What California Form 100W Is For
California Form 100W is the corporate income tax return used by C corporations that elect to file on a water’s-edge basis instead of using worldwide combined reporting. The election lets taxpayers limit their California combined group to U.S. entities and specific categories of foreign income, rather than reporting all global operations. This approach is often advantageous for multinational groups seeking a narrower tax base under California law.
Corporations generally file this form only after making a valid water’s-edge election. Eligible filers include domestic corporations under common ownership and certain foreign entities with substantial U.S. activity or Subpart F income. For the 2020 tax year, corporate income is taxed at 8.84% (10.84% for banks), and the $800 minimum franchise tax still applies unless an exemption is available.
When You’d Use California Form 100W
You must file Form 100W if your corporation conducts business in California and has an active water’s-edge election in place. All members of the combined reporting group must participate; the election applies collectively, not entity-by-entity. The form is also required when a new taxpayer begins filing under an existing election.
Calendar-year filers typically submit the return by April 15. California grants an automatic extension through October 15, but the extension covers filing only—you must still pay your estimated tax liability on time. Corporations file Form 100W for amended reporting years only if the original return was filed using a water’s-edge election. Amendments are made on Form 100X when income, apportionment details, or federal audit changes require correction.
Key Rules or Details for 2020
Water’s-Edge Election Requirements
A corporation elects water’s-edge treatment by attaching Form 100-WE to a timely filed original return. California requires an initial commitment period of 84 consecutive months. Afterward, the election automatically renews unless terminated. Because elections cannot be made on amended returns, missing the original filing deadline generally means waiting until the next eligible year.
Electronic Filing and Payment Rules
Since 2015, corporations preparing their return using approved software must file electronically. Businesses with any single estimated tax payment over $20,000—or annual tax liabilities above $80,000—must make all payments electronically. Once triggered, the electronic payment mandate applies in future years regardless of payment size.
Recordkeeping and Compliance
Water’s-edge filers must maintain detailed documentation, including apportionment data, transfer-pricing support, and information on foreign and domestic affiliates. California may assess a $10,000 penalty per year for failing to maintain records, plus additional penalties if deficiencies continue after notice.
Step-by-Step (High Level)
Step 1: Gather Required Information
Collect your federal Form 1120, supporting schedules, your corporation number, FEIN, payment history, and documentation identifying members of your combined group. Attach Form 100-WE if this is your first water’s-edge year.
Step 2: Determine California Net Income
Use either the federal reconciliation method—starting from federal taxable income and adjusting for California differences—or compute income directly using California rules. Include all schedules needed for adjustments and apportionment.
Step 3: Complete Form 100W and Required Schedules
Print or enter all identifying information clearly, round amounts to whole dollars, and include schedules such as Schedule R for apportionment. Attach required federal forms, including Forms 5471, 5472, 926, 8886, and others if applicable.
Step 4: Calculate Your Tax Liability
Apply the 8.84% rate (or 10.84% for financial corporations) and confirm you meet the $800 minimum franchise tax requirement. Factor in credit limitations—California caps most credits at $5 million for 2020—and calculate estimated tax penalties where applicable.
Step 5: Assemble and File the Return
Place Form 100W on top, followed by Schedule R, Form 100-WE, all attachments, and your federal return if required. Sign and date the return. If mailing, send it to the Franchise Tax Board (FTB) address that corresponds to your payment situation. If paying electronically, follow FTB’s Web Pay or EFT instructions.
Step 6: Submit Payment
If you are not required to pay electronically, checks may be mailed with identifying information. Electronic filers must use EFT, EFW, Web Pay, or credit card options.
Common Mistakes and How to Avoid Them
- Missing or late water’s-edge election — Form 100-WE must be attached to a timely original return.
- Incorrect estimated tax payments — California’s 30/40/0/30 schedule is unique; underpayment triggers penalties.
- Failing to attach federal forms — Missing Forms 5471 or 5472 can lead to significant penalties.
- Ignoring the $800 minimum tax — Applies even with no income unless an exemption applies.
- Incorrect federal conformity assumptions — California does not follow federal rules for GILTI or IRC §965; adjustments are required.
- Overlooking credit limitations or NOL suspension — The 2020 $5 million credit cap and NOL suspension rules affect many corporations.
What Happens After You File
The FTB processes corporate returns by reviewing income, apportionment, and required disclosures. If adjustments are needed, the agency may send a notice requesting clarification or documentation. Corporations may receive confirmation of payment, a bill for additional tax, or a refund if overpaid.
If you discover an error after filing, submit Form 100X to amend the return. Amendments generally must be filed within four years of the original due date. Interest continues to accrue on unpaid tax from the original due date, even if you file during the automatic extension period.
FAQs
What is the main purpose of California Form 100W (2020)?
It is the required income tax return for corporations electing water’s-edge combined reporting instead of worldwide reporting. It reflects California-specific income, apportionment, and tax liability for the 2020 tax year.
Can a corporation make a water’s-edge election on an amended return?
No. California requires the election to be attached to a timely filed original return. If missed, the corporation generally must wait to elect in a future year.
How long does the water’s-edge election last?
The initial election lasts 84 months. After that, it continues annually unless the taxpayer formally terminates it under California procedures.
Are electronic payments always required?
They are required once a corporation makes a single estimated payment of $20,000 or more or has an annual tax liability exceeding $80,000. Once triggered, the requirement applies permanently.
Where can I find the official form?
The IRS does not provide this form; it is issued by the California FTB. You can access Form 100W and instructions at https://www.ftb.ca.gov/forms.
