Form 3806 - Los Angeles Revitalization Zone Businesses Booklet

total average value of all the taxpayer’s real and

since only business income is apportioned to

Example:

tangible personal property owned or rented and

the former LARZ . See Part I on page 2 of the

Trade or

used during the taxable year within California, see

instructions for a discussion of business and

business

Worksheet I, Section A, column (a) .

nonbusiness income .

income

from

Payroll Factor

Part I – Individual Income and Expense Items

Schedule K-1

Entity’s LARZ

LARZ

When determining income apportioned to the

Pass-through

(100S, 541,

apportionment

apportioned

Wages: Taxpayers with wages from a company

former LARZ, the numerator of the payroll factor

entity

565, or 568)

percentage

income

located within and outside the former LARZ,

is the taxpayer’s total compensation paid to

ABC, Inc .

$40,000

80%

$32,000

determine the LARZ wage income by entering the

the employees for working within the former

A, B, & C

30,000

10%

3,000

percentage of their time that they worked within

LARZ during the taxable year, see Worksheet I,

ABC, LLC

10,000

50%

5,000

the former LARZ in column (b) . The percentage

Section A, column (b) . The denominator of the

Total

$40,000

of time is the same period for which the wages

payroll factor is the taxpayer’s total compensation

entered on line 1 were earned . Determine this

Part III – Taxpayer’s Trade or Business

paid to employees working within California, see

percentage based on records of time and events

Worksheet I, Section A, column (a) .

Business Income: Use business income or

such as a travel log or entries in a daily planner .

loss from federal Form 1040, Schedules C,

Section B – Income or Loss

C-EZ, E, and F, plus California adjustments from

Part II – Pass-Through Income or Loss

Schedule CA (540 or 540NR) for each trade or

Form 540 and Long Form 540NR filers, use

Individuals with a K-1

business . Also include business capital gains

Worksheet I, Section B on page 5 to determine

The individual partner, member, or S Corp .

and losses from Schedule D and business gains

the amount to enter on Worksheet II, line 1 and

shareholder completes Worksheet I, Section B,

and losses from Schedule D-1 as adjusted on

line 6 .

Part II, Pass-Through Income or Loss .

Schedule CA (540 or 540NR) .

Do not include disaster losses in any amounts

Multiple Pass-Through Entities: If you are a

used in the table in column (b) .

shareholder, partner, or member in multiple

pass-through entities with businesses located

Only California source business income is

apportioned to the former LARZ .

within and outside the former LARZ from which

you received LARZ incentives, see the example in

The first step is to determine which portion of

the next column for computing business income

the taxpayer’s net income is “business income”

in the former LARZ .

and which portion is “nonbusiness income,”

Worksheet I

Income or Loss Apportionment – Los Angeles Revitalization Zone

Section A Income Apportionment

Use Worksheet I, Section A, if your business has net

(a)

(b)

(c)

income from sources within and outside the former LARZ .

Total within

Percentage within

California

the former LARZ

column (b) ÷ column (a)

PROPERTY FACTOR

1 Average yearly value of owned real and tangible personal

property used in the business (at original cost) . See

instructions for more information . Exclude property not

connected with the business and the value of

construction in progress .

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .

Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delivery equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other tangible assets (attach schedule) . . . . . . . . . . . . . . . .

Rented property used in the business . See instructions . . .

Total property values . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PAYROLL FACTOR

2 Employees’ wages, salaries, commissions, and other

compensation related to business income included in

the tax return .

Total payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 Total percentage - sum of lines 1 and 2, column (c) . . . . . .

4 Average apportionment percentage (1/2 of line 3) .

Enter here and on form FTB 3806, Side 1, line 1 . . . . . . . . .

The average apportionment percentage shown on line 4 represents the portion of the taxpayer’s total business that is attributable to activities conducted within

the former LARZ . Those factors with zero balances in the totals of column (a) will not be included in the computation of the average apportionment percentage .

For example, if the taxpayer has no payroll within and outside the former LARZ, then the average apportionment percentage would be computed by dividing line 3

by one (instead of by two as normally instructed .)

Page 4 FTB 3806 Booklet 2016