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Changes to 2008 Forms

Updates to the Schedule P (540NR) Instructions on 02/13/2014 –– Instructions for 540NR Schedule P, Alternative Minimum Tax and Credit Limitations - Nonresidents and Part-Year Residents

We replaced text on:

  1. Page 1, Column 2, B – Who Must File, Bullet 4
  2. Page 3, Column 2, Line 8, second to the last paragraph
  3. Page 4, Column 1, Line 13
  4. Page 4, Column 2, Line 13h, first paragraph
  5. Page 5, Column 1, after Line 13k, Pollution control facilities
  6. Page 5, Column 1, Line 13l
  7. Page 5, Column 1, Line 13m
  8. Page 5, Column 2, Line 13n
  9. Page 5, Column 2, Line 13n, Bullet 3
  10. Page 5, Column 2, Line 13n, last paragraph
  11. Page 6, Column 2, Line 29

Previous Version

  1. Schedule P (540NR), Part l, line 21 is more than Part II, line 22, and you have one or more adjustments on line 4 or line 7 through line 13n.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13h, line 13l, or line 13m, whichever applies.
  3. Line 13 – Other adjustments and preferences.
    Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13n
  4. Use line 13m for nonpassive tax shelter farm activities.
  5. Note: new text added.
  6. Line 13l – Research and experimental costs
  7. Line 13m – Tax shelter farm activities
  8. Line 13n – Related adjustments
  9. Line 13b through line 13m
  10. Figure the difference between AMT and regular tax amount for each item. Combine the amounts for all your related adjustments and enter the total on line 13n.
  11. Line 29 – Adjustments and preferences
    Follow instructions for Part I, line 7 through line 13n. Enter on line 29a through 29s

Revised Version

  1. Schedule P (540NR), Part l, line 21 is more than Part II, line 22, and you have one or more adjustments on line 4 or line 7 through line 13o.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13h, line 13m, or line 13n, whichever applies.
  3. Line 13 – Other adjustments and preferences.
    Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13o
  4. Use line 13n for nonpassive tax shelter farm activities.
  5. Line 13l – Qualified small business stock exclusion
    California law does not conform to federal law changes regarding the increase in the percentage of the gain exclusion for the sales of qualified small business stock acquired after February 17, 2009. California law allows an exclusion of 50% of any gain from the sale or exchange of qualified small business stock held for more than 5 years. For California purposes, 80% of the issuing corporation’s payroll must be attributable to employment located within California (at time of issuance). Also, at least 80% of the value of the corporation’s assets must be used by the corporation to actively conduct one or more qualified trades or businesses.

    R&TC Section 18038.5 also provides for the deferral of gain from the sale of small business stock that has been held for six months or more, if qualified replacement stock is purchased within 60 days after the sale giving rise to the gain. Report gain deferred from the sale of qualified small business stock in accordance with the instructions contained in Revenue Procedure 98-48.

    For more information, go to ftb.ca.gov and search for qsbs.
  6. Line 13m – Research and experimental costs
  7. Line 13n – Tax shelter farm activities
  8. Line 13o – Related adjustments
  9. Line 13b through line 13n
  10. Figure the difference between AMT and regular tax amount for each item. Combine the amounts for all your related adjustments and enter the total on line 13o.
  11. Line 29 – Adjustments and preferences
    Follow instructions for Part I, line 7 through line 13o. Enter on line 29a through 29t

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012.

Impact

This revision may decrease the tax liability for taxpayers who did not report a QSBS exclusion or deferral for taxable years beginning on or after January 1, 2008.

Back to Tax Form Changes for 2008


Updates to the Schedule P (540NR) Instructions on 02/22/2013 –– Instructions for 540NR Schedule P, Alternative Minimum Tax and Credit Limitations - Nonresidents and Part-Year Residents

We replaced text on:

  1. Page 1, Column 2, B – Who Must File, Bullet 4
  2. Page 3, Column 2, Line 8
  3. Page 4, Column 1, Line 13
  4. Page 4, Column 2, Line 13h
  5. Page 5, Column 1, Line 13l
  6. Page 5, Column 1, Line 13m
  7. Page 5, Column 1, Line 13n
  8. Page 5, Column 2, Line 13o
  9. Page 5, Column 2, Line 13o, Bullet 3
  10. Page 5, Column 2, Line 13o, Paragraph after last bullet
  11. Page 6, Column 2, Line 29

Previous Version

  1. Schedule P (540NR), Part 1, line 21, is more than Part II, line 22, and you have one or more adjustments on line 4 or line 7 through line 13o.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13h, line 13m, or line 13n, whichever applies.
  3. Line 13 – Other adjustments and preferences. Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13o.
  4. Line 13h – Loss limitations. Use line 13n for nonpassive tax shelter farm activities.
  5. Line 13l – Qualified small business stock exclusion (R&TC Section 18152.5) California law provides an exclusion similar to the federal exclusion under IRC Section 1202 for 50% of the gain on the sale of qualifying small business stock originally issued after August 10, 1993, and held for five years. However, for California purposes, 80% of the issuing corporation’s payroll as measured by total dollar value must be attributable to employment located within California, and at least 80% of the value of the assets of the corporation must be used by the corporation in the active conduct of one or more qualified trades or businesses in California. If you excluded gain as allowed under R&TC Section 18152.5, multiply the excluded amount by 50% and enter it on this line as a positive amount.
  6. Line 13m
  7. Line 13n
  8. Line 13o
  9. Line 13o, Line 13b through line 13n
  10. Line 13o, Combine the amounts for all your related adjustments and enter the total on line 13o.
  11. Line 29, Adjustments and preferences. Follow the instructions for Part 1, line 7 through line 13o. Enter on line 29a through 29t the amounts that relate to income and deductions shown on Schedule CA (540NR), Part II, column E.

