Assembly Bill 2503, effective January 1, 2019, adds new sections to the Corporations Code and Revenue and Taxation Code. It is designed to remove records from the California Franchise Tax Board’s (FTB) of domestic corporations and LLCs that are no longer operating in California but that are continuing to accrue tax liability and penalties because they were never dissolved.
Administrative dissolution
A.B. 2503 authorizes the administrative dissolution of a corporation or LLC if its powers were suspended by the FTB for at least 60 continuous months.
Notice must be provided to the corporation or LLC. If it does not want to be dissolved it can submit an objection. If it takes all the steps necessary to cure the delinquency—files a current Statement of Information, changes its name if no longer available, and applies for revivor—the administrative dissolution will be canceled.
If the entity is administratively dissolved, the FTB will abate its liability for the minimum franchise tax (for a corporation) or minimum annual tax (for an LLC) and associated penalties accrued while it was not doing business.
Voluntary request for abatement
A corporation or LLC that either 1) never did business in California, or 2) ceased doing business there but had filed all required returns and paid all required taxes for the years it did business, can submit a request to the FTB to abate its liability for the minimum franchise or annual tax and associated penalties for the years in which it was not doing business. The abatement is conditioned on the dissolution of the corporation or LLC with the Secretary of State.
For more information see A.B. 2503 or Secs. 2205.5 and 17714.10.1 of the Corporations Code and Secs. 23310 and 23311 of the Revenue and Taxation Code (all effective January 1, 2019).
