The California Franchise Tax Board (FTB) is the state agency that administers California’s personal income tax and corporation tax, collects the bulk of the state’s General Fund revenue, and enforces payment through audits, liens, wage garnishments, and bank levies. It operates separately from the IRS, so California residents and anyone earning money from California sources have to satisfy state tax obligations on their own, regardless of what they’ve already handled federally.
Who the FTB Can Tax
If you live in California, the FTB taxes your income from anywhere in the world. If you live somewhere else but earn money from California sources, you still owe tax on the California-sourced portion. That includes wages for work performed in California, rent from California real estate, profit from selling California property, and income from a California business.1State of California Franchise Tax Board. Part-Year Resident and Nonresident Part-year residents pay on worldwide income during their resident months plus California-source income during the months they lived elsewhere.
The FTB’s authority to interpret and enforce state tax law comes from the California Revenue and Taxation Code and includes issuing formal rulings, auditing returns, and pursuing collections.2Justia. California Revenue and Taxation Code Section 19501-19533 – Article 1 Powers and Duties of Franchise Tax Board
The Taxes It Administers
Personal Income Tax
Personal income tax is California’s largest revenue source and applies to individuals, trusts, and estates. The rate structure runs through nine brackets, from 1% at the bottom to 12.3% at the top. Taxpayers with income above $1 million pay an additional 1% mental health services surcharge, bringing the effective top rate to 13.3%. For single filers in the 2025 tax year, the 12.3% rate starts at taxable income above $742,953.
Corporation and Franchise Tax
Corporations incorporated, registered, or doing business in California owe a minimum franchise tax of $800 per year, whether or not they turned a profit.3State of California Franchise Tax Board. Corporations Newly incorporated or qualified corporations get an exemption from the minimum for their first taxable year. Beyond the minimum, the FTB taxes corporate net income for California-based companies and for out-of-state corporations with enough California activity to create nexus.
LLC Tax and Fee
Every LLC doing business or organized in California owes the same $800 annual tax. LLCs with total California income above $250,000 owe an additional fee scaled to revenue:4State of California Franchise Tax Board. Limited Liability Company
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
The fee sits on top of the $800 tax, so an LLC with $2 million in California income owes $6,800 total. The fee is based on gross California income rather than profit, which catches owners off guard.
Pass-Through Entity Elective Tax
Since 2021, qualifying S corporations, partnerships, and LLCs have been able to elect to pay a 9.3% tax at the entity level on qualified net income. The election is designed to work around the federal $10,000 cap on state and local tax deductions: the entity pays, and owners claim a credit on their personal California returns. The election is available through the 2030 tax year.5State of California Franchise Tax Board. Pass-Through Entity (PTE) Elective Tax
Nonprofits
Federal tax-exempt status doesn’t carry over automatically. Nonprofits have to apply to the FTB separately. Organizations with a federal determination letter can submit Form 3500A; those without federal exemption, or with a previously revoked status, need the longer Form 3500.6State of California Franchise Tax Board. Charities and Nonprofits
Filing Deadlines
California personal income tax returns for the 2025 tax year are due April 15, 2026. Any tax owed has to be paid by that date even if you plan to file later.7State of California Franchise Tax Board. Due Dates Personal California grants an automatic six-month filing extension to October 15, 2026, with no paperwork required. The extension covers filing only. Interest and penalties start accruing on any unpaid balance after April 15.
Self-employed taxpayers and others with income not subject to withholding generally owe quarterly estimated payments. For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027. Missing an estimated payment triggers a separate penalty calculated at 4% of the underpayment.8State of California Franchise Tax Board. Interest and Estimate Penalty Rates
Credits and Free Filing
The FTB administers several refundable credits that can zero out a tax bill and return cash. The California Earned Income Tax Credit (CalEITC) is available to working individuals and families earning up to $32,900 in the 2025 tax year, with a maximum credit of $3,756 for families with three or more qualifying children. You need at least $1 of earned income, a valid Social Security Number or ITIN, and more than half the tax year lived in California.9State of California Franchise Tax Board. Eligibility and Credit Information
Two credits stack on top of CalEITC. The Young Child Tax Credit provides up to $1,189 for families with children under six. The Foster Youth Tax Credit offers up to $1,189 for qualifying young adults who were in foster care, reaching $2,378 when both spouses qualify.10State of California Franchise Tax Board. California Earned Income Tax Credit All three share the same $32,900 ceiling for 2025.
