Form 2416 - California Schedule Of Included Controlled Foreign Corporations (Cfc) - 2015 Page 3
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32015 Instructions for Form FTB 2416
Schedule of Included Controlled Foreign Corporations (CFC)
General Information
Column (e) – Subpart F income
In determining whether a CFC has Subpart F
A Purpose
income, defined by IRC Section 952, for
purposes of R&TC Section 25110(a)(2) and
Revenue and Taxation Code (R&TC)
the regulations thereunder, the limitation and
Section 25110(a)(2)(A)(ii) provides that
exclusions provided for in IRC Section 954(b)
the income and apportionment factors of
shall apply. However, IRC Section 952(c) shall
any Controlled Foreign Corporation (CFC)
not apply.
(as defined in Internal Revenue Code [IRC]
Section 957) that has Subpart F income
For these purposes, Subpart F income does not
(defined in IRC Section 952) are to be included
include income defined in IRC Sections 955 or
in the combined report of a taxpayer making a
956.
water’s-edge election.
Include both business and nonbusiness
Use form FTB 2416, Schedule of Included
income as defined under R&TC Section 25120
Controlled Foreign Corporations (CFC), to
for the current year.
compute the net income and apportionment
If there is no Subpart F income, none of the
factors required to be included in the
income or factors of this CFC will be included
water’s-edge combined report.
in the water’s-edge combined report. See
Fujitsu IT Holdings, Inc. vs. Franchise Tax Board
B Controlled Foreign
(2004) 120 Cal. App. 4th 459.
Corporation
Column (f) – Current year earnings and profits
In general, a foreign corporation is a
E&P, as defined in IRC Section 964, includes
corporation that is not created or organized in
both business and nonbusiness income for
the U.S. or under the laws of the U.S. or any
the current taxable year. In most cases, the
state.
E&P can be taken from federal Form 5471,
A CFC is any foreign corporation that is more
Information Return of U.S. Persons With
than 50% owned or considered to be owned
Respect To Certain Foreign Corporations,
per IRC Section 958(b) by U.S. shareholders.
page 4, Schedule H, line 5d.
C Apportionment
If there is no current E&P, stop. None of the
income or factors of this CFC will be included
For each CFC, the amounts included in income
in the water’s-edge combined report.
and the apportionment factors are determined
Column (g) – Percentage
by multiplying the total income and each
component of the apportionment factors
The percentage may not exceed 100% or be
by a fraction. The numerator of the fraction
less than zero.
is the current taxable year total Subpart F
Column (h) – Net income
income defined in IRC Section 952 and the
denominator is the current taxable year
Report the total net income as reflected on the
earnings and profits (E&P) as defined in IRC
CFC’s books and records, adjusted to conform
Section 964.
to California tax law.
See R&TC Section 25110(a)(2) and the related
Column (i) – Net income included in the
regulations for more information.
combined report
Specific Instructions
Enter total from column (i) on Form 100W,
Side 1, line 7a.
Column (b) – Country of incorporation
Columns (j), (l), (n), and (p) – Apportionment
Enter the country of incorporation in
factors
column (b). Use the list of country codes on
form FTB 2416, Side 2.
Determine the apportionment factors for
the CFC to be included in the water’s-edge
Column (c) – Country of primary business
combined report including:
activity
• Total sales everywhere, if using the
Enter the country in which the CFC conducts its
single-sales factor formula, or
primary trade or business in column (c). Use
• Total average property everywhere, rent
the list of country codes on form FTB 2416,
expense everywhere, payroll everywhere,
Side 2. This country may be different from the
and sales everywhere, if using the
country of incorporation.
three-factor formula.
Column (d) – Principal business activity
Refer to the apportionment factor rules set
(PBA) code
forth in R&TC Sections 25128.7, 25128,
and 25129 through 25137. See California
Enter the PBA code of the CFC. The PBA codes
Schedule R, Apportionment and Allocation
are listed on the Principal Business Activity
of Income, for more information.
Codes chart included in this booklet.
Page 38 Form 100W Booklet 2015
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