• Distributions of California source income to domestic (U .S .)
Form 588, Nonresident Withholding Waiver Request, to request a waiver
nonresident S corporation shareholders, partners, or members . For
or a reduced rate of withholding .
more information get FTB Pub . 1017; and
Note: There is no provision in the law to allow waivers or reduced
• Other payments of California source income to nonresidents .
withholding to foreign partners .
Withholding Rates
If the distribution from a partnership is determined to be a return of
capital or does not represent taxable income for the current or prior
Withholding is required on payments made to nonresidents for
years, no withholding is required . Although a waiver is not required
income received from California sources (R&TC Section 18662) . The
in these situations, the partnership may be subject to the penalty for
withholding rate is seven percent unless the withholding is on foreign
failing to withhold if, at audit, the FTB determines that the distribution
partners or a reduced rate is authorized by the FTB . For foreign partners,
represented taxable income .
the withholding rate is the maximum California tax rate applicable to the
partner (corporations 8 .84%, banks 10 .84%, foreign partners 9 .3% that
Interest and Penalties
are not corporations or banks) .
The law provides for interest and penalties on late payments of
Exceptions
withholding . Interest is computed from the due date of the withholding
to the date paid .
Withholding is not required when:
• Failure to timely withhold may result in the withholding agent being
• The payment is for goods;
personally liable for the amount of tax that should have been withheld
• The payment is being made to a resident of California or to an
and for interest and penalties .
S corporation, partnership, or a limited liability company (LLC)
• Failure to timely provide Forms 592-B to the FTB may result in
that has a permanent place of business in California . Form 590,
penalties up to $100 per Form 592-B .
Withholding Exemption Certificate, can be used by vendors/payees
• Failure to provide Forms 592-B to the payees may result in penalties
to certify that they are residents of California or have a permanent
up to $100 per Form 592-B .
place of business in California . The signed form containing this
certification should be retained by the withholding agent and must be
When and Where to File
provided to the FTB upon request . Withholding agents will be relieved
File Form 592-A with the payment of withholding by the 20th day of
of the withholding requirements if they rely in good faith on a signed
the month following the month that the total amount withheld, but not
Form 590 stating that the vendor/payee is a resident of California or
remitted, from all vendors/payees exceeds $2,500 .
has a permanent place of business in California .
Do not include Form 592-A when the final payment for the year is
Note: If the resident, S corporation, partnership, LLC or that has a
included with Form 592 . For foreign partners, payments are due
permanent place of business in California is acting as an agent for the
quarterly to the FTB with Form 592-A on the 15th day of the 4th, 6th,
actual vendor/payee, this exception does not apply;
9th, and 12th months of the partnership’s tax year . Send withholding
• The total payments of California source income to the vendor/payee
payments and Form 592-A to:
by the withholding agent are $1,500 or less for the calendar year (for
FRANCHISE TAX BOARD
foreign partners, there is no minimum threshold before withholding is
PO BOX 942867
required .);
SACRAMENTO CA 94267-0651
• The payments are for interest or dividends;
• The payments are for services performed outside of California or for
Specific Line Instructions
rents, royalties, or leases on property located outside of California;
• The vendor/payee is a tax-exempt organization, insurance company,
Private Mail Box.
IRA, or qualified pension plan under either California or federal law;
Include the Private Mail Box (PMB) in the address field . Write the acro-
• The payments are wages paid to employees .
nym “PMB” first, then the box number .
Note: Wage withholding is administered by the California Employment
Example: 111 Main Street PMB 123 .
Development Department (EDD) . For more information, contact EDD
Year – Enter the year withholding is done unless an S corporation’s,
customer service at (888) 745-3886 or go to their Website at
partnership’s, or LLC’s current year distribution represents prior year
.
California source income . In that case enter the year the income was
• The vendor/payee receives a written authorization from FTB waiving
earned . For withholding on current year distributions of prior year
the withholding;
income, attach a letter explaining that the distribution took place in the
• The domestic nonresident S corporation shareholder or partner
current withholding year, but was for a prior year .
provides the S corporation or partnership with a signed Form 590-P,
Withholding agent – Enter the withholding agent’s tax ID number, name,
Nonresident Withholding Exemption Certificate for Previously
address, and contact information .
Reported Income; or
Preparer – If this form is prepared by someone other than the
• The income of nonresident partners, including a bank or corporation,
withholding agent, enter the preparer’s tax ID (SSN/PTIN), name,
is derived from qualified investment securities of an investment
address, and contact information .
partnership .
Line – Enter the amount of withholding on compensation for services
Waivers
performed in California by nonresident independent contractors
(including payment of expenses not separately stated) . For more
The FTB will generally grant a waiver if:
information, get FTB Pub . 1023, Nonresident Withholding Independent
• The vendor/payee has a history of filing California returns including
Contractor, Rent & Royalty Guidelines, or FTB Pub . 1024, Nonresident
the return most recently due;
Withholding Entertainment Guidelines .
• The vendor/payee is currently making estimated tax payments;
Line 2 – Enter the amount of withholding on payments to nonresidents
• Distributions are made by publicly traded partnerships; or
for rents or royalties on property (real or personal) located in California .
• Distributions are made to brokerage firms or tiered partnerships .
For more information get FTB Pub . 1023 .
The FTB will generally grant a reduced withholding rate when the seven
percent withholding rate results in significant over-withholding . Get
Form 592-A Instructions 2006 Page