Louis E. Michelson, A Professional Corporation

The following summarizes recent guidance issued by the California Franchise Tax Board regarding the automatic extension for filing the Form 199, Exempt Organization Annual Information Return and for the Form 109, Exempt Organization Business Income Tax Return.  The guidance, which is found in FTB Notice 2016-04, is for taxable years beginning on or after January 1, 2016, a copy of which can be accessed at the following link.

Original Due Date.  Exempt organizations should file Form 199 by the 15^th day of the fifth month after the close of the tax year.  If an organization has income in excess of $1,000 from a trade or business that is unrelated to its exempt purposes – even if the profits are used for exempt purposes – it is required to file Form 109.  The same due date applies for Form 109 as for Form 199.  For example, a calendar year exempt organization, the two forms are due on May 15^th.

Automatic Extension if in Good Standing.  For taxable years beginning on or after January 1, 2016, if Form 199 (or 109) cannot be filed by the 15^th day of the fifth month, the organization has an additional six months to file without filing a written request for extension.  This automatic extension is extended to organizations that are in good standing with the Franchise Tax Board on the original due date.  The granting of the extension is also conditioned on the filing of a return within the automatic extension period.  The extended due date will be the 15^th day of the 11^th month after the close of the tax year.  For example, a calendar year exempt organization, the extended due date would be November 15^th.

No Automatic Extension if Not in Good Standing.  If an organization is not in good standing with the FTB, neither the 199 return nor the 109 return will be given an extension of time to file.  With respect to Form 109 to avoid late payment penalties, the organization must pay 100% of the tax liability by the original due date of the return.

Caution:  The above discussion is limited to the Form 199 and 109 returns filed by exempt organizations.   Please also note that this information is for taxable years beginning on or after January 1, 2016 and not for earlier tax years (for example:  the instructions for the 2015 forms refer to seven additional months for the automatic extension).