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California Franchise Tax Board (FTB)
Since 1950· Agency
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
California's income-tax agency: it processes state returns, collects LLC taxes and fees, and audits residency.
See it on the Personal Finance & Estate map →How it works
The Franchise Tax Board administers California's personal income tax and its corporate franchise tax. Its three-member board is the State Controller, the Director of Finance and the chair of the Board of Equalization. It collects the $800 minimum annual tax and gross-receipts fee owed by most LLCs, receives the 3⅓% that escrow withholds on many property sales, and audits people who claim to have left the state. It can generally assess four years back.
Why it matters for you
With rates up to 13.3% and many departures from federal rules, California is a second, separate tax plan; a move out of state draws residency scrutiny for years.
Rules, limits and sources (2026)
Its powers come from the Revenue and Taxation Code; FTB annual reports publish collections, and disputes go to the Office of Tax Appeals, which began hearing cases in 2018.
Watch out for
How aggressively it audits former residents who moved to no-tax states like Nevada or Texas, and how often it wins, is debated by practitioners.
Inside this (1)
Connections (3)
▸California Franchise Tax Board (FTB) is California's counterpart to Internal Revenue Service (IRS)Law or rule (2026)
How they connect
The FTB does for California what the IRS does federally, starting from federal numbers: Form 540 begins with federal AGI, then adjusts for California differences. The agencies share audit results, so an IRS adjustment usually triggers an FTB bill, and taxpayers must report federal changes to California within six months.
When it applies
California adopted a personal income tax in 1935 and gave it to the FTB in 1950; federal law (IRC Sec. 6103(d)) lets the IRS share return data with states.
The rule
Revenue and Taxation Code Sec. 18622 requires reporting federal changes; FTB notices often cite federal audit adjustments as the basis for a proposed assessment.
Watch out for
California increasingly departs from federal law, on bonus depreciation, HSAs and much of the 2025 tax law, so conformity gaps keep growing.
▸California Employment Development Department (EDD) collects payroll taxes alongside California Franchise Tax Board (FTB)Law or rule (2026)
How they connect
California splits collection: the FTB handles income-tax returns, while EDD collects payroll taxes, including state income-tax withholding from paychecks, which shows up as a credit on your Form 540. Quarterly wage data employers report to EDD also lets the FTB check returns and find people who didn't file.
When it applies
California began income-tax withholding in 1972 and assigned its collection to the state employment department now called EDD.
The rule
Employers file quarterly DE 9 and DE 9C reports with EDD listing wages and withholding; the FTB's non-filer program uses that wage data.
Watch out for
Whether a family paying a caregiver has a household employee or an independent contractor is a common gray area, and misclassification disputes are frequent.
▸California income tax (top rate 13.3%) is collected by California Franchise Tax Board (FTB)Law or rule (2026)
How they connect
The Franchise Tax Board runs California's personal income tax: it processes Form 540, collects estimated payments and withholding, audits residency, and collects LLC taxes and fees. It can generally assess up to four years back, versus the IRS's usual three, and pursues former residents who claim to have moved.
When it applies
Created in 1950 in Sacramento; its board is the State Controller, the Director of Finance and the Board of Equalization chair.
The rule
Revenue and Taxation Code Sec. 19057 sets the four-year limit; FTB annual reports list collections and audits.
Watch out for
How strict residency audits are for people who move, and what evidence proves a move, fuels frequent appeals at the Office of Tax Appeals.