California Franchise Tax Board Updates Affecting Nonprofits in 2021

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The California Franchise Tax Board (FTB) recently announced several updates affecting nonprofits for 2021. These changes are effective as of January 1, 2021.

FTB Form 3500

To apply for or reinstate tax-exempt status in California, an organization must complete FTB Form 3500 Exemption Application. For those that file after January 1, 2021, the $25 application fee is no longer required. The FTB will use the date on which the application was received to determine whether or not an application fee applies. Any fees paid but not owed will be refunded.

Due to the COVID-19 pandemic, many filings have been delayed. However, the FTB notes that its goal is to assign a filed Form 3500 within 60 days of receipt and complete processing within 90 days.

An updated Form 3500 and instruction booklet is expected soon. Until then, Form 3500 is only available upon request to the FTB. The revised form has been reduced to five pages and financials are not required in the format provided by prior versions of Form 3500.

FTB Form 3500A

FTB Form 3500A, Exemption Based on IRC Section 501(c)(3) Federal Determination Letter, is being updated and is currently unavailable on the FTB website.

FTB Form 199

Form 199, California Exempt Organization Annual Information Return, is required for organizations that have been granted tax-exempt status by the FTB as well as nonexempt charitable trusts as described in IRC Section 4947(a)(1).

For those returns that are due after January 1, 2021, the $10 timely filing fee or the $25 late fee is no longer required. However, the late filing penalty of up to $40 is still applicable. The FTB will use the due date as the determining factor. Returns due prior to January 1, 2021, that are filed after that date will still be required to pay the filing fee and any applicable penalties. Any fees paid but not owed will be refunded.

In addition, the FTB announced that the processing time for Form 3502, Nonprofit Corporation Request for Pre-Dissolution Tax Abatement, is approximately six months.

The Church Law Center of California advises churches and other nonprofits on how to protect themselves from risk while furthering their mission. Call us today at (949) 892-1221 or reach out to us through our contact page.

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