Perspectives

Common tax audit issues affecting California corporate taxpayers

Discussing income and franchise tax audit issues

​In this article, authors E. Scott Ewing, Benjamin Elliott, and Natasha Ng restate the common audit issues identified by the California Franchise Tax Board ("FTB"), summarize the technical aspects of each issue, and provide general insight regarding the potential prevalence of such issues in future FTB audits.

​Four areas of common tax audit issues

In its April 2014 issue of Tax News, the California FTB identified the most common franchise/income tax audit issues currently affecting corporations. In this article we restate the common audit issues identified by the FTB, summarize the technical aspects of each issue and provide general insight regarding the potential prevalence of such issues in future FTB audits, including a discussion of some of the recent and contemplated changes in the California Revenue and Taxation Code and California Code of Regulations, title 18 adopted thereunder that may affect these issues.

The FTB identified the following four areas as some of the most common audit issues affecting corporations:

  • Cost of Performance and Sourcing of Intangible Sales
  • Sales Factor and Gross Receipts
  • Abusive Tax Shelters
  • Credits
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