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It seems to me CA wants extra tax when an S corporation has QSubs. For example. An S corporation has $200,000 of income and has 2 QSubs. According to the FTB the tax is as follows: $200,000 x 1.5% = $3,000 (which is greater than the minimum tax of $800) plus $1,600 ($800 for each QSub) or $4,600. Now this seems a bit eggregious. After reading Section 23800.5 it seems to me the tax should be as follows: the greater of $3,000 or $2,400 ($800 x 3) = $3,000. When I called the Tax Practioner Hotline, the representative could only cite FTB form instructions. When pressed she cited Section 23101 as the controlling authority. Section 23101 deals with who has nexus and is subject to tax. it does not deal with how to calcultate the tax. Now Section 23800(a)(1)(B) provides that there is a tax imposed on every QSub of $800; i.e. the minimum tax of Section 23153. Section 23800.5(a)(2)(B) provides, "All activities, assets, liabilities, including liability for the tax imposed under this subdivision, and any items of income, deduction, and credit of a qualified Subschapter S subsidiary shall be treated as activities (including activities for purposes of Section 23101), assets, liabilities, and those items, as the case may be, of the 'S' Corporation;" emphasis added. It seems to me that this last section suggests that the minimum tax of a QSub is part of the minimum tax of the S corporation! It seems to me the FTB is incorrect in my example above. I welcome any thoughts on this. If my analysis is flawed then where is the flaw?