What California Form 100S (2020) Is For
California Form 100S (2020) is the annual franchise or income tax return for S corporations doing business in California or earning California-source income. Even though an S corporation generally passes income, losses, deductions, and credits through to shareholders, the state still imposes tax at the entity level.
For 2020, most S corporations owed the greater of 1.5% of net income (3.5% for financial S corporations) or the $800 minimum franchise tax. Newly incorporated or qualified corporations were exempt from the $800 minimum only in their first taxable year. Shareholders receive Schedule K-1 (100S) to report their pro rata share on their individual income tax return.
When You’d Use California Form 100S (2020)
You use California Form 100S (2020) if the corporation has elected federal S corporation status and meets California’s “doing business” thresholds for sales, property, or payroll. This applies even if the corporation has a loss, is inactive, or files a short-period return. In the second taxable year and beyond, the $800 minimum franchise tax generally applies whenever you file a tax return.
You also file Form 100S to report a past due return or a return filed under extension. The 2020 calendar-year due date was March 15, 2021, with an automatic six-month extension to September 15, 2021, for filing only. If you need to correct a previously filed 2020 return, you submit an amended return using Form 100X.
Key Rules or Details for 2020
Tax Rates and Minimum Franchise Tax
For 2020, general S corporations were taxed at 1.5% of net income, and financial S corporations were taxed at 3.5%. Certain built-in gains or excess net passive investment income were subject to an 8.84% rate. The $800 minimum franchise tax was due with the first estimated tax payment, except for first-year corporations and certain qualifying deployed military small businesses operating at a loss.
Doing Business in California
An S corporation was considered to be “doing business” in California if it met any of these 2020 thresholds:
- California sales exceeded $610,395 or 25% of total sales
- California property exceeded $61,040 or 25% of total property
- California compensation exceeded $61,040 or 25% of total compensation
If any threshold was met, the corporation had California filing requirements and owed at least the minimum tax.
2020 NOL Suspension and Credit Limitation
For 2020–2022, corporations with taxable income of $1 million or more could not use net operating loss carryover deductions. They could still compute NOLs and carry them forward, and the carryover period was extended. Total business tax credits (including carryovers) generally could not reduce tax liability by more than $5 million, though the Low Income Housing Credit was excluded from this cap.
COVID-19 Relief Treatment
California excluded certain COVID-19 relief from gross income for 2020, including PPP loan forgiveness and various federal and state grant programs. In many cases, eligible expenses funded by these programs remained deductible, though “ineligible entities” faced restrictions. These rules impacted the corporation’s income tax calculation and therefore its California tax liability.
Federal Nonconformity, E-Filing, and Payments
California conformed to the Internal Revenue Code as of January 1, 2015 and did not adopt most Tax Cuts and Jobs Act changes. Adjustments were needed for items like bonus depreciation, expanded Section 179 expensing, GILTI, IRC Section 965, and Opportunity Zone provisions. Business entities using tax software were required to e-file, and any single payment over $20,000 or total tax over $80,000 had to be paid electronically to avoid a 10% penalty.
Step-by-Step (High Level)
Step 1: Gather Identification and Federal Data
Collect the California corporation number, FEIN, and Secretary of State file number, along with federal Form 1120-S and all relevant schedules. Include records of estimated tax payments, extension payments, and any prior notices related to the 2020 year.
Step 2: Determine California Net Income
Choose either the federal reconciliation method or the California computation method. Start with federal ordinary income and adjust for California differences, or use Schedule F to compute California income directly. Incorporate nonconformity adjustments, NOL suspension rules, and credit limitations that apply for 2020.
Step 3: Calculate Tax and Apply Minimums
Apply the 1.5% or 3.5% rate to net income and compare the result to the $800 minimum franchise tax. Factor in any built-in gains or excess net passive income taxed at 8.84%. Subtract estimated payments, credits, and withholding to determine the balance due or refund.
Step 4: Assemble Required Attachments
Put the return in the proper order without staples or permanent bindings. Include Form 100S, Schedule R if apportioning income, supporting schedules, a copy of Form 1120-S if required, and Form FTB 5806 when there is an underpayment of estimated tax. Attach any required federal informational forms such as 5471, 5472, or 8886.
Step 5: Sign, File, and Pay
An authorized officer must sign the return and provide a phone number and email address. A paid preparer must sign and include their PTIN. File electronically if required and submit any remaining payment by the original due date, using electronic payments when thresholds are met.
Common Mistakes and How to Avoid Them
- Missing or incorrect identification numbers
- Underpaying estimated taxes or ignoring the 30% / 40% / 0% / 30% schedule
- Failing to pay electronically when large payment rules apply
- Claiming suspended NOLs for 2020–2022 when taxable income is $1 million or more
- Ignoring the $5 million credit limitation on total credits
- Forgetting California’s nonconformity to TCJA for depreciation and foreign income
- Not issuing Schedule K-1 (100S) to each shareholder by the due date
What Happens After You File
Once Form 100S is filed, the Franchise Tax Board reviews it for completeness, required schedules, and proper signatures. If something is missing or inconsistent, the FTB may contact the corporation or preparer for clarification, which can delay any refund or increase the risk of additional notices.
If a refund is due, it is issued by direct deposit (if requested) or check after processing. If tax remains unpaid, penalties and interest are assessed and billed. Some returns may be selected for further review or audit, and the FTB can request additional documentation for up to four years from the original due date. Failure to file or pay can eventually lead to suspension or forfeiture of the corporation’s rights to do business in California.
FAQs
Do I have to pay the $800 minimum tax if my S corporation had no income?
Yes. If your S corporation is doing business in California, it generally must pay the $800 minimum franchise tax starting in the second taxable year, even when there is no income or a loss. Certain deployed military small businesses operating at a loss have a limited exemption.
What are the estimated tax payment requirements for 2020?
For 2020, estimated taxes were due in four installments: 30% by the 15th day of the 4th month, 40% by the 6th month, 0% by the 9th month, and 30% by the 12th month. The first installment could not be less than $800, and electronic payment was required once the large-payment thresholds were met.
How does the 2020 NOL suspension affect my S corporation?
If your corporation’s taxable income is $1 million or more, you cannot claim NOL carryover deductions for 2020–2022. You may still compute NOLs and carry them forward, and the carryover period is extended, but the deduction itself is suspended for those years unless an exception such as a qualifying disaster loss applies.
What is the $5 million credit limitation for 2020–2022?
During 2020–2022, total credits—both current year and carryovers—generally cannot reduce the corporation’s tax by more than $5 million. The Low Income Housing Credit is excluded from this limitation. Any credits disallowed by the cap may be carried forward with an extended carryover period.
Are PPP loans and COVID-19 relief grants taxable for 2020 in California?
For many S corporations, forgiven PPP loans and specified COVID-19 grants are excluded from gross income for California purposes. In addition, qualifying expenses paid with those funds may remain deductible, subject to special rules for ineligible entities such as certain publicly traded companies.
What happens if I file or pay late for tax year 2020?
Late filing can trigger a 5% per month penalty (up to 25%) plus an additional $18 per shareholder per month (up to 12 months). Late payment adds a 5% penalty plus 0.5% per month of unpaid tax, up to 25%, and interest accrues from the original due date. Continued noncompliance can result in suspension of the corporation’s ability to operate in California.
