Instructions For Form Ftb 3801-Cr - Passive Activity Credit Limitations - 2015

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2015 Instructions for Form FTB 3801-CR
Passive Activity Credit Limitations
These instructions are based on the Internal Revenue Code (IRC) as of January 1, 2015, and the California Revenue and Taxation Code (R&TC).
General Information
A Purpose
Nonresident
In determining California taxable income,
In general, for taxable years beginning on or
Use form FTB 3801-CR, Passive Activity Credit
nonresidents compute prior year items by
after January 1, 2015, California law conforms
Limitations, to determine whether you have a
taking into account only those items with a
to the Internal Revenue Code (IRC) as of
passive activity credit for the current taxable
California source, subject to any limitations
January 1, 2015. However, there are continuing
year and, if so, how much of the credit is
provided by law. For example, passive losses
differences between California and federal
allowed for the current year. The amount of the
are limited to passive gains (IRC Section 469
law. When California conforms to federal tax
credit that is disallowed in the current year is
and R&TC Sections 17551 and 17561). Make
law changes, we do not always adopt all of
carried forward.
this computation even if you were always a
the changes made at the federal level. For
nonresident or a former resident who moved
B Special Note
more information, go to ftb.ca.gov and search
out of California.
for conformity. Additional information can
Generally, California law is the same as
Part-Year Resident
be found in FTB Pub. 1001, Supplemental
federal law concerning passive activity credit
California taxes part-year residents as
Guidelines to California Adjustments, the
limitations. Get federal Form 8582-CR for
residents for the period of the year they were
instructions for California Schedule CA (540 or
definitions.
California residents and as nonresidents for
540NR), and the Business Entity tax booklets.
Personal service corporations and closely held
the period of the year they were nonresidents.
The instructions provided with California tax
corporations subject to the passive activity
Therefore, a part-year resident must compute
forms are a summary of California tax law
rules must use form FTB 3802, Corporate
any suspended passive losses as if they were
and are only intended to aid taxpayers in
Passive Activity Loss and Credit Limitations,
a California resident for all prior years and as
preparing their state income tax returns. We
instead of form FTB 3801, Passive Activity
if they were a nonresident for all prior years.
include information that is most useful to the
Loss Limitations, and form FTB 3801-CR.
These amounts must then be prorated based
greatest number of taxpayers in the limited
upon the period of California residency and the
S Corporations
space available. It is not possible to include
period of nonresidency for the year.
The passive activity loss (PAL) rules apply as
all requirements of the California Revenue
Renewal Communities
if the S corporation was an individual. This
and Taxation Code (R&TC) in the tax booklets.
California law does not conform to the tax
means that losses from passive activities
Taxpayers should not consider the tax booklets
incentives related to “renewal communities.”
may not be used to offset nonpassive income,
as authoritative law.
except for $25,000 in losses from rental
Expense treatment for small business,
Registered Domestic Partners (RDP)
real estate activities. See IRC Section 469(i).
IRC Section 179(b)(1): California law generally
For purposes of California income tax,
However, the material participation rules apply
conforms to the federal rules for expensing
references to a spouse, husband, or wife also
as if the S corporation was a closely held
IRC Section 179. However, federal limitation
refer to a California RDP, unless otherwise
corporation. The material participation rules for
amounts may be different than California
specified. When we use the initials RDP they
closely held corporations are explained in the
limitation amounts. For California purposes,
refer to both a California registered domestic
instructions for federal Form 8810, Corporate
the maximum IRC Section 179 expense
“partner” and a California registered domestic
Passive Activity Loss and Credit Limitations.
deduction allowed for 2015 is $25,000.
“partnership,” as applicable. For more
See IRC Section 469(h)(4) and the related
The following may affect the computation of
information on RDPs, get FTB Pub. 737, Tax
regulations for more information.
your passive activity credit limitations:
Information for Registered Domestic Partners.
To compute your California passive activity
Material Participation in Real Property
Military Personnel
credit limitations for S corporations, use the
Business – IRC Section 469(c)(7): Beginning
Servicemembers domiciled outside of
worksheets in the instructions for federal
in 1994, and for federal purposes only, rental
California, and their spouses/RDPs, may
Form 8582-CR using California amounts.
real estate activities of taxpayers engaged in
exclude the servicemember’s military
Enter the amount from line 20 of Form 100S,
a real property business are not automatically
compensation from gross income when
California S Corporation Franchise or Income
treated as a passive activity. California did
computing the tax rate on nonmilitary income.
Tax Return, on line 10 and line 22 of form
not conform to this provision. For California
Requirements for military servicemembers
FTB 3801-CR in place of the federal modified
purposes, all rental activities are treated
domiciled in California remain unchanged.
adjusted gross income.
as passive activities. Therefore, an election
Military servicemembers domiciled in
under IRC section 469(c)(7) is inapplicable
C Who Must File
California must include their military pay in
for purposes of California personal income
gross income. In addition, they must include
Form FTB 3801-CR is filed by individuals,
or franchise tax and taxpayers should
their military pay in California source income
estates, trusts, and S corporations with any of
group rental activities without regard to
when stationed in California. However, military
the following credits from passive activities:
IRC section 469(c)(7). Get federal Form 8582,
pay is not California source income when
Passive Activity Loss Limitations, for general
Credit
Code
a servicemember is permanently stationed
rules regarding grouping of activities.
Orphan drug credit carryover
185
outside of California. Beginning in 2009,
Low-income housing
172
the Military Spouses Residency Relief Act
Disclosure Requirements for Groupings
Research
183
may affect the California income tax filing
On January 24, 2010, the Internal Revenue
requirements for spouses of military personnel.
Service issued Revenue Procedure 2010-13
Enter the code number for your credit on your
For more information, get FTB Pub. 1032, Tax
regarding disclosure requirements for
tax return when you are able to claim the credit.
Information for Military Personnel.
groupings. California generally conforms
to Revenue Procedure 2010-13, which is
effective for tax years beginning on or after
January 25, 2010. A separate disclosure
statement is not required for state purposes.
Get federal Form 8582-CR, Passive Activity
Credit Limitations, for more information.
FTB 3801-CR Instructions 2015 Page 1

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