California recognizes organizations exempt under section 501(c)(3) of the Internal Revenue Code (“IRC”) as automatically exempt for California income and franchise tax purposes. But currently the Franchise Tax Board (“FTB”) doesn’t extend the same courtesy to other types of 501(c) organizations. This means that those organizations must complete a lengthy exemption application to achieve state exemption even if they are already recognized as exempt by the IRS.
As of January 1, 2014, the FTB will extend the automatic state exemption to IRC section 501(c)(4), (5), (6), and (7) organizations. These organizations will then be able to use the one-page form currently only allowed for 501(c)(3) organizations instead of the current, lengthy form. This will be more efficient and cost-effective for both the organizations and for the FTB.
Other 501(c) organizations are still out of luck.
If you have questions about taking advantage of this simplified process, contact us.