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California Franchise Tax board notice
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My club is organized in California. I recently received a notice from the California Franchise Tax Board (FTB) regarding a California state employer ID number (SEIN). The FTB stated they had no record of our partnership having an SEIN. The notice also informed us the FTB had assigned an SEIN to our partnership and informed us this number was to be included with all our tax forms. I know at least one other club has received this notice and suspect the notice was sent to all California partnerships without an SEIN. Here is some further information regarding the California SEIN. California partnerships are only required to have an SEIN if they pay at least $100 a quarter in wages. Investment clubs generally do not pay wages to their members or anyone else, so would not be required to have an SEIN. California investment clubs generally only submit tax forms 565 and 565 schedule K-1. These tax forms do not have a place to enter an SEIN. The FTB notice also has information on registering a partnership with the California Secretary of State. Limited partnerships and LLCs must register with the Secretary of State in California. California general partnerships are NOT required to register with the Secretary of State. The only reason I know for registering a California general partnership with the Secretary of State is to invest in real estate. An SOS number for the partnership may be needed to record property transaction information with county clerks. In summary, the SEIN assigned to a California investment club by the FTB will probably never be needed by clubs that stick to investing in publicly traded securities and pay no wages. Russell Malley
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Rank: Administration
Posts: 280
Thanks: 3 times
Was thanked: 47 time(s) in 42 post(s)
|
There is a development on the issue of a Secretary of State Number (SOS#) being required on California form 565.
Background: The Franchise Tax Board (FTB) sent a notice assigning a temporary SOS# to partnerships that did not have a SOS# in the FTB records. I originally thought this temporary number was a California State Employer ID Number or SEIN as the FTB used the terminology "California identification number".
When it became clear the FTB was actually referring to a SOS# there was another problem related to using the temporary number on form 565. A SOS# assigned by the Secretary of State is 12 numbers and form 565 is set for that format. The temporary number from the FTB was 9 numbers with the text "TEMP" at the front. To properly format the number on form 565, some guidance from the FTB was needed.
I emailed the ICLUBcentral contact at the FTB asking about the number formatting and also requesting a reason general partnerships need an SOS# on form 565 when registering with the Secretary of State is not required of general partnerships in California. Evidently, my inquiry was not the only one. Today, Feb 8, I received a link in an email from the FTB about a notice they sent to ALL California 565 e-file providers. This notice, dated Feb 7, stated the SOS# on form 565 will be OPTIONAL (my emphasis) for all form 565 returns e-filed. (By-the-way, CA has a requirement that form 565 must be e-filed if it was prepared using tax software.)
Due to this notice, the ICLUBcentral California state tax printer will NOT provide a way to enter an SOS# for clubs organized as general partnerships. California club treasurers should expect to see a notice like the one below when they start the California tax printer.
Russell Malley
On February 7, 2022, the California Franchise Tax Board (FTB) informed e-filing providers (including ICLUBcentral Inc.) that the Secretary of State Number (SOS#) is optional for general partnerships and does not need to be included on CA Form 565. As a result, the myICLUB.com Club Tax Printer for California does not require a general partnership’s SOS# (including any temporary SOS# issued by the FTB).
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California Franchise Tax board notice
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