Capital Account ReportingPublic Service Bulletin

March 10, 2022

Purpose of bulletin

The purpose of this Public Service Bulletin is to provide details regarding the recently issued FTB Notice 2022-01.

Background

Starting in taxable year 2022, and all subsequent years, partnerships and limited liability companies taxed as partnerships will be required to report partners’ and members’ capital account information using the “tax basis method” described in the 2021 Instructions of IRS Form 1065, but calculated under California law, on their Schedule K-1 (565) and Schedule K-1 (568).

For taxable year 2021, Franchise Tax Board has issued Notice 2022-01 which allows partnerships and limited liability companies taxed as partnerships to report their partners’ or members’ capital account information using the “tax basis method” as determined under either federal or California law.

The option to use the federal amount is limited solely to reporting the capital account information on Schedule K-1 (565) and Schedule K-1 (568) for the taxable year 2021, and does not allow any taxpayer to use such amounts for any other purpose, including reporting or determining their California tax liability.

Additional information

For more information please see Notice 2022-01.