Effective January 1, 2011, CA FTB (California Franchise Tax Board) began applying Federal Treasury Regulation 1.1446-6 procedures, which allow foreign partners to request reduced or no withholding of California tax on effectively connected taxable income from California sources allocable to a foreign partner.

The foreign partner certifies to the partnership, and to California State, that no or reduced California tax will be due. If CA approves the request, the State will notify the foreign partner and the partnership. The term “partner” in this article, includes Limited Liability Company (LLC) members of an LLC taxed as a partnership for federal purposes.

Foreign partners can request reduced withholding from us annually before the first installment period using FTB Form 589, Nonresident Reduced Withholding Request. Taxpayers are requested to see FTB Form 589 instructions for further details.

A foreign partner must submit a completed and signed IRS Form 8804-C, Certificate of Partner-Level Items to Reduce Section 1446 Withholding, with FTB Form 589. On line 10 of the Form 589, enter the total of California amounts from 8a through 8f of Form 8804-C.

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