CalFile is the FTB’s free electronic filing tool for state returns, so you don’t have to pay for tax preparation software to submit directly.11State of California Franchise Tax Board. CalFile
What Happens When You Don’t Pay
Filing late costs 5% of the unpaid tax for each month the return is overdue, up to 25%.12State of California Franchise Tax Board. Common Penalties and Fees Interest compounds on top. For the period through June 30, 2026, the FTB charges 7% annual interest on personal and corporate underpayments.8State of California Franchise Tax Board. Interest and Estimate Penalty Rates A $10,000 debt can grow by thousands in a year if ignored.
A statutory lien attaches automatically to all your California real and personal property the moment you owe. If you don’t pay, respond, or set up a plan, the FTB can record a formal Notice of State Tax Lien with your county recorder for real property, or file one with the Secretary of State for personal property like business equipment and vehicles.13State of California Franchise Tax Board. Liens A recorded lien is public, damages credit, and complicates any sale or refinance.
The FTB can also issue an earnings withholding order for taxes (EWOT) requiring your employer to send a portion of each paycheck to the state until the debt is paid.14State of California Franchise Tax Board. Wage Garnishments for Taxes Your employer has to give you a copy within 10 days and begin sending payments within 15 days of your last pay period. Only the FTB can adjust the amount withheld.
A bank levy is faster. The FTB issues an order to withhold that freezes the funds in your account, and after 10 days the bank sends them to the state. Unlike a wage garnishment that drips over time, a levy can take the full account balance up to the amount you owe in a single action.
The FTB also collects non-tax debts on behalf of other agencies, including court-ordered fines and fees, unpaid DMV vehicle registration charges, and court-ordered child support.15State of California Franchise Tax Board. State Suspends Certain Debt Collection Activities It can intercept state refunds and use the same collection tools it uses for tax debts.
How Long the FTB Has to Audit and Collect
The FTB generally has four years from the date you filed a return to assess additional tax, penalties, or fees. If you filed before the original due date, the four years run from the due date rather than the filing date.16State of California Franchise Tax Board. Your Tax Audit Two situations remove the limit entirely: never filing a return, and having federal adjustments without notifying the FTB. In either case, the FTB can come after you at any time.
If the IRS changes your federal return and you notify the FTB within six months, the state has two additional years from your notification to assess. Wait longer than six months, and the state gets four years.
Once a tax debt is assessed, the FTB has 20 years to collect.17State of California Franchise Tax Board. Statute of Limitations on Collection Actions The clock can pause for bankruptcy, active military deployment in a combat zone, pending litigation, or other specific circumstances, and certain penalty assessments can reset it entirely. That window is twice the IRS’s 10-year limit. California tax debts rarely expire on their own.
Disputing an Assessment
If the FTB audits your return and disagrees with what you reported, it issues a Notice of Proposed Assessment (NPA). You have 60 days from the date on the NPA to file a protest with the FTB. Miss that window and the assessment becomes final.18State of California Franchise Tax Board. Taxpayer Dispute Process Notice of Proposed Assessment of Tax (NPA) This is where most people lose the chance to fight a tax bill.
If the FTB reviews your protest and rules against you, it issues a Notice of Action (NOA). The next step is an appeal to the Office of Tax Appeals (OTA), an independent body where a panel of three administrative law judges hears disputes. You can request an oral hearing or let the panel decide on written submissions. OTA decisions become final 30 days after they’re issued unless you file a petition for rehearing. If the OTA rules against you, the last option is California Superior Court.
If You Can’t Pay in Full
The FTB offers installment agreements for taxpayers who can’t pay their balance all at once. Taxpayers who owe $25,000 or less can set up a streamlined plan lasting up to 60 months. Balances above $25,000 or plans longer than 60 months are still possible but require additional review.19Franchise Tax Board. FTB 3567 Installment Agreement Request Interest and penalties keep accruing on a payment plan, so paying faster costs less overall.
In limited situations, the FTB will accept less than the full amount through an Offer in Compromise. The agency evaluates offers based on your ability to pay, the value of your assets, your current and future income and expenses, and whether accepting serves the state’s interest.20State of California Franchise Tax Board. Make an Offer on Your Tax Debt The FTB approves an offer when the amount offered is the most it can realistically expect to collect. The offer has to be a lump sum, can’t be zero dollars, and can’t include amounts you’ve already paid. Most applications are rejected.