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§ 23663-4. Correction of Error.

18 CA ADC § 23663-4BARCLAYS OFFICIAL CALIFORNIA CODE OF REGULATIONS

Barclays Official California Code of Regulations Currentness
Title 18. Public Revenues
Division 3. Franchise Tax Board
Chapter 3.5. Bank and Corporation Tax (Taxable Years Beginning After 12-31-54)
Subchapter 3. Corporation Income Tax
Article 3. Tax Credits
18 CCR § 23663-4
§ 23663-4. Correction of Error.
(a) In General. Pursuant to Regulation 23663-5(a), no assignor, assignee, or any other taxpayer shall claim, assign or otherwise benefit from a credit which was assigned in a defective assignment, unless that credit is allocated to the assignor or assignee under Regulations 23663-2 through 23663-5. Under this regulation, parties to a defective assignment may, prior to the filing of their subsequent taxable year's tax return, request permission to correct errors in an assignment made pursuant to Revenue and Taxation Code section 23663. For example, parties to a defective assignment that filed original assignment forms with unclear, inconsistent or incomplete information, or forms containing erroneous assignors, assignees, credit types or credit amounts, may request permission to correct such errors subject to the limitations and requirements of this regulation.
Example 1: In its election to assign credits, X includes the name of Y but the FEIN of Z. This is a defective assignment because the identity of the assignee is uncertain. Under these facts and assuming the other requirements of this regulation were met, X would be able to request correction of the defective assignment.
Example 2: X reported that it has $200 of 2010 R & D credits. On its original tax return for the 2010 taxable year, X elects to assign $10 of the 2010 R & D credits to Y. However, X now asserts that it intended to assign $100 of the 2010 R & D credits to Y. No correction would be allowed under this regulation because X's assignment to Y was not a defective assignment.
(b) Requirements to Request a Correction of an Error. An assignor may request the correction of an error in the form and manner specified in Regulation 23663-5(f), provided all of the following conditions are met:
(1) The assignment for which a correction is requested is a defective assignment;
(2) All parties to a defective assignment consent in writing to such a correction;
(3) The assignor demonstrates by clear and convincing objective evidence contemporaneous to the time of the original assignment that an error was made;
(4) The assignor demonstrates by clear and convincing objective evidence contemporaneous to the time of the original assignment that the correction is consistent with the assignor's original intent;
(5) The corrected assignment meets the requirements of a valid assignment as set forth in Revenue and Taxation Code section 23663, except for the requirement under Revenue and Taxation Code section 23663(c) that the assignment must be made on an original return; and
(6) The request is made no later than the earlier of the filing date or the extended due date of the assignor's or any parties to the defective assignment's subsequent taxable year's tax return following the taxable year of the original assignment.
(7) Examples.
Example 3: X reported that it has $200 of 2010 R & D credits. On its original tax return for the 2010 taxable year, X elects to assign $1,000 of the R & D credits to Y. X's assignment form shows X as having $200 of 2010 R & D credits, assigning $1,000 of these credits to Y and retaining $100 of these credits. X intended to assign $100 of the credits to Y. Here, the assignment is defective due to the error in the amount of credits X assigned to Y on the original assignment form. If X satisfied all the other requirements under this regulation, X would be able to request use of this regulation to correct the defective assignment to Y of $1,000 of 2010 R & D credits to $100 of the credits.
Example 4: Assume the same facts as in Example 3, except that on its original tax return for the 2010 taxable year, X assigned $100 of the 2010 R & D Credits to Y and $100 of the 2010 R & D credits to Z. Three months after filing its 2010 tax return, X requests a correction of an error and has contemporaneous evidence sufficient to meet the conditions in paragraphs (3) and (4) to demonstrate that X intended to assign $100 of 2010 R & D credits to W, and not Z. Under these facts, X would not be able to use this regulation because the original assignment to Z was not a defective assignment.
Example 5: In its election to assign credits, X includes the name of Y but the FEIN of Z. X requests a correction of an error to show that W was the intended assignee, and provides an affidavit from X's chief financial officer stating that X intended to assign credits to W. Under these facts, X would not be able to use this regulation because it did not provide contemporaneous evidence as required by paragraphs (3) and (4).
Example 6: Assume the same facts as in Example 5, except that instead of the affidavit, X provides forms and schedules which are consistent with the requested correction and were filed with the original tax return in the year of the defective assignment, contemporaneous tax preparation workpapers, emails, correspondence, and memos as evidence to demonstrate that W was the intended assignee. Under these facts and assuming the other requirements of this regulation were met, X would be able to request a correction of an error under this regulation to correct the assignment substituting W for Z.
