Beginning January 1, 2010, California law requires, with some exceptions, anyone who lives outside of California and who owns rental property in this state to pay a quarterly withholding credit on any rents collected.
As your contracted management company, HomePointe Property Management is mandated by law to withhold 7 percent if you live in the United States but not in California, or 9.55% if you live out of the country of the rents we collect on your behalf and to send those funds to the Franchise Tax Board each quarter.
The law may not apply to you, and in that case, I am required to keep on file a Franchise Tax Board form that demonstrates your exemption. Alternatively, you may be eligible for a reduced withholding or a waiver altogether.
In order to qualify, read and follow these instructions:
Step 1 - About Exemptions This law does not apply to you if you are a, California resident; Corporations, Partnerships, LLC’s qualified with the Secretary of State to do business in California or that have a permanent place of business in California; Estates where the deceased was a California resident at the time of death; Tax-exempt organizations; Insurance Companies, IRA’s, Qualified Pension and Profit Sharing Plans; or California non-grantor trusts
If you meet any of these requirements above, please complete Form 590 in order to certify your status as exempt and return it to our office. See the link at the bottom of this letter. No need to do anything further.
Step 2 - About Waivers If you are not exempt, you may still be eligible to receive a waiver from the tax withholding if, You have California tax returns on file for the past two taxable years in which there was a filing requirement and you are considered current on any outstanding FTB tax obligations; or If you have no tax filing history but are making estimated tax payments for the current year and are current on any outstanding FTB tax obligations.
If you wish to receive a waiver from the withholding requirements, please complete the FTB Form 588 and attach any pertinent information and return it to me. As part of our service for you, we will file the information with the FTB on your behalf. See the link at the bottom of this letter A Note on Waivers: They are available to domestic nonresident owners only. Waivers are generally granted for fixed periods. The Franchise Tax Board generally responds to a waiver request within 21 working days.
Step 3 – About Reduced Withholding If you don’t qualify for an exemption or a waiver, you may still be eligible for a reduced withholding. The reduced withholding credit is based upon the expenses paid out each month related to your property. Please review this form, sign it if appropriate, and return it. We can file the paperwork on your behalf. Please contact us to discuss this option. See the link at the bottom of this letter
Step 4 – Annual Filings I will provide to you an annual written withholding statement – FTB Form 592-B –Resident and Nonresident Withholding Tax Statement – by January 31 (following the end of the calendar year). It will summarize the rents I have sent to you and the amounts withheld and forwarded to the FTB. You must file a California tax return to claim your withholding credit at the end of the year. When you file your return, attach the withholding tax statement (FTB Form 592-B) that I send to you as proof of the credit withheld. We do need an addendum to your Property Management Agreement signed and returned as well. The Addendum is attached. Please sign and return it as soon as possible. You can obtain more information from the Franchise Tax Board about this withholding requirement. See the links below. If you have any questions, please do not hesitate to contact me. Thank you.
FTB Form 590 – Witholding Exemption Certificate http://www.ftb.ca.gov/forms/2009/09_590.pdf FTB
Form 588 – Nonresident Withholding Waiver Request http://www.ftb.ca.gov/forms/2009/09_588.pdf FTB
Form 589 – Nonresident Reduced Withholding Request http://www.ftb.ca.gov/forms/2009/09_589.pdf FTB
Fact Sheet http://www.ftb.ca.gov/forms/2009/09_1076.pdf