Discussion:California LLC Gross Receipts Fee - Northwest Energetic

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Discussion Forum Index --> Advanced Tax Questions --> California LLC Gross Receipts Fee - Northwest Energetic

Discussion Forum Index --> Tax Questions --> California LLC Gross Receipts Fee - Northwest Energetic

Riley2 (talk|edits) said:

1 February 2008
I just received an email notification that the Northwest Energetic Appeal was decided in favor of the taxpayer. Does this mean that the entire gross receipts statute is unconstitutional? I suppose I will need to wait for the published decision to find the answer to that question.

Riley2 (talk|edits) said:

1 February 2008
I just read the published opinion. My initial impression is that the court ruled that Sec. 17942, as it applied to Northwest Energetic, violated the commerce clause, but that LLC's that conducted business only in California would not be entitled to a refund.

The published opinion can be found at the following link:


Taxtips (talk|edits) said:

2 February 2008
Can we assume that the FTB will notify LLC's that might be entitled to a refund?

KatieJ (talk|edits) said:

2 February 2008
See Footnote 21 on page 36 of the decision. LLCs that have filed timely claims for refund will, if Sec. 17942 as it was in effect prior to its amendment in 2007 is finally held to be unconstitutional, will receive refunds to the extent that the fee they paid exceeded the fee that would have been assessed pursuant to the law as amended.

AB 198, Ch. 381, Stats. 2007 amended Sec. 17942 to provide that the fee is based on total income derived from or attributable to California sources, as determined with reference to the UDITPA rules for assigning sales to the numerator of the sales factor provided by Cal. Rev. & Tax. Code Secs. 25135 and 25136 and the regulations under Sec. 25137, except for those provisions that exclude certain items from the sales factor.

An LLC that did no business in California, such as NW Energetic, will receive a refund of all of the fee paid. LLCs that did all of their business in California will receive no refund. The FTB will recalculate the fees of LLCs that did business within and without California (possibly after some correspondence with taxpayers for additional information) and refund the difference between the fee paid and the fee calculated under the new rules.

If the FTB files a petition for review of this decision with the California Supreme Court within the required period, this decision will not be final. Don't count these chickens quite yet.

An LLC that has not filed a claim for refund presumably will not be contacted. It is up to the taxpayer to file a claim. California has a 4-year statute of limitations.

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