Example 7: Assume the same facts as in Example 5, except that instead of the affidavit, X provides W's Form 3544A which was filed with the original tax return in the year of the defective assignment and which shows W as receiving the assigned credits from X. X also provides contemporaneous tax preparation workpapers. Under these facts and assuming the other requirements of this regulation were met, X would be able to request a correction of an error under this regulation because it provided contemporaneous evidence sufficient to meet the conditions in paragraphs (3) and (4).
Example 8: Assume the same facts as in Example 7, except that W, Y and Z's Forms 3544A all show that they each received the same identical credits from X. Under these facts, X would not be able to use this regulation to correct the defective assignment because the Forms 3544A that were provided are conflicting and thus X did not provide clear and convincing objective evidence of the assignor's original intent as required in paragraph (4).
Example 9: Assume the same facts as in Example 7, except that instead of providing W's Form 3544A, X only provides contemporaneous tax preparation workpapers that do not include copies of contemporaneous emails, correspondence, and memos demonstrating that W was the intended assignee. X provides no other contemporaneous evidence. Under these facts, X would not be able to use this regulation because, for purposes of this regulation, tax preparation workpapers alone do not provide clear and convincing objective evidence of the assignor's original intent as required in paragraph (4).
(c) Excluded Credits. A correction of an error shall not be made for any credits to which such correction would result in the actuality or possibility of the credits being claimed more than once.
(d) Additional Limitations. For For defective assignments made in taxable years beginning on or after January 1, 2017, the following limitations shall apply:
(1) The amount of credits that may be allocated pursuant to a request for a correction of an error under this regulation shall not exceed the amount originally assigned in the defective assignment for which a correction is requested under this regulation.
(2) If the assignor or any members of the same combined reporting group (pursuant to Revenue and Taxation Code sections 25101 or 25110) have requested and been granted another correction of an error in any other taxable year within a four taxable year period, then no additional correction of an error shall be allowed for the defective assignments listed in paragraph (3). For purposes of the preceding sentence, the four taxable year period means the taxable year of the defective assignment for which the correction of an error is being requested, and the three taxable years immediately preceding that taxable year and the three taxable years immediately following that taxable year.
(3) Paragraph (2) shall apply to the following defective assignments:
(A) Wrong assignor;
(B) Wrong, ineligible or unspecified assignee;
(C) Wrong or unspecified type of identical credit; or
(D) Wrong or unspecified amount of credits was assigned.
(4) Examples.
Example 10: X reported that it has $100 of 2010 R & D credits. On its original tax return for the 2010 taxable year, X assigned $25 of 2010 R & D credits to Y and $25 of 2010 R & D credits to Z. The assignees' FEINs on X's Form 3544 do not match Y and Z's FEINs, so the assignments to Y and Z are defective. X provides Y and Z's Forms 3544A and tax preparation workpapers to show that it intended to assign $50 of 2010 R & D credits each to Y and Z. Under these facts, and assuming the other requirements of this regulation were met, X may request a correction of an error to use this regulation to correct the FEINs on the original defective assignments, but would not be able to allocate $50 of 2010 R & D credits each to Y and Z because the amount allocated would exceed the maximum amount that may be allocated under paragraph (1).
Example 11: Assume the same facts as in Example 10, except that X assigned 2010 R & D credits to Y and Z and put “various” as the amount on X's Form 3544. X provides Y and Z's Forms 3544A and tax preparation workpapers to show that it intended to assign $50 of 2010 R & D credits each to Y and Z. Under these facts, X will not be able to allocate any amount of 2010 R & D credits to Y and Z because it did not specify an amount of credits on the original defective assignment, because, under paragraph (1), an assignment using the amount “various” shall be treated as though X assigned no credits.
Example 12: Assume the same facts as in Example 6, except that X makes its second request under this regulation within four taxable years for a correction of an error to show that W was the intended assignee. Under these facts, and assuming the other requirements of this regulation were met, X may not use this regulation to correct the assignee because paragraph (3)(B) applies.
(e) Prior Defective Assignments. For a period of one year from the effective date of this regulation for any defective assignments made prior to that date, an assignor may request a correction of an error under this regulation, without regard to the limitation set forth in subsection (b)(6).
Note: Authority cited: Sections 19503 and 23663, Revenue and Taxation Code. Reference: Section 23663, Revenue and Taxation Code.
HISTORY
1. New section filed 9-18-2018; operative 9-18-2018 pursuant to Government Code section 11343.4(b)(3) (Register 2018, No. 38).
This database is current through 10/16/20 Register 2020, No. 42
18 CCR § 23663-4, 18 CA ADC § 23663-4
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