritative law .
penalty amount is $100 per failure to file the
restaurant, or similar business .
California law does not conform to the federal
form .
Question P – For the purpose of calculating
law changes in regard to the increase in the
Failure of the corporation to file form FTB 3565
the total value of the assets, any ownership of,
percentage of the gain exclusion for the sale
will not disqualify the stockholder from
dealing in, or renting of, real property shall not
of qualified small business stock acquired
excluding gain from the sale or exchange of
be treated as the active conduct of a qualified
after February 17, 2009, and before January 1,
stock . However, the stockholder bears the
trade or business .
2011 . Current California law allows an
burden of proving that the gain from the sale
exclusion of 50% of any gain from the sale
Question R – Enter the aggregate subscription
or exchange qualifies for exclusion pursuant
or exchange of qualified small business stock
amount of non-treasury stock the corporation
to R&TC Section 18152 .5 whether or not the
held for more than 5 years .
issued during the entire taxable year .
corporation files/provides form FTB 3565 .
A Purpose
Question S – Enter the amount included in
Private Mail Box (PMB)
Question R that the corporation received for
Include the PMB in the address field . Write
Use form FTB 3565, Small Business Stock
that part of the stock issuance that qualifies as
“PMB” first, then the box number . Example:
Questionnaire, to provide information
small business stock under the provisions of
111 Main Street PMB 123 .
regarding issuance of stock pursuant to R&TC
R&TC Section 18152 .5 .
Section 18152 .5 .
Specific Instructions
The amounts entered in Question R and
B Who Must File
Question S should not include the value of
Item F – Principal business activity (PBA)
stock issued in exchange for stock .
code – Do not leave blank. Enter the six-digit
A corporation must file form FTB 3565 if
PBA code from the Principal Business Activity
Question T – If there was more than one
it qualifies as a “qualified small business”
Codes chart included in the 2011 Form 100,
issuance of small business stock during the
and issued stock pursuant to R&TC
Corporation Tax Booklet, or Form 100W,
current taxable year, enter the date of the first
Section 18152 .5 during the current taxable
Corporation Tax Booklet, Water’s-Edge Filers .
issuance here .
year . Complete a separate form FTB 3565
The PBA code should be the number for
for each issuance of small business stock
Question U – If there was more than one
the specific industry group from which the
during the taxable year . The corporation
issuance of small business stock during the
corporation derives the greatest percentage of
current taxable year, enter the date of the last
should maintain records to show that the
California “total receipts .” Total receipts means
issuance here .
stock issuance met the requirements of
gross receipts plus all other income . The
R&TC Section 18152 .5 .
California PBA code may be different than the
For purposes of this form, all corporations
federal PBA code .
which are members of the same parent-
Questions G through L – If the answer
subsidiary controlled group shall be treated as
to any of these questions is “No,’’ stop .
one corporation . A parent-subsidiary controlled
The stock issuance does not qualify under
group is defined in IRC Section 1563(a)(1),
R&TC Section 18152 .5 . The corporation does
except that for California tax purposes
not need to complete the rest of form FTB 3565
“more than 50%” shall be substituted for “at
and should not attach it to the Form 100 or
least 80% .”
Form 100W .
FTB 3565 Instructions 2011 Page 1
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