(1) Except as provided in (2) below, for calendar years beginning after December 31, 1969, every individual, partnership, bank, corporation, mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, stock broker, dealer in securities, or similar entity, including a nonprofit corporation, joint stock company or association, insurance company, or Massachusetts or business trust, engaged in a trade or business in this State, and making payment in the course of such trade or business, must make an information return on forms prescribed by the Franchise Tax Board for each calendar year respecting payments of interest or dividends, as described in subdivision (a) or (c) of Section 18639, and distributions out of earnings or profits accumulated since February 28, 1913 (except nontaxable stock dividends and distributions in liquidation), aggregating $10 or more to any individual, fiduciary, or partnership shareholder whose last known address is in this State. Payments or distributions to shareholders, whose last known address is outside this State need be reported only if the paying entity has reason to believe that the shareholder (or any member in case the shareholder is a partnership) is a resident of this State.

(2) In the case of distributions which are made from a depletion or depreciation reserve, or which for any other reason are deemed by the distributing entity to be nontaxable or partly nontaxable to its shareholders, the distributing entity should complete the prescribed forms and forward them to the Franchise Tax Board, Operations Division, Sacramento, California 95814, not later than February 1 of the year following the year in which made. Upon receipt of this information, the Franchise Tax Board will determine and advise the distributing entity by letter whether any portion of such distribution is subject to tax.