Looking for a California Franchise Tax Board Forms And Templates? Download it for free!

•

There will be no credit recapture if the

The amount of LAMBRA credits (sales or

Record Keeping

termination was:

use tax credit, hiring credit and credit

To support the sales or use tax credit claimed

•

carryovers from earlier years) claimed for

on your tax return, you must keep records

Voluntary on the part of the employee;

•

any year may not exceed the amount of

that identify or describe the property

Caused by the employee becoming

tax that would be imposed on the income

purchased, the amount of sales or use tax

disabled;

•

earned solely from your business activities

paid on its purchase and the location where it

Due to employee misconduct;

•

in the LAMBRA.

is used. If you purchase machinery

Due to a substantial reduction in business;

•

You may not increase the basis of

manufactured outside of California, you

•

property by the amount of the sales or use

should be able to substantiate attempts to

Carried out so that other qualified

tax paid.

purchase comparable items within California.

individuals could be hired, creating a net

•

If you purchase machinery manufactured

increase in the number of qualified

outside of California and claim the credit

employees and their hours of employment.

Business Expense Deduction

for the use tax paid, you will be allowed

Job Creation Required

the credit only if machinery of a

The cost of qualified property purchased for

In addition to the credit recapture and

comparable quality and price was not

exclusive use in a LAMBRA may be deducted

exception rules listed above, if at the close of

available for timely purchase and delivery

as a business expense in the first year it is

the second taxable or income year after

from a California manufacturer.

placed in service.

•

designation, the taxpayer does not have a net

In the case where the item of property

The type of property that qualifies for this

increase of one or more jobs (defined as

qualifies the taxpayer to take the LAMBRA

special treatment is tangible personal property

2,000 paid hours per employee per year), the

sales or use tax credit as well as any other

(not real estate) that is used for business

amount of the LAMBRA hiring credit

credit, the taxpayer may claim only one

purposes and is eligible for depreciation. This

previously claimed must be added back to the

credit.

•

includes most equipment and furnishings

taxpayer’s tax in that second year.

The credit cannot reduce the minimum

purchased for exclusive use in a LAMBRA,

There are no exceptions to this recapture rule.

franchise tax, alternative minimum tax,

but not office supplies or other small items

built-in gains tax or excess net passive

Record Keeping

that are normally ineligible for depreciation.

income tax. In addition, the credit may not

If you hire qualified employees and claim this

reduce regular tax below tentative

The maximum aggregate deduction the

credit on your tax return, keep records

minimum tax.

business may claim in any taxable or income

including:

year is determined by the number of years

•

Example 3: You spend $50,000 to purchase

Copies of Form TCA EZ1 for each

that have elapsed since the LAMBRA

airplane repair equipment. The sales tax paid

qualified person hired;

received final designation. For the income

•

for the purchase is $3,000. You may reduce

Records of any other federal or state

year of designation and the first income year

the amount of your tax imposed on LAMBRA

subsidies you may have received for hiring

after the year of designation, the aggregate

income by up to $3,000. If you cannot claim

qualified individuals; and

deduction for each income year shall not

•

the full $3,000 in a single year, you may carry

An employment history for each qualified

exceed $5,000. For the second and third

over the remaining amount to reduce next

employee showing the dates of

income year after the year of designation, the

year’s tax imposed on LAMBRA income.

employment, wages paid, the duties

aggregate deduction for each income year

Claiming Both Hiring Credit and Sales or

performed and the location of employment.

shall not exceed $7,500. See Page 4 for

Use Tax Credit

designation dates.

Taxpayers who claim both credits available to

Sales or Use Tax Credit

The election to treat the cost of qualified

LAMBRA businesses (the sales or use tax

property as a business expense must be

credit and the credit for hiring qualified

LAMBRA businesses may reduce taxes by the

made on a timely filed tax return in the year

employees) may not claim a total credit

amount of sales or use tax paid or incurred on

the property is first placed in service.

amount that exceeds the tax imposed on

qualified property purchased for exclusive use

However, this election is not allowed if the

LAMBRA income for any one taxable or

in a LAMBRA. In any year, individuals may

property was:

income year. However, credits that exceed

claim a credit equal to the sales or use tax

•

Transferred between members of an

this amount may be carried over to offset tax

paid or incurred on the first $1 million of

affiliated group;

imposed on LAMBRA income in subsequent

qualified property. Corporations may claim a

•

Acquired as a gift or inherited;

years.

credit equal to the sales or use tax paid or

•

Traded or exchanged for other property;

incurred on the first $20 million of qualified

Credit Carryover

•

Received from a personal or business

property.

If the amount of sales or use tax credit is

relation as defined in IRC Section 267 or

greater than the tax on LAMBRA income in

To qualify for the credit, the qualified property

707(b);

any year, the excess credit can be carried

•

must be:

Described in IRC Section 168(f); or

•

over to future years to offset LAMBRA tax.

High technology equipment, including, but

Purchased by an estate or trust.

Credit Recapture

not limited to, computers and electronic

Depreciation

•

processing equipment;

The full amount of the credit must be

•

Depreciation of the property in excess of

Aircraft maintenance equipment, including,

recaptured (added back to tax) if the

the amount deducted may be claimed

but not limited to, engine stands, hydraulic

qualified property is disposed of or is no

using any method of depreciation normally

mules, power carts, test equipment,

longer used in the LAMBRA before the

allowed.

handtools, aircraft start carts and tugs;

close of the first two taxable or income

•

The deduction allowed under IRC Section

•

Aircraft components, including, but not

years beginning after the property was first

179, relating to an election to expense

limited to, engines, fuel control units,

placed into service.

•

certain depreciable business assets cannot

hydraulic pumps, avionics, starts, wheels

In addition, if at the close of the second

be claimed if the taxpayer elects the

and tires; or

taxable or income year after designation,

business expense deduction.

•

Any property that is Section 1245 property,

the taxpayer does not have a net increase

•

Corporations may not claim additional

as defined in Internal Revenue Code (IRC)

of one or more jobs, (defined as 2,000

first-year depreciation under R&TC

Section 1245(a)(3).

paid hours per employee per year) the

Section 24356 for these assets.

amount of the credit previously claimed

Limitations

Example 4: Three months after the location

•

must be added back to the taxpayer’s tax

You must use the property exclusively

where you do business has been designated

for the taxpayer’s second taxable year.

within the boundaries of a LAMBRA.

a LAMBRA, you purchase a baking oven that

costs $20,000. You depreciate the oven over

Page 2

FTB Pub. 1102 (REV. 6/1998)

Guidelines For Form Ftb Pub.1102 Local Agency Military Base Recovery Area Tax Incentives - California Franchise Tax Board Page 2

Related Articles

Related forms

Related Categories