Form 3806 - Los Angeles Revitalization Zone Businesses Booklet

2016 Instructions for Form FTB 3806

Los Angeles Revitalization Zone Businesses

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

Contents

Single-Sales Factor Formula

Complete Worksheets I and II in this booklet

For taxable years beginning on or after

for the NOL carryover deduction for which the

General Information . . . . . . . . . . . . . . . . . . . . . 2

January 1, 2013, R&TC Section 25128 .7 requires

business is eligible . Then enter the NOL carryover

How to Claim NOL Carryover Deduction . . . . . . . 2

all business income of an apportioning trade

deduction on form FTB 3806 .

Part I – Portion of Business Attributable to the

or business, other than an apportioning trade

If your business is located both within and

Former Los Angeles Revitalization Zone . . . . 2

or business under R&TC Section 25128(b),

outside the former LARZ, see Part I, Portion of

Worksheet I, Income or Loss Apportionment . . 4

to apportion its business income to California

Business Attributable to the Former Los Angeles

Part II – Net Operating Loss (NOL) Carryover

using the single-sales factor formula . For more

Revitalization Zone, for information on how to

and Deduction . . . . . . . . . . . . . . . . . . . . . . . . 6

information, get Schedule R, Apportionment and

apportion business income .

Worksheet II, Net Operating Loss (NOL)

Allocation of Income, or go to ftb.ca.gov and

Carryover and Carryover Limitations . . . . . . 7

How to Claim NOL Carryover

search for single sales factor . However, business

Form FTB 3806, Los Angeles

income apportioned to the former LARZ continues

Deduction

Revitalization Zone Net Operating Loss (NOL)

to be apportioned based on the property and

Carryover Deduction . . . . . . . . . . . . . . . . . . . 9

payroll factors .

To claim any LARZ NOL carryover deduction,

How to Get California Tax Information . . . . . . . 11

attach a completed form FTB 3806 to your

Pass-Through Entities

California tax return .

General Information

For purposes of this booklet, the term

“pass-through entity” refers to an S corporation,

Attach a separate form FTB 3806 for each

Federal/State Conformity

estate, trust, partnership, and a limited liability

business you operate or invest in that is located

In general, for taxable years beginning on or

company (LLC) classified as a partnership .

within the former LARZ . Also, complete the

after January 1, 2015, California law conforms

References to partnerships include LLCs

following worksheets:

to the Internal Revenue Code (IRC) as of

classified as partnerships .

• Corporations complete all the worksheets,

January 1, 2015 . However, there are continuing

except for Worksheet I, Section B .

Reporting Requirement

differences between California and federal law .

• Sole proprietors complete all the worksheets .

When California conforms to federal tax law

California statutes require the Franchise Tax Board

• Trusts, estates, and partnerships, complete

changes, we do not always adopt all of the

(FTB) to provide information to the California

Worksheet I, Section A .

changes made at the federal level . For more

Legislature regarding the number of businesses

• All other investors complete Worksheet I,

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

using the Economic Development Area (EDA)

Section A and Worksheet II .

conformity . Additional information can be found

tax incentives, types of EDA tax incentives being

in FTB Pub . 1001, Supplemental Guidelines

Form FTB 3806 – Instructions

used, and the EDAs in which the businesses are

to California Adjustments, the instructions for

claiming the tax incentives .

for Items A through G

California Schedule CA (540 or 540NR), California

Complete items A through G on Side 1 of form

Adjustments, and the Business Entity tax

Corporations, estates, trusts, partnerships,

FTB 3806, Los Angeles Revitalization Zone Net

booklets .

exempt organizations, and sole proprietors,

Operating Loss (NOL) Carryover Deduction, as

The instructions provided with California tax

complete items A through G .

applicable . The FTB will use this information to

forms are a summary of California tax law and are

meet its statutory reporting requirement .

Investors of pass-through entities, complete

only intended to aid taxpayers in preparing their

items A through D .

state income tax returns . We include information

Introduction

Principal Business Activity (PBA) Codes

that is most useful to the greatest number of

The PBA codes are based on the North American

taxpayers in the limited space available . It is

The Former Los Angeles

Industry Classification System published by the

not possible to include all requirements of the

Revitalization Zone

United States Office of Management and Budget .

California Revenue and Taxation Code (R&TC) in

the instructions . Taxpayers should not consider

If you are a business entity, get the PBA code

The LARZ expired on December 1, 1998 . It was

the instructions as authoritative law .

from the 2016 tax booklet (100, 100S, 100W,

established to aid economic development in areas

565, or 568) that you used to file your tax return .

Los Angeles Revitalization Zone (LARZ) Credit

that suffered damage during the civil unrest that

If you are an individual, get the PBA code reported

Carryover Expired

occurred in the County of Los Angeles during

on your federal Form 1040, Schedule C, line B .

The LARZ credit carryover has expired during the

April and May 1992 . The LARZ became operative

2012 taxable year . For taxable years beginning

on May 1, 1992, and applied to businesses

Part I – Portion of Business

on or after January 1, 2013, taxpayers can no

with taxable years beginning on or after

longer use the LARZ credit carryover . Exception:

Attributable to the Former Los

January 1, 1992 .

Taxpayers can use the LARZ credit carryover if the

Angeles Revitalization Zone

The following tax incentives were provided for

following situation applies:

businesses operating within the LARZ:

LARZ NOL carryover deductions are limited to

For taxable years beginning on or after

• General hiring credit

January 1, 2008, and before January 1, 2010,

business income attributable to operations within

• Construction hiring credit

business tax credits could only offset 50% of

the former LARZ . If the business is located within

• Sales or use tax credit

the tax (corporations) or net tax (individuals), if

and outside of the former LARZ, determine the

• Business expense deduction

a corporation’s taxable income was $500,000 or

portion of total business operations that are

• Net interest deduction

attributable to the former LARZ . Each taxpayer

more, or if an individual’s net business income

• Net Operating Loss (NOL) carryover deduction

was $500,000 or more . Business tax credits

must complete one form FTB 3806 for each zone,

References in this booklet to the “LARZ” are

disallowed due to the 50% limitation may be

and therefore, must also compute the income

interpreted as “the boundaries of the former LARZ

carried over . The carryover period for disallowed

limitation for each zone .

as it existed on November 30, 1998 .”

credits was extended by the number of taxable

Business Income vs.

years the credits were not allowed . Note: The

Purpose

Nonbusiness Income

2014 taxable year was the last year this exception

applies . For taxable years beginning on or after

Claiming NOL Carryover Deduction

Only business income is apportioned to the

January 1, 2015, taxpayers cannot claim any

Use this booklet to determine the NOL carryover

former LARZ to determine the incentive limitation .

LARZ credit carryover .

deduction that the business may claim for

operating or investing in a trade or business

within the former LARZ .

Page 2 FTB 3806 Booklet 2016

Form 3806 - Los Angeles Revitalization Zone Businesses Booklet - 2016 Page 2

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