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• In column (d), enter the result of combining

Completing Table 1

Note: California line numbers are different from

column (b) and column (c). This is total

Complete Table 1 only if the LLC has nonbusiness

federal line numbers in the Income and Deduc-

income under California law.

intangible income. If the LLC has nonbusiness

tions sections.

intangible income, and knows that the member is

Column (e) is used to report California source

Income

a resident individual, then the LLC does not need

income and credits. Include the following items in

to complete Table 1 for the member.

Line 1 through Line 7

this column:

See the instructions for federal Schedule K (1065)

Completing Table 2

1. Income from separate businesses, trades, or

and Schedule K-1 (1065), Income (Loss), line 1

The LLC does not need to complete Table 2 if the

professions conducted wholly within

through line 11.

LLC knows that the member is not unitary with its

California, see Cal. Code Regs., tit. 18

trade or business or any other trade or business.

Note: Energy conservation rebates, vouchers, or

section 17951-4(a).

Special Rules for Members and LLCs in a Single

other financial incentives are excluded from

2. Income from a trade or business conducted

Unitary Business

income.

within and outside California, when the part of

Special rules apply if the LLC and a member are

business conducted within California can be

Line 1, column (c)

engaged in a single unitary business. In that case,

separately accounted for, see Cal. Code Regs.,

An adjustment to increase the business income of

a unitary member will not use the income

tit. 18 section 17951-4(b).

a service LLC to reflect the guaranteed payment

information shown in column (e). Instead, the

3. Income from a trade or business conducted

deduction adjustment required by Cal. Code

member’s distributive share of business income

within and outside California that is appor-

Regs., tit. 18 section 17951-4(f) should be made

is combined with the member’s own business

tioned to California. This includes intangible

here.

income. The combined business income is

income attributable to the business, trade or

Note: Schedule K must include all income and

apportioned using an apportionment formula that

profession, see Cal. Code Regs., tit. 18

losses from the LLC activities as determined

consists of an aggregate of the member’s share

section 17951-4(c) and R&TC Sections 25128

under California laws and regulations. Any

of the apportionment factors from the LLC and

through 25137. Generally, the LLC should

differences reported between the federal and

the member’s own apportionment factors, Cal.

apportion business income using a 4-factor

California amounts should be related to differ-

Code Regs., tit. 18 section 25137-1(f). The

formula consisting of property, payroll, and a

ences in the tax laws. Do not apply the apportion-

determination of whether a 3-factor or 4-factor

double weighted sales factor. Use a 3-factor

ment formula to the income or losses on

apportionment formula applies to the combined

formula consisting of payroll, property and a

Schedule K.

income will be made at the member level. The

single weighted sales factor if more than 50%

member’s distributive share of business income

Line 6

of the business receipts of the LLC are from

and property, payroll, and sales factors are

Enter on line 6 the amount shown on

agricultural, extractive, savings and loans, or

entered in Table 2.

Schedule D-1, Sales of Business Property, line 7.

bank and financial activities. Apportioning

Do not include specially allocated ordinary gains

LLCs should get and complete Schedule R

If the LLC knows that all of the members are

and losses, or net gains (losses) from involuntary

and attach it to Form 568.

unitary with the LLC, the LLC need not complete

conversions due to casualties or thefts on this

4. Nonbusiness income from real and tangible

column (e) or attach Schedule R. For further

line. Instead, report them on line 7, along with a

property located in California. Enter the

information, see Member’s Instructions for

schedule and explanation.

member’s share of nonbusiness income from

Schedule K-1 (568).

real and tangible property located in California

If the LLC has more than one activity and the

Special Reporting Requirements for Passive

in column (e). If the LLC believes it may have

amount on line 6 is a passive activity amount to

Activities

a unitary member, enter this income in

the member, attach a statement to Schedule K-1

If items of income (loss), deduction, or credit

Table 2, Part B.

(568), or use the space provided on Side 2 of

from more than one activity are reported on

5. California credits.

Schedule K-1 (568) that identifies the activity to

Schedule K-1 (568), the LLC must attach a

which IRC Section 1231 gain (loss) relates.

Note: Nonbusiness income from intangible

statement to Schedule K-1 (568) for each activity

property should not be entered in column (e).

that is a passive activity to the member. Rental

Deductions

Enter this income in Table 1. For more

activities are passive activities to all members;

information, see Member’s Instructions for

trade or business activities may be passive

Line 8 – Charitable Contributions

activities to some members. The attachment must

Schedule K-1 (568).

Enter the total amount of charitable contributions

include all the information explained in the

made by the LLC during its taxable year on

Completing Column (d) and Column (e):

instructions for federal Schedule K-1 (1065).

Schedule K (568) and each member’s distributive

Schedule K-1 (568), column (d), includes the

share on Schedule K-1 (568). Attach an itemized

Question A, Schedule K-1 (568)

member’s distributive share of total LLC income,

list to both schedules that show the amount

Check the appropriate box to indicate the

deductions, gains, or losses under California law.

subject to the 50%, 30%, and 20% limitations.

member’s entity type. Exempt organizations

Column (e) includes only income, deductions,

should check the exempt organization box

gains or losses that are apportioned or sourced to

Members are allowed a deduction for contribu-

regardless of legal form.

California. The computation of these amounts is a

tions to qualified organizations as provided in IRC

matter of law and regulation. The residency of the

Question B, Schedule K-1 (568)

Section 170. For taxable years beginning on or

member is not a factor in the computation of

after January 1, 2002, California law conforms to

See the instructions for Question J, located on the

amounts to be included in column (d) and

the federal law, relating to the denial of the

federal Schedule K-1 (1065).

column (e).

deduction for lobbying activities, club dues, and

Question C, Schedule K-1 (568)

employee remuneration in excess of one million

For an LLC that is doing business wholly within

Percentages must be 4 to 7 characters in length

dollars.

California, column (e) will generally be the same

and have a decimal point before the final 4

as column (d), except for nonbusiness intangible

characters. For example, 50% is represented as

Note: California conforms to IRC Section 170(f)(8)

income (for example, nonbusiness interest,

50.0000, 5% as 5.0000, 100% as 100.0000. Do

substantiation requirement for charitable

dividends, gain, or loss from sales of securities).

not enter a fraction, the percentage symbol (%),

contributions.

or the term ‘’Various.’’

For an LLC that is doing business within and

Line 9 through Line 11

Specific Line Instructions

outside California, the amounts in column (d) and

See the instructions for federal Schedule K (1065)

The California Schedule K (568) generally follows

column (e) may be different.

and Schedule K-1 (1065), Deductions, line 12 and

the federal Schedule K (1065). Where California

line 13.

If the LLC knows the member is a resident indi-

and federal laws are the same, the instructions for

vidual, then the LLC answers “No” to Question H

IRC Section 179 expense deductions are subject

California Schedule K (568) refer to the instruc-

on Schedule K-1 (568), and completes column

to different rules for California. See instructions

tions for federal Schedule K (1065).

(d), only. Otherwise, the LLC should complete

for form FTB 3885L, Depreciation and

Question D, Schedule K-1 (568)

column (e) for all other members.

Amortization.

See the instructions for Question F located on the

federal Schedule K-1 (1065).

Page 14 Form 568 Booklet 2005

Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 14

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