California issues legal rulings addressing nexus and apportionment issues

The California Franchise Tax Board (FTB) has recently issued its first legal rulings in almost 24 months, dealing with complex nexus and apportionment concepts. In the first ruling, the FTB concluded through a series of examples that a business entity with a membership interest in a multiple-member limited liability company (MMLLC) that is classified as a partnership for tax purposes may have California return filing requirements and may be subject to the LLC tax and fee based solely upon the actions of the MMLLC. In the second ruling, the FTB concluded that proceeds from asset sales transactions that took place during a Chapter 11 bankruptcy plan of reorganization were not “occasional sales” and were includible in the taxpayer’s sales factor.

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