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For out-of-state owners, the state of California requires that 7% of monies collected be withheld to send in quarterly payments to the Franchise Tax Board. This applies to non-residents of California who receive income from sources within the state (e.g.-Rents). Under special circumstances, a waived or reduced withholding may be awarded depending on the form submitted to the Franchise Tax Board.

There are three main forms of which one must be kept on file and submitted to the Franchise Tax Board.

These are:

Form 588-Nonresident Withholding Waiver Request
This form is used for taxpayers who have tax returns on file for the past two years and no outstanding payments.

Form 589-Nonresident Reduced Withholding Request
This form is used to itemize expenses for the property for a reduced withholding.

Form 590-Withholding Exemption Certificate

This form is used when filing state taxes from a California address.

These forms will be supplied to you once the Management Agreement is signed, and they can always be obtained online at https://www.ftb.ca.gov/forms/. Independent Property Investors is required to withhold the 7% up until one of these forms are received and approved by the Franchise Tax Board.
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California franchise tax board

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