California Form 3802 - Corporate Passive Activity Loss And Credit Limitations - 2016 Page 2
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32016 Instructions for Form FTB 3802
Corporate Passive Activity Loss and Credit Limitations
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).
General Information
C
Who Must File
A personal service corporation has a PAL for
the taxable year if the total losses (including
Personal service corporations and closely held
In general, for taxable years beginning on or
prior year unallowed losses) from all of the
C corporations that have losses or credits from
after January 1, 2015, California law conforms
corporation’s passive activities exceed the total
passive activities must file form FTB 3802. See
to the Internal Revenue Code (IRC) as of
income from all of the corporation’s passive
the instructions for federal Form 8810 for the
January 1, 2015. However, there are continuing
activities. A closely held C corporation has
definitions of personal service corporations
differences between California and federal
a PAL for the taxable year if the total losses
and closely held C corporations. S corporations
law. When California conforms to federal tax
(including prior year unallowed losses) from
must use forms FTB 3801 and FTB 3801‑CR
law changes, we do not always adopt all of
all its passive activities exceed the sum of the
instead of form FTB 3802.
the changes made at the federal level. For
total income from all its passive activities and
more information, go to ftb.ca.gov and search
its net active income.
D
Coordination With Other
for conformity. Additional information can
A personal service corporation has passive
Limitations
be found in FTB Pub. 1001, Supplemental
activity credits if the passive activity credits
Guidelines to California Adjustments, the
Items of deduction or loss from passive
(including prior year unallowed credits)
instructions for California Schedule CA (540 or
activities are subject to basis and at‑risk
exceed the tax attributable to net passive
540NR), and the Business Entity tax booklets.
limitations before they are subject to the
income. A closely held C corporation has a
passive loss limitations. For details on
The instructions provided with California tax
passive activity credit for the year if its credits
at‑risk rules, get federal Form 6198, At‑Risk
forms are a summary of California tax law
from passive activities (including prior year
Limitations. Complete federal Form 6198
and are only intended to aid taxpayers in
unallowed credits) exceed the sum of the tax
using California amounts before completing
preparing their state income tax returns. We
attributable to net passive income and the tax
form FTB 3802.
include information that is most useful to the
attributable to net active income.
greatest number of taxpayers in the limited
Form FTB 3802 closely follows federal
E
Special Rules for
space available. It is not possible to include
Form 8810. In general, if the corporation
Corporations Filing a
all requirements of the California Revenue
completed federal Form 8810 to determine
and Taxation Code (R&TC) in the instructions.
Combined Report
the amount of the federal PAL and credit
Taxpayers should not consider the instructions
limitations, the corporation must also
The PAL and passive activity credit of a
as authoritative law.
complete form FTB 3802.
corporation filing a combined report are
Disclosure Requirements for Groupings
determined by taking into account the
Using California amounts, complete
Revenue Procedure 2010‑13 regarding
following items of all members of the group:
federal Worksheet 1 through Worksheet 6
disclosure requirements for groupings is
in the instructions for federal Form 8810
y Passive activity gross income and
generally applicable for California purposes. A
to determine the amounts to enter on form
deductions.
separate disclosure statement is not required if
FTB 3802. Keep both the California and federal
y Gain or loss on dispositions.
a disclosure statement is filed with the Internal
worksheets for the corporation’s records.
y Net active income (in the case of a
Revenue Service. Get federal Form 8810,
corporation filing a combined report treated
B
Special Rules
Corporate Passive Activity Loss and Credit
as a closely held C corporation).
Limitations, for more information.
y Credits from passive activities.
S Corporations
The following may affect the computation
S corporations must use form FTB 3801,
of the corporation’s passive loss and credit
Specific Line Instructions
Passive Activity Loss Limitations, and
limitation:
form FTB 3801‑CR, Passive Activity Credit
y Passive loss rules (IRC Section 469(c)(7)):
The PAL rules of IRC Section 469 apply to
Limitations, instead of form FTB 3802 to figure
For federal purposes only, rental real estate
closely held corporations and personal service
the California PAL and credit limitations.
activities of taxpayers engaged in a real
corporations. Corporations subject to the
Publicly Traded Partnerships (PTPs)
property business are not automatically
PAL rules must complete form FTB 3802
A PTP is a partnership whose interests are
treated as passive activities. California
to compute the allowable PAL and credit
traded on an established securities market or
did not conform to this provision. For
limitations. Before completing form FTB 3802,
are readily tradable on a secondary market (or
California purposes, all rental activities are
complete federal Worksheet 1 through
its substantial equivalent).
passive activities regardless of the level of
Worksheet 6 in the instructions for federal
Because California and federal laws differ, PTPs
participation.
Form 8810, using California amounts.
may have different income amounts for state
Also, see Temporary Treas. Reg.
A
Purpose
and federal purposes (see form FTB 3801).
Section 1.163‑8T, which provides rules for
However, when figuring PALs, California PTPs
Personal service corporations and closely held
allocating interest expense among activities.
are treated the same as federal PTPs. Follow
C corporations use form FTB 3802, Corporate
The interest offset computation should
the “Special Instructions for PTPs” in the
Passive Activity Loss and Credit Limitations,
be made before allocating this interest
instructions for federal Form 8582, Passive
to figure the amount of any passive activity
expense among activities. Get Schedule R,
Activity Loss Limitations.
loss (PAL) or credit for the current taxable
Apportionment and Allocation of Income, for
year and the amount of losses and credits
more information.
from passive activities allowed on the
corporation’s tax return. See the instructions
for federal Form 8810 for the definitions of
personal service corporations and closely held
C corporations.
FTB 3802 Instructions 2016 Page 1
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