What California Form 100S (2015) Is For
California Form 100S (2015) is the annual franchise or income tax return for S corporations that operate in California or earn income from California sources. If your corporation has made a valid federal S election and is incorporated, qualified, registered, or “doing business” in California, you generally file this form.
Unlike C corporations, an S corporation is a pass-through entity. Most income, deductions, and credits flow to shareholders using Schedule K-1 (100S), but California still imposes an entity-level tax. California Form 100S (2015) calculates this corporate tax and provides the information shareholders need for their own individual income tax return.
When You’d Use California Form 100S (2015)
You use California Form 100S (2015) for taxable years beginning in 2015 when your corporation is an S corporation for federal purposes and has California filing requirements. For calendar-year corporations, the normal due date is March 15, 2016, which is the 15th day of the 3rd month after year-end.
If you can’t file on time, California grants an automatic 7-month extension to the 15th day of the 10th month after your year ends. This extension only applies to filing the tax return. You must still pay your tax liability, including the $800 minimum franchise tax if it applies, by the original due date or your return will be treated as a past due return and penalties and interest may apply.
Amended filings are also done through this system. If the IRS later changes your federal S corporation return or you file an amended federal return, you generally must file California Form 100X to correct your state tax liability. Short-period returns—such as when you dissolve, merge, or change accounting periods—use the same due-date rules but are based on the shortened tax year.
Key Rules or Details for 2015
Tax Rates and Minimum Franchise Tax
For 2015, most S corporations pay a 1.5% tax on California net income. Financial S corporations, such as banks, pay 3.5% (2% more than the standard rate). In addition, certain built-in gains and excess net passive income can be taxed at 8.84%, or 10.84% for financial S corporations, similar to a C corporation’s tax liability on those items.
Almost all S corporations that are doing business in California must pay at least the $800 minimum franchise tax each year. Newly incorporated or newly qualified corporations are exempt from this minimum for their first taxable year and pay only the percentage tax on net income. The minimum franchise tax applies starting in the second taxable year and does not apply to every type of entity, such as QSubs that do not qualify through the Secretary of State.
Doing Business and Nexus Thresholds
You are “doing business” in California if you actively engage in transactions for financial gain in the state or cross certain economic thresholds. For 2015, those thresholds are:
- California sales above the lesser of $536,446 or 25% of total sales
- California property above the lesser of $53,644 or 25% of total property
- California payroll above the lesser of $53,644 or 25% of total compensation
Meeting any one of these thresholds can create franchise tax liability, including the $800 minimum, even if you otherwise have a loss for the year.
Conformity Differences and Apportionment
California generally conforms to the IRC as of January 1, 2015, but there are important differences. California does not allow federal bonus depreciation, enhanced IRC Section 179 expensing, the domestic production activities deduction, certain qualified small business stock rules, and some energy and real-estate incentives. You must make state adjustments on California Form 100S (2015) to reverse disallowed deductions or apply California’s alternative rules.
If your S corporation earns income both inside and outside California, you must usually complete Schedule R. For 2015, California uses a single-sales-factor apportionment formula for most businesses, and applies market assignment for services and intangibles. That means sales are assigned to California based on where the customer receives the benefit, not where the work is performed.
Special Rules and Electronic Filing
For taxable years beginning on or after January 1, 2010 and before January 1, 2018, a small S corporation solely owned by a deployed member of the U.S. Armed Forces may be exempt from the $800 minimum franchise tax if it operates at a loss or ceases operations and has $250,000 or less of California income. You must write “Deployed Military” in red ink across the top of the return to claim this relief.
For years beginning on or after January 1, 2014, business entities that prepare their returns using tax preparation software are generally required to e-file California Form 100S (2015). Paper filing is still allowed in limited circumstances, but most S corporations are expected to file a tax return electronically.
Step-by-Step (High Level)
Step 1: Gather Financial and Entity Information
Collect your federal Form 1120S, trial balance, shareholder information, prior-year returns, and records of estimated tax payments and withholding. Confirm your legal name, FEIN, California corporation number, and Secretary of State file number.
Step 2: Complete Basic Corporate Information
On the top of California Form 100S (2015), enter your legal name exactly as registered with the Secretary of State. Add your identification numbers and address using black or blue ink. Make sure the accounting period matches your federal return.
Step 3: Start with Federal Income and Make State Adjustments
Report ordinary business income from Form 1120S or compute it using Schedule F. Then complete the state adjustments section (lines 2–13) to add back disallowed deductions, such as state income tax or bonus depreciation, and subtract California-allowed items like dividend deductions.
