Nonresident Aliens with Federal Information Filing Requirements Must Also File in California

The California Franchise Tax Board (FTB) issued Legal Ruling 2017-02 on October 16, 2017, concerning the state filing requirements of certain nonresident aliens with respect to foreign financial assets.

California filing requirements generally conform to federal requirements. Under federal law, IRC section 6038D, specified individuals and business entities must file information returns concerning their interests in certain foreign financial assets when the aggregate value of the assets exceeds $50,000 or a higher prescribed amount. Failure to comply with this regulation leads to a minimum federal penalty of $10,000 unless the reporter can show reasonable cause or non-willful neglect. In 2015, AB 154 amended California's Revenue and Taxation Code section 19141.5 to add a similar requirement and related penalty at the state level.

Nonresident aliens with California-source income or California information return filing requirements should provide the state with their IRS Form 8938, "Statement of Specified Foreign Financial Assets," when they file their California income tax returns, the FTB concluded. To read Legal Ruling 2017-02 in full, click here.

For assistance getting into compliance with California state tax law, contact one of our attorneys today.

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