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California Franchise Tax Board (FTB) Abating some Limited Liability Company (LLC) Penalties

The FTB is processing refunds of a penalty incorrectly applied to certain single-member LLCs (SMLLCs). They discovered that the per-partner Late Filing Penalty under California Revenue & Taxation Code Section 19172 was misapplied to SMLLCs treated as disregarded entities for tax purposes.

The penalty is a maximum of $50 ($10 per member × 5 months) for years 2010 and prior, and $216 ($18 per member × 12 months) for 2011 and later. SMLLCs will be identified by the FTB based on information on their California Form 568, Limited Liability Company Return of Income.

The FTB will mail affected SMLLCs a letter indicating their eligibility for a refund, with a refund warrant to follow. The refund or credit of the penalty will include applicable interest and is currently restricted to those tax years and/or payments made within the statute of limitations for refunds as of June 26, 2013. However, the FTB has stated that it is actively exploring alternative relief options for taxpayers outside the statute of limitations.

For more information about this article, please contact our tax professionals at or toll free at 844.4WINDES (844.494.6337).
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