Norma Desmond wrote:
- quote -

The statute of limitations for claims is four years from the
date the return was filed or its original due date,
whichever is later.

You can file a claim by writing a letter to the FTB. Be
sure to head it in big, bold letters, "CLAIM FOR REFUND"
(just like you would write "PROTEST" in big letters on a
protest letter), so it will be properly logged. It must
clearly identify the taxpayer (the LLC) and the years and
amounts involved, and be signed by a member of the LLC
(authorized under the LLC agreement to sign such documents)
or an authorized representative. A non-member
representative need not be an attorney or CPA, but must have
a Power of Attorney signed by an authorized member. A Power
of Attorney form is available on the FTB web site
(www.ftb.ca.gov).

A simple statement of grounds for the claim would be that
the fee violates the Due Process and Commerce clauses of the
U.S. Constitution because it is not fairly apportioned and
discriminates against interstate commerce.

The FTB used to have a claim for refund form, which you
might find useful if it still exists. It was never
mandatory, just provided for convenience. Check the web
site.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice. It may not
be relied upon to avoid any penalties that may be imposed on
a taxpayer or tax preparer.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"Katie" <katiej_1958[at]yahoo.com> wrote:

- quote -

this is very interesting, and I could not find anything
about this on the web or the FTB site.

1. how should one "file a claim"?
2. please refresh my memory as to the statute of
limitations.
3. I assume future payments of this LLC fee should be
accompanied by a claim as well.

since I am retired and apparently thought of as a "pretty
big fish" (but not by me or my dates . . .), I could stand
to recover some of those LLC fees.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Three lawsuits have been filed challenging the California
LLC fee. In January 2005 an LLC based in Washington (state)
filed suit in superior court in San Francisco challenging
the constitutionality of the LLC fee (Northwest Energetic
Services, Inc. v. FTB, San Francisco Superior Court #
CGC-05-437721, filed 1/15/05). I understand another suit
has also been filed on similar grounds. In addition, a
third lawsuit has been filed claiming that an LLC organized
outside the state can be protected from the fee by P.L.
86-272.

The FTB has indicated that it will hold claims for refund of
the fee pending resolution of these lawsuits. If you have
clients that have paid the fee, you should consider filing
claims for years that are open under the statute of
limitatons. It may be a long time before these issues are
resolved.

The fee is imposed in addition to the $800 fixed-dollar
minimum tax, and is based on (not measured by) "total
income," which is gross receipts with certain adjustments.
"Total income" for this purpose includes income from all
sources, before any apportionment or allocation among
states. LLCs with "total income" $250,000 or less pay no
fee; those with $250,000 to $500,000 pay $900; $500,000 to
$1 million pay $2,500; $1 million to $5 million pay $6,000;
and over $5 million pay $11,790. This fee applies to all
LLCs organized, registered or doing business in California.

The LLC fee was enacted in 1993 for the purpose of making
the ability to create and operate LLCs in California
"revenue neutral." The thinking at the time was that LLCs
would primarily be used by small, "mom and pop" businesses,
and that the Legislature would not want to discourage their
use by small enterprises by imposing a fee. On the other
hand, big LLCs should pay for the privilege of operating as
a flowthrough entity with liability protection for all of
its owners. The unapportioned bracket figures were adopted
in an effort to distinguish between "big'ns" and
"little'ns," a classification not dependent on whether the
entity did business wholly within California or in other
states as well.

It was described as a "fee" rather than a "tax" so that it
would be deductible for California income tax purposes. The
$800 minimum is a tax and cannot be deducted either by the
LLC or by its members.

If the fee is really a tax, then it clearly violates the
internal consistency test for fair apportionment under the
Commerce Clause, arising out of several U.S. Supreme Court
decisions, including _ATA v. Scheiner_ and _Container_. A
tax is internally consistent (and therefore probably fairly
apportioned) if, assuming other states used identical
systems, a multistate taxpayer would not pay tax on more
than 100% of its income. Assume Arizona imposed a fee
structure identical to California's. An LLC with $5,000,000
of "total income," doing business only in California, would
pay the maximum fee. If it also did business in Arizona, it
would still pay the maximum fee to California and would also
pay the maximum fee to Arizona. Thus an interstate business
would pay the same fee multiple times, if other states had
the same taxing scheme, while an intrastate business would
pay it only once. Also, the fee arguably violates the
external consistency test, because the measure of the fee is
not reasonably related to the extent of the taxpayer's
activities within the state.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice. It may
not be used or cited to avoid penalties that may be imposed
on any taxpayer or tax preparer.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It may not be relied upon for the purpose of avoiding > << penalties that may be imposed on the taxpayer or the > << tax preparer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >