California Form 3802 - Corporate Passive Activity Loss And Credit Limitations - 2016 Page 3
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3A state adjustment may be required on
For purposes of computing net active income,
y The corporation is a closely held
Form 100, California Corporation Franchise or
figure any contribution deduction by taking
C corporation with a loss on form
Income Tax Return, or Form 100W, California
10% of net active income (figured without
FTB 3802, line 1d, and the corporation had
Corporation Franchise or Income Tax Return
the contribution deduction) and subtract the
no net active income.
‑ Water’s‑Edge Filers, line 8 or line 15, if the
smaller of that amount or the contribution
y The corporation is a closely held
corporation uses the “federal reconciliation”
deduction from the net active income (figured
C corporation with net passive income on
method to file Form 100 or Form 100W.
without the contribution deduction).
form FTB 3802, line 1d, and had an overall
See General Information I, Net Income
loss from an entire disposition that was
Line 4 – Total deductions and losses allowed
Computation, in the Form 100 Tax Booklet or
equal to or greater than the amount on
Use Worksheet 3 and Worksheet 4 in the
Form 100W Tax Booklet for more information.
form FTB 3802, line 1d, and the corporation
instructions for federal Form 8810 to figure
had no net active income.
To complete form FTB 3802, see the
the unallowed deductions and losses to be
instructions that follow and the specific
See the instructions for federal Form 8810,
carried forward and the allowed deductions
instructions for federal Form 8810, Part I and
line 7, for more information.
and losses to report on the 2016 California
Part II.
forms. Federal Worksheet 2, columns (d)
Line 8 – Unallowed passive activity credit
and (e), will show whether an activity had
Part I – Passive Activity Loss
If line 8 is zero, all of the passive activity
an overall gain or loss. If an activity has an
credits on line 6 are allowed. See the
overall gain on Worksheet 2, column (d),
Line 1d and Line 3
instructions for line 9 for how to report the
report all of the deductions and losses listed
credits.
If line 1d or line 3 shows net income or
in Worksheet 1 and any prior year unallowed
zero, all of the deductions and losses are
Line 9 – Allowed passive activity credit
losses in Worksheet 2 for those activities
allowed, including any prior year unallowed
If the credits allowed on line 9 do not have
on the appropriate lines of Form 100 or
losses entered on line 1c. If the “federal
to be allocated between activities or different
Form 100W.
reconciliation” method was used to complete
types of credits, report the amount on line 9 on
Use Worksheet 3 and Worksheet 4 for activities
Form 100 or Form 100W, compare the
the appropriate credit form.
in Worksheet 2 that show an overall loss in
California amount on form FTB 3802, line 1d
If the credits allowed on line 9 must be
column (e).
or line 3 to the amount on federal Form 8810,
allocated between activities or different types
line 1d or line 3. Enter the difference as a state
Part II – Passive Activity Credits
of credits, complete federal Worksheet 6 using
adjustment on Form 100 or Form 100W, line 8
California amounts to determine the credit
or line 15, whichever is applicable.
Use form FTB 3802, Part II to determine the
amount allowed for each activity.
amount of certain credits allowed from passive
Line 2 – Closely held C corporations
activities for the current taxable year and the
Part III – Election to Increase
Closely held C corporations can offset the
passive activities credit carryover amount.
loss, if any, on line 1d with net active income.
Basis of Credit Property
The following credits from passive activities
Net active income is the corporation’s taxable
When a taxpayer disposes of an entire
are included on form FTB 3802:
income for the taxable year, determined
interest in a passive activity through a taxable
without regard to the following items:
Credit
Code
transaction, the taxpayer may elect to increase
Orphan drug credit carryover
185
y Net passive income or loss.
the property’s basis, immediately before the
Low‑income housing credit
172
y Portfolio income.
disposition, by the credit amount if both of the
Research credit
183
y Deductions attributable to portfolio income
following circumstances are met:
described in Temporary Treas. Reg.
Credit Limitations
y The taxpayer was required to reduce the
Section 1.469‑2T(d)(2)(i), (ii), and (iv).
Each credit is subject to specific requirements
property’s basis by the amount of the
y Interest expense allocated under Temporary
and limitations. Get the applicable credit form
credit.
Treas. Reg. Section 1.163‑8T to a portfolio
for more information before applying the
y The taxpayer was not able to apply all
expenditure within the meaning of
passive credit limitations.
or part of the credit against tax liability
Section 1.163‑8T(b)(6).
Line 7 – Tax attributable to net active/passive
because of the limitations imposed by the
y Gain on the disposition of substantially
income
passive activity rules.
appreciated property formerly held
Use Part I or Part II of the Computation for
See IRC Section 469(j)(9) for more
for investment. See Treas. Reg.
Line 7 in the instructions for federal Form 8810
information. The amount of the unallowed
Section 1.469‑2(c)(2)(iii).
to figure the tax attributable to net passive/
credit which a taxpayer may elect to add
y Gross income from certain oil or gas
active income.
back to the basis of property for California
properties treated under Treas. Reg.
Enter ‑0‑ on line 7, if any of the following apply:
tax purposes may differ from the amount of
Section 1.469‑2(c)(6) as if from a
unallowed credit entered on federal Form 8810,
non‑passive activity.
y The corporation is a personal service
Part III, because of differences in California
y Gross income and deductions from
corporation with a loss on form FTB 3802,
and federal law. Complete Part III to make the
any trade or business activity from
line 1d.
election for California tax purposes.
trading certain personal property
y The corporation is a personal service
described in Temporary Treas. Reg.
corporation with net passive income on
Section 1.469‑1T(e)(6), but only if the
form FTB 3802, line 1d, and the corporation
corporation does not materially participate
had an overall loss from the entire
in the activity for the taxable year.
disposition of a passive activity that was
equal to or greater than the net income on
Net active income includes an overall loss
line 1d.
from a passive activity if there is a fully taxable
disposition of an entire interest in a passive
activity. Include the overall loss to the extent
that it exceeds net passive income. If there is a
net passive loss, include all of the loss.
Page 2 FTB 3802 Instructions 2016
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