What California Form 100S Is For
California Form 100S is the annual return S corporations must file when they operate in California, are incorporated in the state, or earn income from California sources. Although S corporations are pass-through entities at the federal level, California imposes an entity-level tax of 1.5% on net income (3.5% for financial S corporations). Shareholders still report their pass-through income separately using Schedule K-1 (100S).
This form ensures the Franchise Tax Board (FTB) can calculate the corporation-level tax and confirm each shareholder’s share of income, deductions, and credits. For 2019, California continued to diverge from several federal rules, so corporations must make California-specific adjustments on the return. Most S corporations must also pay the $800 annual minimum franchise tax unless they qualify for the first-year exemption.
When You’d Use California Form 100S
S corporations file Form 100S each year by the 15th day of the third month following the end of their taxable year. For calendar-year filers, the 2019 due date was March 15, 2020. California grants an automatic filing extension to the 15th day of the ninth month, but taxes must still be paid by the original deadline to avoid penalties and interest.
You use this form when filing your original return, and you may need it again if a federal audit changes your taxable income. If you discover errors after filing, you must file Form 100X to amend the return within the statute of limitations. Corporations with short tax years due to dissolution, merger, or other restructuring events also file Form 100S for that shortened period.
Key Rules or Details for 2019
Tax Rates and Minimum Franchise Tax
For 2019, standard S corporations paid tax at 1.5% of California net income, while financial S corporations paid 3.5%. Certain items such as built-in gains or excess net passive income may be taxed at 8.84%. All corporations doing business in California owe at least the $800 minimum franchise tax unless they qualify for the first-year exemption.
Doing Business Thresholds
A corporation is “doing business” in California in 2019 if it meets one of the following:
- California sales exceed $601,967 or 25% of total sales
- California property exceeds $60,197 or 25% of total property
- California payroll exceeds $60,197 or 25% of total compensation
- It is organized or commercially domiciled in California
Meeting any threshold triggers the filing requirement and minimum franchise tax.
Notable 2019 Changes
Key updates for the 2019 tax year include:
- No NOL carrybacks allowed for years beginning on or after January 1, 2019
- Like-kind exchange rules conform to federal limitations, applying only to real property
- Mandatory use of federal Section 338 treatment following a qualifying election
- Consolidated rules for tax credit assignments under FTB Form 3544
- New accounting method election for qualifying small businesses
California does not conform to many federal provisions, including GILTI, IRC Section 965, bonus depreciation, expanded Section 179 expensing, and qualified opportunity zones.
Apportionment Rules
Corporations earning income inside and outside California must use Schedule R to apportion income. California uses a single-sales factor formula and market-based sourcing for services and intangible property.
E-File Requirement
If you use tax preparation software, you must e-file Form 100S with the FTB. The form and instructions are available at the California FTB website.
Step-by-Step (High Level)
Step 1: Gather Records
Collect federal Form 1120S, financial statements, shareholder details, and all payment documentation such as estimated taxes or withholding for the 2019 year.
Step 2: Complete Identification and Corporate Information
Enter the correct legal name, FEIN, California corporation number, and Secretary of State file number. Use the information exactly as registered with the state.
Step 3: Calculate Income and Make State Adjustments
Start with federal ordinary business income, then complete lines 2–13 to adjust for California differences. This includes add-backs for depreciation, federal taxes deducted, and other nonconforming items.
Step 4: Determine Net Income and Compute Tax
Apply allowable deductions, NOLs, and special adjustments. Multiply net income by the applicable tax rate or apply the $800 minimum tax if higher.
Step 5: Apply Credits, Add Special Taxes, and Reconcile Payments
Report credits on Schedule C (100S), built-in gains, passive income taxes, and all payments made throughout the year. Determine the balance due or overpayment.
Step 6: Prepare Schedule K and K-1s and File the Return
Complete the pass-through schedules for shareholders and attach all required forms. File by mail or e-file as required.
Common Mistakes and How to Avoid Them
- Incorrect identification numbers — Verify FEIN and state numbers before filing
- Using a DBA instead of legal name — Always use the name on file with the Secretary of State
- Not rounding to whole dollars — California requires rounding throughout the return
- Missing attachments or schedules — Confirm all required California-specific schedules are included
- Substituting federal versions of K-1s — California requires its own formats
- Stapling documents — The FTB instructs filers not to staple returns or payments
What Happens After You File
The FTB reviews your return, verifies calculations, and checks for missing information. If anything is unclear, they will send a request for clarification. Refunds can be issued by direct deposit, while overpayments applied to next year’s estimated tax are automatically carried forward.
If the FTB identifies underpaid tax, they will issue a Notice of Proposed Assessment. Penalties may apply for late filing, late payment, underpayment of estimated tax, or failure to maintain records. Interest accrues on any unpaid balance from the original due date. Returns may also be selected for audit, particularly when federal changes are reported. Shareholders use Schedule K-1 to report their share of income on their individual income tax return.
FAQs
What is the difference between franchise tax and income tax for S corporations?
Franchise tax applies when a corporation is incorporated, qualified, or doing business in California. Income tax applies when income is sourced to California but the entity is not “doing business” in the state. Most S corporations fall under the franchise tax rules and must pay the $800 minimum.
Does a newly formed corporation owe the $800 minimum in its first year?
No. A corporation incorporated or qualified with the Secretary of State in 2019 does not owe the $800 minimum for its first tax year. The tax applies starting in the second year.
How did California’s 2019 NOL changes affect filers?
California eliminated NOL carrybacks beginning in 2019. NOLs may be carried forward only, subject to state limitations.
Does California follow federal 1031 rules for 2019?
Yes, but only for real property exchanges. Personal property exchanges no longer qualify for nonrecognition treatment under California law.
What happens if an S corporation misses the original March 15 deadline?
You receive an automatic extension to file, but not to pay. At least 90% of your tax liability or the $800 minimum must be paid by March 15 to avoid penalties and interest.
How should corporations handle California’s nonconformity to TCJA?
Filers must make state adjustments to remove federal items such as GILTI, IRC Section 965 income, bonus depreciation, and opportunity zone benefits. These adjustments appear on lines 2–13 of Form 100S.
