California Form 3546 - Enhanced Oil Recovery Credit - 2012 Page 2

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H Carryover
polymer-augmented water flooding, cyclic-
An SMLLC may be disregarded as an entity
steam injection, alkaline (or caustic) flooding,
separate from its owner, and subject to certain
If the available credit exceeds the current year
carbonated water flooding, immiscible
statutory provisions that recognize otherwise
tax liability, the unused credit may be carried
nonhydrocarbon gas displacement, or
disregarded entities for certain purposes,
over to succeeding years. The maximum
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(s) 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.
Specific Line 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 2012. 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 2011.
organizations, individuals, and fiduciaries),
California purposes. The California enhanced
Enter the amount from your 2011 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. Refer to the
carryovers were reduced to 1/3 and transferred
IRC Section 613 because they are retailers of
credit instructions in your tax booklet for more
to the S corporation. The remaining 2/3 were
oil or natural gas, and certain related parties,
information. These instructions also explain
disregarded. The allowable carryovers may
cannot claim the California enhanced oil
how to claim this credit on your tax return.
be used to offset the 1.5% tax on net income
recovery credit. See IRC Sections 613A(d)(2)
Use credit code number 203 when you claim
in accordance with the respective carryover
through 613A(d)(4) for more information on
this credit. Also see General Information F,
rules. These C corporation carryovers may
ineligible taxpayers.
Limitations. If you’re claiming an assigned
not be passed through to shareholders. For
credit use form FTB 3544A to track the amount
Reduced credit – The credit is reduced when
more information, get Schedule C (100S),
the reference price, determined under IRC
you claimed.
S Corporation Tax Credits.
Section 45K (d)(2)(C), exceeds $28 per barrel.
Line 7b – Credit Assigned to Other
This credit cannot reduce regular tax below
The $28 value is adjusted for inflation for years
the tentative minimum tax. Get Schedule P
after 1991. If the reference price exceeds the
Corporations that complete form FTB 3544 for
(100, 100W, 540, 540NR, or 541), Alternative
base value of $28 (as adjusted by inflation) by
this credit, enter the amount from column (g)
Minimum Tax and Credit Limitations, for
more than $6, the credit is zero. For 2007 thru
on this line.
more information.
2012 the 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 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.
Side 2 FTB 3546 2012


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