Protective refund claims regarding California water's-edge election fee.

Taxpayers that have made a water's-edge election for California corporation franchise tax purposes may file protective claims for refund of the election fee based on the final outcome of challenges to the constitutionality of worldwide combined reporting (WWCR). (California Franchise Tax Board Notice 93-1.)

Taxpayers whose claims are based solely on the possibility that a final appellate decision will hold WWCR unconstitutional may file Form 1117, Request for Termination of Election, and claims for refund of the election fee. The requests may be filed for all open years. Refund claims must be filed within four years from the return's due date (without extensions) or one year from the overpayments date, whichever is later.

These documents will be held until all appeals have been exhausted. If the request is allowed, all water's-edge contract provisions will be inapplicable.

Request for Termination of Election together with refund claims should be mailed to:

Franchise Tax Board International Audit P.O.Box 1779 Rancho Cordova, CA 95741-1779.

The water's-edge election initially was available for "income" years beginning after 1987. (A California "income" year corresponds to a Federal "tax" year.) Therefore, if a calendar-year corporation, for example, made a water's-edge election for 1988, its first available year, 1988 refund claims would have been due by Mar. 15, 1993. However, claims for subsequent years still may be filed.