California estimated LLC Fee

BEG The annual tax is due on the 15th day of the fourth month after the beginning of the tax year.

The limited liability company fee must be paid by the original return due date of the partnership return.

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So for a calendar year LLC operating from 1/1/2011 to 12/31/2011, looks like the $800 should have been paid on 4/15/2011. The LLC fee should be paid on 4/15/2012. Also it looks like the LLC is subject to a corporate tax of 8.84 percent, and the excess of this over $800 is also due on 4/15/201.

But now it gets confusing:

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If the Limited Liability Company is classified as a corporation and files California Form 100, the following estimated tax guidelines apply.

• The estimated tax is payable in four installments. * Installments are due and payable on April 15, June 15, September

If the Limited Liability Company is classified as a partnership or disregarded entity and files California Form 568, the following estimated tax guidelines apply:

• Estimated LLC fee is due by the 15th day of the 6th month. * Members may have to make estimated tax payments for their own reporting purposes.

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Note above it says "estimated LLC fee" is due by 6/15 -- if your LLC is a disregarded entity. There is a difference between estimated and actual LLC fee, so I suppose you must pay the estimate by a certain date, and the actual later, and there won't be a penalty if the actual is much higher than the estimate.

I would think the proper procedure is to annualize your income each quarter and calculate estimated payments based on a flat tax of 8.84% (but pay at least $800 in the first quarter), calculate LLC fee based on annualized income and pay this amount too.

Also I found

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In a recent superior court case, Northwest Energetic Services, LLC v. FTB (San Francisco Superior Court Case No. CGC-05-437721), the court issued a Proposed Statement of Decision ruling California's LLC fee is unconstitutional because it is an unapportioned tax on income. The Court determined the LLC fee violates the Commerce and Due Process clauses. The LLC fee, which is imposed by R&TC ?17942, computes the fee based on worldwide income.

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No idea whether the above has been resolved or not.

just a couple days ago someplace . . .)

If the LLC underpays the estimated fee, a penalty of 10% of the amount of any underpayment will be added to the fee. The underpayment amount will be equal to the difference between the total amount of the fee due for the taxable year less the amount paid by the estimated fee due date. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year. To avoid late payment penalties and interest, the LLC's estimated fee must be paid by the 15th day of the 6th month of the current taxable year. The penalty and interest will be computed from the due date of the return to the date of the payment.

There is a prior year exception: no penalty if the estimated fee paid is at least as much as the prior year's fee. See the Form 3536 instructions, under "Penalties and Interest," at

Katie in San Diego

snip

ps, you are confusing the LLC fee provisions with the rules that apply to LLCs that have elected to be taxed as corporations. Those LLCs are not subject to the LLC fee. Instead, they are subject to the measured corporate franchise or income tax.

The Court of Appeal in a later case held that the fee was unconstitutional for want of apportionment, but limited the refund to the difference between the fee the taxpayer paid and the fee it would have paid had an apportionment provision applied (Ventas Finance I LLC v. FTB, 165 Cal App 4th 1207 81 Cal Rptr 3d 823, 08/11/2008., pet. for rev. denied 11/12/08, Calif. Sup. Ct. Dkt. No. S166870). The California Supreme Court denied the taxpayer's petition for review, as noted in the citation, and the US Supreme Court denied its petition for certiorari (Dkt No. 08?1022, 04/06/2009).

In 2007 the Legislature amended Sec. 17942 so that the fee basis is calculated under the rules that apply for assigning gross receipts to the California numerator of the sales factor in the apportionment formula. The change applies for years beginning on or after 1/1/07 and to claims for refund for prior years.

Katie in San Diego

How do you find out how a court case concluded? Is there some website, because when I searched in google and bing I found the case from 2007 -- as maybe that's the most popular result by search engine rankings. But there should be someplace where it will track the progress of that case

Google scholar (scholar.google.com) has a lot of California cases, but apparently not this one. There are other fee sites that have some cases (e.g. findlaw.com), though they are not consistent. You may have to either go to a law library or use a paid service.

___ Stu

pacer.gov provides access to many federal court cases at little or no cost to the occasional user.