New LLC fee court decision

Courtesy of Spidell Publishing Inc.

A California Court of Appeal has ruled that the LLC fee must be apportioned in Ventas Finance I, LLC. The court ruled that, while former R&TC §17942 — as applied to Ventas — violates the Commerce Clause, neither federal due process nor any principle of California law requires the FTB to refund the entire LLC fee that Ventas paid.

The Court ruled that, in the case of Ventas, the correct fee should be based on an apportionment formula.

The case has been remanded back to the trial court. According to the taxpayer’s attorney, they anticipate appealing the case. All Ventas-type protective claims will be on hold pending the appeal. When the case is final, the FTB will likely issue guidance for refunds in LLC cases where the LLC had income inside and outside of California.

Spidell will have complete information on recovering your clients’ LLC fees, including sample forms and letters, at Spidell’s Fall Tax Update.

[TaxMama note: In other words, for folks hoping to have the California LLC gross receipts tax ruled out completely – you’ll have to wait. So far, the courts are only allowing companies to apportion the LLC based on the percentage of the company’s income generated in California.]