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Note: California has not conformed to the federal

Members

Limited Liability Company Nonresident Members’

Job Creation and Worker Assistance Act of 2002

Consent, is not signed on behalf of the member

If taxes were withheld from payments to the LLC,

that allows taxpayers to take an additional first-year

LLC, the amount paid by an LLC is entered on the

this withholding is allocated to all members

depreciation deduction and Alternative Minimum

member LLC's Schedule K-1 (568) line 13e. This

according to their LLC interests.

Tax depreciation adjustment for property placed in

credit is allocated to all members according to

Line 13a(2) – Limited Liability Company

service after September 10, 2001.

their LLC interest. Individual members must

Withholding on Nonresident Members,

attach a copy of the Schedule K-1 (568),

Investment Interest

Schedule K-1 (568) only

previously issued to the member LLC by its LLC

If taxes were withheld-at-source on a domestic or

Line 12a through Line 12b(2)

as well as the Schedule K-1 (568) issued by the

foreign nonresident member, the amount withheld

These lines must be completed whether or not a

member LLC to its members, to their California

is entered on the member’s Schedule K-1 (568),

member is subject to the investment interest

tax return to claim their share of the tax paid by

line 13a(2). This is not a distributive share item.

rules.

the LLC on behalf of the member LLC.

Line 13a(3) – Total Withholding,

Line 12a – Interest Expense on Investment

Line 14 – Other Credits

Schedule K-1 (568) only

Debts

Attach a schedule showing each member’s

Enter the interest paid or accrued to purchase or

The amounts on a member’s Schedule K-1 (568),

allocable share of any credit or credit information

carry property held for investment. Property held

line 13a(1) and line 13a(2) are added together to

that is related to a trade or business activity.

for investment includes property that produces

get the total amount of withholding credit for that

Credits that may be reported on line 14 (depend-

portfolio income (interest, dividends, annuities,

member for the LLC year. If taxes were withheld

ing on the type of activity they relate to) include:

royalties, etc.). Therefore, interest expense

by the LLC or if there is a pass-through withhold-

• Community Development Financial Institution

allocable to portfolio income should be reported

ing credit from another entity, the LLC must

Deposits Credit. Use credit code 209.

on line 12a of Schedule K (568) and Schedule K-1

provide each affected member (including

• Disabled Access Credit for Eligible Small

(568) rather than line 10 of Schedule K (568) and

California residents) a completed Form 592-B.

Businesses. Get form FTB 3548.

Schedule K-1 (568).

Members must attach Form 592-B to the front of

their California tax return to claim the withheld

• Donated Agricultural Products Transportation

Property held for investment includes a member’s

Credit. Get form FTB 3547.

amounts. Schedule K-1 (568) may not be used to

interest in a trade or business activity that is not a

• Employer Child Care Program/Contribution

claim this withholding credit.

passive activity to the LLC and in which the

Credit. Get form FTB 3501.

member does not materially participate. An

Line 13b through Line 13d

• Enhanced Oil Recovery Credit. Get form

example would be the rule concerning a

These lines relate to rental activities. Use line 14

FTB 3546.

member’s working interest in an oil and gas

to report credits related to trade or business

• Enterprise Zone (EZ) Hiring and Sales or Use

property (i.e., the member’s interest is not limited

activities.

Tax Credit. Get form FTB 3805Z.

if the member does not materially participate in

Note: California line numbers are different from

• Environmental Tax Credit. Get form FTB 3511.

the oil and gas activity). Investment interest does

federal line numbers in this section.

• Farmworker Housing Credit-Construction. Use

not include interest expense allocable to a passive

credit code 207.

Line 13b – Low-Income Housing Credit

activity. For more information, get form FTB 3526,

• Farmworker Housing Credit-Loan. Use credit

A credit may be claimed by owners of residential

Investment Interest Expense Deduction.

code 208.

rental projects providing low-income housing

Line 12b(1) and Line 12b(2) – Investment

•

Joint Strike Fighter Credit. Get form FTB 3534.

