California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 3 - Corporation Income Tax › Article 3 - Tax Credits › Section 23663-4 - Correction of Error

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(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).