Form 3546 - California Enhanced Oil Recovery Credit

H Carryover

polymer-augmented water flooding,

An SMLLC may be disregarded as an entity

cyclic-steam injection, alkaline (or caustic)

separate from its owner, and subject to certain

If the available credit exceeds the current year

flooding, carbonated water flooding,

statutory provisions that recognize otherwise

tax liability, the unused credit may be carried

immiscible nonhydrocarbon gas displacement,

disregarded entities for certain purposes,

over to succeeding years. The maximum

or any other method the Secretary of the

for example:

carryover period is 15 years. Apply the carryover

Treasury approves.

• The tax and fee of an LLC

to the earliest taxable year possible.

• The tax return filing requirements of an LLC

E Basis

In no event can you carry the credit back to

• The credit limitations previously mentioned

apply against a prior year’s tax.

You must reduce the basis of property by

Get Form 568, Limited Liability Company Tax

If you have a carryover, retain all records that

the amount of the credit attributable to that

Booklet, for more information.

document this credit and carryover used in

property. You must make the basis adjustment

If the disregarded entity reports a loss, the

prior years. The FTB may require access to

for the taxable year in which the credit

taxpayer may not claim the credit this year but

these records.

is allowed.

can carry over the credit amount received from

the disregarded entity.

Instructions

F Limitations

This credit cannot reduce the minimum

Federal election – If a taxpayer has no federal

Credit Computation

franchise tax (corporations and

enhanced oil recovery credit due to making

S corporations), annual tax (limited

an election for an item of property under IRC

Only a credit carryover from a prior year

partnerships, limited liability partnerships,

is allowed in 2014. Begin your credit

Section 43(e), which is an election not to

and LLCs classified as partnerships), the

apply IRC Section 43 for federal tax purposes,

computation on line 5.

alternative minimum tax (corporations, exempt

the election is binding and irrevocable for

Line 5 – Credit carryover from 2013.

organizations, individuals, and fiduciaries),

California purposes. The California enhanced

Enter the amount from your 2013 form

the built-in gains tax (S corporations),

oil recovery credit with respect to that item of

FTB 3546, line 8.

or the excess net passive income tax

property is zero.

(S corporations).

Line 7a – Enter the amount of credit claimed

Ineligible taxpayers – Certain refiners of

on the current year tax return.

If a C corporation had unused credit carryovers

crude oil, taxpayers that are not permitted

The amount of this credit you can claim on

when it elected S corporation status, the

to compute their depletion allowance under

your tax return may be limited. See General

carryovers were reduced to 1/3 and transferred

IRC Section 613 because they are retailers of

Information F, Limitations. Also refer to the

to the S corporation. The remaining 2/3 were

oil or natural gas, and certain related parties,

credit instructions in your tax booklet for more

disregarded. The allowable carryovers may

cannot claim the California enhanced oil

information. Use credit code 203 when you

be used to offset the 1.5% tax on net income

recovery credit. See IRC Sections 613A(d)(2)

claim this credit. If you’re claiming an assigned

in accordance with the respective carryover

through 613A(d)(4) for more information on

credit use form FTB 3544A to track the amount

rules. These C corporation carryovers may

ineligible taxpayers.

you claimed.

not be passed through to shareholders. For

Reduced credit – The credit is reduced when

more information, get Schedule C (100S),

Line 7b – Credit Assigned to Other

the reference price, determined under IRC

S Corporation Tax Credits.

Corporations

Section 45K (d)(2)(C), exceeds $28 per barrel.

Corporations that complete form FTB 3544 for

This credit cannot reduce regular tax below

The $28 value is adjusted for inflation for years

this credit, enter the amount from column (g)

the tentative minimum tax. Get Schedule P

after 1991. If the reference price exceeds the

on this line.

(100, 100W, 540, 540NR, or 541), Alternative

base value of $28 (as adjusted by inflation) by

Minimum Tax and Credit Limitations, for

more than $6, the credit is zero. For 2014 the

more information.

credit is zero ($0).

If this credit is taken in lieu of any deduction

Other limitations

otherwise allowable for the same costs, the

If an item of property qualifies the taxpayer to

deduction must be reduced by the amount of

take the enhanced oil recovery credit as well as

credit claimed for the current taxable year (the

any other California credit, the taxpayer must

amount shown on Side I, line 7a).

make an election on the original tax return for

This credit is not refundable.

each year stating which credit is being claimed.

Such an election cannot be revoked except

G Assignment of Credits

with the written consent of the FTB.

Assigned Credits to Affiliated Corporations –

S corporations may claim only 1/3 of the credit

For taxable years beginning on or after

against the 1.5% entity-level tax (3.5% for

July 1, 2008, credit earned by members of a

financial S corporations), the remaining 2/3

combined reporting group may be assigned

must be disregarded and may not be used as

to an affiliated corporation that is a member

carryover. S corporations can pass through

of the same combined reporting group. A

100% of the credit to their shareholders.

credit assigned may only be claimed by the

If a taxpayer owns an interest in a disregarded

affiliated corporation against its tax in taxable

business entity [a single member limited

years beginning on or after January 1, 2010.

liability company (SMLLC) not recognized by

For more information, get form FTB 3544,

California, and for tax purposes treated as a

Election to Assign Credit Within Combined

sole proprietorship owned by an individual

Reporting Group, or form FTB 3544A, List of

or a branch owned by a corporation], the

Assigned Credit Received and/or Claimed by

credit amount received from the disregarded

Assignee or go to ftb.ca.gov and search for

entity is limited to the difference between the

credit assignment.

taxpayer’s regular tax figured with the income

of the disregarded entity, and the taxpayer’s

regular tax figured without the income of the

disregarded entity.

Page 2 FTB 3546 Instructions 2014

Form 3546 - California Enhanced Oil Recovery Credit - 2014 Page 2

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