(IRC Section 42). Generally, the credit is effective

Interest Income and Expenses

• Local Agency Military Base Recovery Area

for buildings placed in service after 1986. Get

Enter on line 12b(1) only the investment income

(LAMBRA) Hiring and Sales or Use Tax Credit.

form FTB 3521, Low-Income Housing Credit, for

included on line 4a, line 4b, line 4c, and line 4e of

Get form FTB 3807.

more information.

Schedule K (568) and Schedule K-1 (568). Enter

• Manufacturing Enhancement Area (MEA)

Line 13c – Credits Related to Rental Real Estate

on line 12b(2) only the investment expense

Hiring Credit. Get form FTB 3808.

Activities Other Than Line 13b

included on line 10 of Schedule K (568) and

• Natural Heritage Preservation Credit. Get form

Report any information that the members need to

Schedule K-1 (568).

FTB 3505.

figure credits related to a rental real estate

If items of investment income or expense are

• Prison Inmate Labor Credit. Get form

activity, other than the low-income housing

included in the amounts that are required to be

FTB 3507.

credit. Attach to each member’s Schedule K-1

passed through separately to the member on

• Research Credit. Get form FTB 3523.

(568) a statement showing the amount to be

Schedule K-1 (568), items other than the

• Rice Straw Credit. Use credit code 206.

reported and the applicable form on which the

amounts included on line 4 and line 10 of

• Solar or Wind Energy System Credit. Get form

amount should be reported.

Schedule K-1 (568), give each member a

FTB 3508.

Line 13d – Credits Related to Other Rental

statement identifying these amounts.

• Targeted Tax Area (TTA) Hiring and Sales or

Activities

Use Tax Credit. Get form FTB 3809.

Investment income includes gross income from

Use this line to report information that the

property held for investment, gain attributable to

Line 14 may also include the distributive share of

members need to figure credits related to a rental

the disposition of property held for investment

net income taxes paid to other states by the LLC.

activity. Attach to each member’s Schedule K-1

and other amounts that are gross portfolio

Subject to limitations of R&TC Section 18001 and

(568) a statement showing the amount to be

income. Investment income and investment

Section 18006, members may claim a credit

reported and the applicable form on which the

expense generally do not include any income or

against their individual income tax for net income

amount should be reported.

expense from a passive activity.

taxes paid by the LLC to another state. The

Line 13e – Nonconsenting Nonresident

amount of tax paid must be supported by a

Property subject to a net lease is not treated as

Member’s Tax Paid by LLC,

schedule of payments and evidence of tax liability

investment property because it is subject to the

Schedule K-1 (568) only

by the LLC to the other states. Refer the members

passive loss rules. Do not reduce investment

If income tax was paid by the LLC on behalf of a

to Schedule S for more information.

income by losses from passive activities.

nonresident member who did not sign form

Reminder: All of the above credit forms and

FTB 3832, the amount paid is entered on the

Investment expenses are deductible expenses

many others are available on our Website at

member's Schedule K-1 (568), line 13e. This is

(other than interest) directly connected with the

not a distributive share item; it is only reported on

production of investment income. Get the

the specific nonresident member's Schedule K-1.

instructions for form FTB 3526 for more

Adjustments and Tax Preference

Members must attach a copy of Schedule K-1

information.

Items

(568) to their California income tax return to

Credits

claim the tax paid by the LLC on their behalf.

Line 15a through Line 15e

Line 13a(1) – Withholding on Payments to the

If income tax was paid by an LLC on behalf of a

Enter each member’s distributive share of income

Limited Liability Company Allocated to All

member that is an LLC and form FTB 3832,

and deductions that are adjustments and tax

preference items. Get Schedule P (540),

Form 568 Booklet 2005

Page 15

Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 15

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