Step 4: Determine California Net Income and Apportion if Needed
After adjustments, compute net income for California purposes. If you do business in multiple states, use Schedule R to calculate your California apportionment percentage and apply it to business income. Enter California-sourced net income on the appropriate line.
Step 5: Apply Deductions, NOLs, and Special Taxes
Claim allowable deductions such as NOLs or disaster losses, if applicable under 2015 rules. Then compute the 1.5% (or 3.5%) tax on net income and ensure the total is not below the $800 minimum franchise tax if it applies. Add any built-in gains or net passive income tax.
Step 6: Apply Credits, Payments, and Use Tax
Complete credit schedules if you qualify for California credits and reduce your tax accordingly. Total estimated tax payments, prior-year overpayments, and withholding. If you owe California use tax on out-of-state purchases, report it on the designated line before calculating your final balance.
Step 7: Prepare Schedules K and K-1 and File
Complete Schedule K and a separate Schedule K-1 (100S) for each shareholder showing their share of income, deductions, credits, and California-source amounts. Provide K-1s to shareholders so they can file a tax return accurately. Assemble your return in the required order and e-file or mail it by the deadline.
Common Mistakes and How to Avoid Them
- Missing or incorrect ID numbers – Verify the California corporation number, FEIN, and Secretary of State file number against official documents
- Using DBA instead of legal name – Always use the legal name registered with the Secretary of State and report any DBA separately
- Skipping California adjustments – Don’t copy the federal amounts without adjusting for nonconformity items like bonus depreciation or Section 179
- Forgetting required schedules and K-1s – Attach Schedule R if you apportion, and provide complete Schedule K-1s to all shareholders
- Misapplying the first-year minimum tax exemption – Confirm your incorporation or qualification date before skipping the $800 minimum franchise tax
- Assuming an extension covers payment – The automatic extension gives more time to file, not to pay; pay at least 90% of tax liability by the original due date
What Happens After You File
Once you file California Form 100S (2015), the Franchise Tax Board checks your return for math errors, compares reported payments and withholding, and confirms required schedules are attached. E-filed returns are usually processed faster than paper returns, which helps if you are expecting a refund.
If you reported an overpayment, the FTB will issue a refund or apply it to your next year’s estimated payments, depending on your election on the return. If your payments were short, you will receive a bill with additional tax, penalties, and interest based on your filing requirements and payment history.
Late filings or underpayments may trigger penalties, including late filing and late payment penalties, plus interest from the original due date. In more serious cases, such as repeated non-filings or large balances, your corporation may be suspended or forfeited, and you could face additional penalties for operating while suspended. Separately, the FTB may select your return for audit, especially if there are large adjustments, multistate apportionment issues, or significant credits.
FAQs
What’s the difference between franchise tax and income tax for an S corporation?
Franchise tax is imposed on S corporations that are incorporated, qualified, or doing business in California and is tied to the privilege of doing business in the state. Income tax applies when an S corporation has California-source income but does not meet the doing business thresholds, and tax is based only on that income. Both use the 1.5% rate and are subject to similar filing requirements.
Do I owe the $800 minimum franchise tax in my first year?
If your S corporation first incorporated or qualified with the California Secretary of State in 2015, you are generally exempt from the $800 minimum franchise tax in that first taxable year. You still calculate tax at 1.5% (or 3.5% for financial S corporations) on your net income. Starting with your second taxable year, you must pay at least $800 each year, even if you have a loss.
How does California treat my federal S election?
California normally follows your federal S corporation election automatically, with the same effective date. You don’t file a separate California S election. If the federal S status ends, California S status ends at the same time, and you may need to file short-period returns for both S and C corporation periods and update how you file a tax return.
How are nonresident shareholders taxed on California S corporation income?
California resident shareholders are taxed on their entire share of S corporation income from all sources. Nonresident shareholders are taxed only on their share of California-source income, which is reported separately on Schedule K-1 (100S). If you apportion income, each nonresident’s California income is their pro-rata share multiplied by the California sales factor.
What happens if we miss the original filing deadline?
You automatically receive extra time to file, but not to pay. If you miss the March 15 due date and don’t pay enough tax by that date, penalties and interest begin to accrue, even if you file within the extended deadline. Paying at least 90% of your expected tax liability, including the minimum franchise tax, by the original due date helps limit late payment penalties.
Can we carry forward unused California tax credits?
Yes, many California credits can be carried forward if they exceed your current-year tax liability. Some credits are used only at the S corporation level, while others partly or wholly pass through to shareholders. Each credit has its own filing requirements, limits, and carryforward period, so review the credit instructions and Schedule C (100S) carefully when planning how to manage your income tax and credits.
