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2013 Instructions for Form FTB 3805Q

Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Corporations

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).

What’s New

7 months of the due date of the return (excluding

• The general NOL carryover percentage varies

extensions). Once made, the election shall be

for NOLs incurred prior to January 1, 2004.

Net Operating Loss (NOL) Carryback – NOLs

irrevocable for such taxable year.

See General Information F, Types of NOLs, for

incurred in taxable years beginning on or after

more information.

January 1, 2013, shall be carried back to each of

Important Information

• In 1998, the Franchise Tax Board (FTB)

the preceding two taxable years.

implemented the new Principal Business

• For taxable years beginning in 2010 and

The allowable NOL carryback percentage varies.

Activity (PBA) Codes chart that is based on

2011, California suspended the NOL carryover

For an NOL incurred in a taxable year beginning

the North American Industry Classification

deduction. Corporations continued to

on or after:

System (NAICS) in the corporate tax booklets.

compute and carryover NOLs during the

• January 1, 2013, and before January 1, 2014,

However, the California R&TC still uses the

suspension period. However, corporations

the carryback amount shall not exceed 50% of

Standard Industrial Codes (SIC) for purposes

with net income after state adjustments (pre-

the NOL.

of the new business and eligible small

apportioned income) of less than $300,000 or

• January 1, 2014, and before January 1, 2015,

business NOL.

with disaster loss carryovers were not affected

the carryback amount shall not exceed 75% of

by the NOL suspension rules.

General Information

the NOL.

If taxpayers are required to be included in a

• January 1, 2015, the carryback amount shall

combined report, the 2010 and 2011 NOL

In general, for taxable years beginning on or

be 100% of the NOL.

limitation amount of $300,000 or more

after January 1, 2010, California law conforms

The corporation computes the NOL carryback

shall apply to the aggregate amount of pre-

to the IRC as of January 1, 2009. However, there

in Part III of form FTB 3805Q, Net Operating

apportioned income for all members included

are continuing differences between California

Loss (NOL) Computation and NOL and Disaster

in the combined report.

and federal law. When California conforms to

Loss Limitations — Corporations. For more

federal tax law changes, we do not always adopt

For taxable years beginning in 2008 and

information, see Revenue and Taxation Code

all of the changes made at the federal level. For

2009, California suspended the NOL carryover

(R&TC) Section 24416.20 and get FTB Legal

more information, go to ftb.ca.gov and search

deduction. Corporations continued to compute

Ruling 2011-04 (see Situation 3).

for conformity. Additional information can be

and carryover an NOL during the suspension

found in FTB Pub. 1001, Supplemental Guidelines

Amended Return – The corporation claims

period. However, corporations with taxable

to California Adjustments, the instructions for

the NOL carryback by amending the 2011 and/

income of less than $500,000 or with disaster

California Schedule CA (540 or 540NR), and the

or 2012 tax return using Form 100X, Amended

loss carryovers are not affected by the NOL

Business Entity tax booklets.

Corporation Franchise or Income Tax Return,

suspension rules.

or Form 109, California Exempt Organization

The instructions provided with California tax

The carryover period for any NOL or NOL

Business Income Tax Return.

forms are a summary of California tax law and are

carryover, for which a deduction is disallowed

only intended to aid taxpayers in preparing their

Note: If the corporation will claim the NOL as

because of the 2008-2011 suspension, are

state income tax returns. We include information

a carryback in any of the previous two years,

extended by:

that is most useful to the greatest number of

the corporation will first file the applicable 2013

• One year for losses incurred in

taxpayers in the limited space available. It is not

tax return and attach the completed 2013 form

taxable years beginning on or

possible to include all requirements of the R&TC

FTB 3805Q to the tax return.

after January 1, 2010, and before

in the tax booklets. Taxpayers should not consider

After the 2013 tax return is filed, the corporation

January 1, 2011.

the tax booklets as authoritative law.

will file the amended return for 2011 and/or

• Two years for losses incurred in taxable

2012 to claim the NOL carryback deduction and

years beginning before January 1, 2010.

A Purpose

provide the following explanation on Form 100X,

• Three years for losses incurred in taxable

Part V, line 2, Explanation of Changes: “2013 NOL

Use form FTB 3805Q to figure the current year

years beginning before January 1, 2009.

carryback deduction”. For amended Form 109,

NOL and to limit NOL carryback/carryover and

• Four years for losses incurred in taxable

attach a statement and provide the following

disaster loss carryover deductions.

years beginning before January 1, 2008.

explanation: “2013 NOL carryback deduction”.

Exempt trusts should use form FTB 3805V, Net

For more information, get FTB Legal

Do not attach the 2013 form FTB 3805Q to the

Operating Loss (NOL) Computation and NOL and

Ruling 2011-04.

2011 or 2012 amended return. Attaching form

Disaster Loss Limitations — Individuals, Estates,

• For NOLs incurred in taxable years beginning

FTB 3805Q may delay processing of the amended

and Trusts.

on or after January 1, 2008, California has

return.

The California NOL is figured the same way as the

extended the NOL carryover period from 10

Election to Waive Carryback – Any corporation

federal NOL, except that for California:

taxable years to 20 taxable years following the

entitled to a carryback period pursuant to Internal

year of the loss.

• The carryover period and the amount to be

Revenue Code (IRC) Section 172(b)(3) may elect

• For taxable years that began in 2002 and

carried over differ from federal allowances.

to relinquish/waive the entire carryback period with

2003, California suspended the NOL carryover

See General Information F, Types of NOLs, for

respect to an NOL incurred in the 2013 taxable

deduction. Corporations continued to compute

more information.

year. By making the election, the corporation

and carryover an NOL during the suspension

• An NOL may be carried over to future

is electing to carry an NOL forward instead of

period. However, the deduction for disaster

years (No carrybacks are allowed for NOL

carrying it back in the previous two years.

losses was not affected by the NOL suspension

incurred in taxable years beginning before

To make the election, check the box in Part l

rules.

January 1, 2013.)

under Election to Waive Carryback of form

The carryover period for an NOL incurred in

Note: California will allow NOLs incurred

FTB 3805Q, and attach form FTB 3805Q to the

taxable years:

in taxable years beginning on or after

tax return. The election shall be made by the due

January 1, 2013, to be carried back to each

• Beginning before January 1, 2002, have

date (including extensions of time) for filing the

of the preceding two taxable years. For more

been extended for two years.

corporation’s return for the taxable year of the

information, see What’s New section and

• Beginning on or after January 1, 2002,

NOL for which the election is to be in effect. If

Specific Line Instructions, Parts I and III.

and before January 1, 2003, have been

the corporation filed the return on time without

extended for one year.

If the corporation has a current year NOL under

making the election, the corporation can still

make the election on the form FTB 3805Q and

For more information, get FTB Legal

attach it to the amended return filed within

Ruling 2011-04.

FTB 3805Q Instructions 2013 Page 1

Instructions For Form Ftb 3805q - Net Operating Loss (Nol) Computation And Nol And Disaster Loss Limitations - Corporations - 2013

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