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• Local Agency Military Base Recovery Area (LAMBRA) Hiring and Sales

• Has aggregate gross receipts, less returns and allowances, of less than

or Use Tax Credit. Get form FTB 3807.

$1,000,000 during the taxable year from all trades or businesses in

• Manufacturing Enhancement Area (MEA) Hiring Credit. Get form

which the taxpayer is an owner or has an ownership interest. In the

FTB 3808.

case of an ownership interest, you should include only your propor-

• Natural Heritage Preservation Tax Credit. Get form FTB 3503.

tional share of aggregate gross receipts of any trade or business from a

• Prison Inmate Labor Credit. Get form FTB 3507.

partnership, LLC, S corporation, regulated investment company (RIC),

• Research Credit. Get form FTB 3523.

real estate investment trust (REIT), or real estate mortgage investment

• Rice Straw Credit. Use credit code 206.

conduit (REMIC).

• Solar or Wind Energy System Credit. Get form FTB 3508.

You need to add your share of the aggregate gross receipts from this LLC

• Targeted Tax Area (TTA) Hiring and Sales or Use Tax Credit. Get form

to your aggregate gross receipts from all other trades or businesses in

FTB 3809.

which you hold an interest to determine if you are a qualified taxpayer.

Note: The passive activity limitations of IRC Section 469 may limit the

For purposes of R&TC Section 17062(b)(4), “ aggregate gross receipts,

amount of credits on line 13b, line 13c, line 13d, and line 14. Line 13b,

less returns and allowances ” means the sum of:

line 13c, and line 13d credits are related to the rental activities of the LLC.

• The gross receipts of the trades or businesses which the taxpayer

Line 14 credits are related to the trade or business activities of the LLC. In

owns;

general, passive activity credits from passive activities are limited to tax

• The proportionate interest of the gross receipts of the trades or

attributable to passive activities for California purposes (R&TC Sec-

businesses which the taxpayer owns; and

tion 17561). Credits that may be limited under the passive activity credit

• The proportionate interest of pass-through entities gross receipts in

rules are the:

which the taxpayer holds an interest.

• Research credit; and

“Gross receipts” means the sum of the gross receipts from the production

• Low-income housing credit.

of business income, as defined in subdivision (a) of R&TC Section 25120,

You may be able to use the low-income housing credit, and other credits

and the gross receipts from the production of nonbusiness income, as

generated from rental activities, against tax on other income. See form

defined in subdivision (d) of R&TC Section 25120.

FTB 3801-CR for more information.

For purposes of this section “ pass-through entity ” means a partnership (as

The LLC can include on line 14 your distributive share of net income taxes

defined by R&TC Section 17008), an S corporation, a RIC, a REIT, and a

paid to other states by the LLC. Subject to the limitations of R&TC

REMIC. See R&TC Section 17062 for more information.

Section 18006, members may claim a credit against their individual tax for

See the instructions for federal Schedule K-1 (1065), box 25, for examples

net income taxes paid by the LLC to another state. The amount of tax paid

of supplemental information to be reported here. Also, get FTB Pub. 1001

is required to be supported by a copy of the return filed with the other state

for a listing of items of nonconformity for individuals.

and evidence of the payment of the tax. Get Schedule S for more

The pro-rata share of gain or loss on property subject to the IRC

information.

Section 179 expense deduction recapture should be reported on

Reminder: All of these forms and many others are available from our

Schedule K-1 as supplemental information. Follow the instructions on the

Website at

federal Form 4797 and federal Schedule K-1 (1065) for the reporting

requirements.

E Adjustments and Tax Preference Items

G Table 1

Line 15a through Line 15e col. (d)

Use the information reported on line 15a through line 15e, column (d) as

Generally, nonbusiness interest and dividends are sourced to the state of

well as your adjustments and tax preference items from other sources to

residence for nonapportioning individuals. Nonapportioning means doing

complete Schedule P (540), Alternative Minimum Tax and Credit Limita-

business entirely within California. For more information regarding the

tions — Residents; Schedule P (540NR), Alternative Minimum Tax and

sourcing of intangibles, see R&TC Section 17952.

Credit Limitations — Nonresidents or Part-Year Residents; Schedule P

For apportioning members, nonbusiness interest and dividends generally

(541), Alternative Minimum Tax and Credit Limitations — Fiduciaries;

are allocable to California if the taxpayer’s commercial domicile is

Schedule P (100), Alternative Minimum Tax and Credit Limitations —

California. For information regarding sourcing of intangibles for apportion-

Corporations; or Schedule P (100W), Alternative Minimum Tax and Credits

ing taxpayers, see R&TC Sections 25126 and 25127.

Limitations – Water’s-Edge Filers. For additional information, see the

The income data contained in Table 1 is not reflected in column (e) of

instructions for federal Schedule K-1 (1065), Alternative minimum tax

Schedule K-1 (568). For additional information, see General Information E.

(AMT) items box 17.

H Table 2

F Other

The final determination of unity is made at the member level.

Line 16 through Line 19

If the member and the LLC are engaged in a single unitary business, or if

See the federal instructions for Schedule K-1 (1065), box 18 through

the LLC is uncertain as to whether it is unitary with the member, the LLC

box 20. The LLC should give you a description and the amount of your

will furnish the information on Table 2.

share for each item applicable to California in this category.

The member’s share of the LLC’s business income is entered on Table 2,

Line 22 – Supplemental Information

Part A. The member then adds that income to its own business income and

apportions the combined business income using the revised factor

The LLC will provide supplemental information required to be reported to

described below.

you on this line. If the LLC is claiming tax benefits from an EZ, LARZ,

LAMBRA, MEA, or TTA, it will give you the business income, and business

Table 2, Part B, reflects the member’s share of nonbusiness income from

capital gains and losses, apportioned to the EZ, LARZ, LAMBRA, MEA, or

real and tangible property wholly sourced or allocable to California. This is

TTA, on this line. Get form FTB 3805Z, FTB 3806, FTB 3807, FTB 3808, or

added to apportioned business income and nonbusiness intangible income

FTB 3809 to claim any applicable credit.

allocated to California and becomes a part of California taxable income. For

more information on sourcing intangibles, see R&TC Sections 25124 and

The LLC may have provided an amount showing your proportionate

25125, and Cal. Code Regs., tit. 18 sections 17951-1, 17951-2, and

interest in the LLC’s aggregate gross receipts, less returns and allowances

17951-3.

on this line. A qualified taxpayer may exclude income, positive and

negative adjustments, and preference items attributable to any trade or

The member’s share of the LLC’s property, payroll, and sales factors is in

business from alternative minimum taxable income. A “qualified taxpayer”

Table 2, Part C. The member combines its apportionment factors with the

is defined as an individual, estate, or trust that:

apportionment factors of the LLC and uses the revised factor to compute

its business income apportioned to California. For further information, see

• Is the owner of, or has an ownership interest in a trade or business;

General Information D.

and

Schedule K-1 (568) Instructions 2005

Page 39

Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 26

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