California Franchise Tax Board Adopts Single-Sales Factor Election Regulation

The California Franchise Tax Board has adopted Regulation 25128.5, which provides the procedures to use a single-sales factor formula to apportion taxable income to California. Previously, most businesses were required to apportion income using property, payroll, and double-weighted sales factors. Effective for tax years beginning after December 31, 2010, corporations may elect to apportion income using the single-sales factor method. Please note, however, that a corporation that derives more than 50% of its gross business receipts from agricultural, extractive, savings and loan, banking, or financial activities may not use this apportionment method.

To elect to use the single-sales factor apportionment method, a business must timely file a written notification of election on Part B of Schedule R-1 with its California tax return. The election to apportion income to California based on a single-sales factor is binding for the tax year for which the election is made.

TECHNICAL INFORMATION CONTACT:

Mark L. Nachbar
Principal
Ryan
630.515.0477
mark.nachbar@ryan.com