Effective January 1, 2010, California has adopted a new penalty for failure to report a change of ownership or change of control of a legal entity. (California Revenue and Taxation Code Section 482.) The penalty applies if Form BOE-100-B isn’t filed within 45 days after the earlier of (1) a change in ownership or change of control or (2) the date of a written request by the State Board of Equalization.
The penalty is the greater of (1) $100 or (2) 10% of the taxes applicable to the new base year value reflecting the change in ownership or the real property or manufactured home, or 10% of the current year’s taxes on the property if no change in control or change of ownership occurred. If the failure to file was not willful, the maximum penalty will not exceed $2,500.
A change in control occurs when any person or legal entity obtains more than 50% of the ownership interest in a legal entity. Control can be direct or indirect.
A change in ownership occurs when cumulatively more than 50% of the original co-owners’ interest in the legal entity is transferred.
When there has been a change in control for an entity, the property tax values of real property owned by the entity is reassessed and becomes the new base value under Proposition 13.
Carryover schedules should be kept to track whether a change in control or a change in ownership has occurred.
There is a question on income tax returns for corporations, S corporations, partnerships and LLCs about whether a change of ownership occurred during the taxable year. If the question is answered "yes," the State Board of Equalization will request that Form BOE-100-B be completed and submitted.
These rules are complex, so any time corporate stock or an interest in a partnership or LLC is transferred, the management should review with its legal counsel and tax advisors whether a change in ownership has occurred.
When doing estate planning using family owned entities, change in ownership should be considered. In some cases with special planning, reassessment may be avoided. See your attorney about this.
Change of ownership or control is another item that we need to be alert for when making any transaction, including gifts and transfers after a death.
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that any written tax advice contained on this website was
not written or intended to be used (and cannot be used) by any
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imposed under the U.S. Internal Revenue Code.