Revised Version

  1. Schedule P (540NR), Part 1, line 21, is more than Part II, line 22, and you have one or more adjustments on line 4 or line 7 through line 13n.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13h, line 13l, or line 13m, whichever applies.
  3. Line 13 – Other adjustments and preferences. Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13n.
  4. Line 13h – Loss limitations. Use line 13m for nonpassive tax shelter farm activities.
  5. Note: text deleted.
  6. Line 13l
  7. Line 13m
  8. Line 13n
  9. Line 13o, Line 13b through line 13m
  10. Line 13o, Combine the amounts for all your related adjustments and enter the total on line 13n.
  11. Line 29, Adjustments and preferences. Follow the instructions for Part 1, line 7 through line 13n. Enter on line 29a through 29s the amounts that relate to income and deductions shown on Schedule CA (540NR), Part II, column E.

Reason for the changes

The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

Impact

This revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

Back to Tax Form Changes for 2008


Updates to the Schedule P (540NR) Instructions on 01/27/2010 –– Instructions for 540NR Schedule P, Alternative Minimum Tax and Credit Limitations – Nonresidents and Part-Year Residents

We replaced text on the Schedule P (540NR) on Page 6, Part III, Credits That Reduce Tax, How to compute the net business income.

Previous Version

How to compute the net business income

Net business income is reflected, respectively, on California Schedule CA (540NR) line 12 and line 18 Column E, and the federal Schedule E, line 26, line 32, and line 40; and the federal Form 4797, line 9, using California amounts.

Revised Version

How to compute the net business income

Net business income is reflected, respectively, on California Schedule CA (540NR) line 12, line 14, and line 18 Column E, and the federal Schedule E, line 26, line 32, and line 40; and the federal Form 4797, line 9, using California amounts.

Reason for the changes

Net business income includes recapture amounts resulting from the sale of business property. We added Schedule CA line 14 to include the recapture amounts from the sale of depreciable business assets.

Impact

This change includes recapture amounts in the net business income computation. This may result in an increased tax liability if the taxpayer meets the criteria for a NOL carryover suspension and credit limitation.


Updates to the Schedule P (540NR) Instructions on 02/24/2009 –– Alternative Minimum Tax and Credit Limitations - Nonresidents and Part-Year Residents Instructions

We replaced text on Page 6, Column 2, “How to compute the limitation” bulleted list, continued through Page 7, Column 1.

Previous Version

  • Credit for household and dependent care
  • Credit for adoption costs
  • Renter’s tax credit
  • Credit for personal exemption
  • Credit for qualified joint custody head of household and qualifying taxpayer with a dependent parent
  • Credit for senior head of household
  • Excess contributions of unemployment compensation
  • Other State Tax Credit

Revised Version

  • Child and Dependent Care Expenses Credit
  • Credit for Child Adoption Costs
  • Renter’s Credit
  • Exemption Credits (personal, dependent, senior and blind)
  • Credit for Joint Custody Head of Household
  • Credit for Dependent Parent
  • Credit for Senior Head of Household
  • Credit for Excess California SDI or VPDI Withheld
  • Other State Tax Credit

Reason for the changes
This revision is being made for the ease of readers; we are renaming the credits in the bulleted list to the common name used in the tax booklets. The credits on this list are exempt from the credit limitation imposed by RTC 17039.2.


Updates to the 2008 Schedule P (540NR) -- Alternative Minimum Tax and Credit Limitations - Nonresidents and Part-Year Residents

The revised Internet version is available for download as of 01/30/2009.

Revision Details:
Adding Other State Tax Credit (OSTC) to the list provides clarity. R&TC Section 17039.2 places a limitation on the application of business credits equal to 50% of the net tax, but only to business credits allowable under Chapter 2. OSTC are found in R&TC Section 18001, Chapter 12.

  • This update is located in the Schedule P (540NR)instructions, Bottom of Page 6, Second Column and Page 7, top of the 1st Column, "How to compute the limitation " bulleted list.

Previously read:
* Credit for household and dependent care * Credit for adoption costs * Renter’s tax credit * Credit for personal exemption * Credit for qualified joint custody head of household and qualifying taxpayer with a dependent parent * Credit for senior head of household * Excess contributions of unemployment compensation

Revised to:
* Credit for household and dependent care * Credit for adoption costs * Renter’s tax credit * Credit for personal exemption * Credit for qualified joint custody head of household and qualifying taxpayer with a dependent parent * Credit for senior head of household * Excess contributions of unemployment compensation * Other State Tax Credit

This may reduce the taxpayer’s tax liability because it removes the business credit limitation from the OSTC.


The revised Internet version is available for download as of 01/22/2009.

Revision Details:
The first update occurs on the Schedule P (540NR), and it moves the parentheses from Line 35 and to Line 34. This corrects a mathematical error on the form.

The second update occurs on the Schedule P (540NR) Instructions. It corrects Line 15 and Line 21 references (located in second bolded heading under How to Claim Your Credits) to read as Line 16 and Line 20, respectively. This clarifies that the A1, A2, B2, and B3 credits should be entered on the Form 540NR, Line 32 and/or Line 33.

Line 15, a B1 credit, refers to the Nonrefundable Renters Credit, which has its own separate set of instructions. Line 21, is located in Schedule P, Part III, Section C, is not a credit. Line 21 requires the taxpayer to enter their AMT from Sched P, Side II, Line 45 as part of a new calculation.

  • First Update: Schedule P (540NR), Side 2, Lines 34 and 35.

Previously read:
Line 35 Total AMT Itemized Deductions had brackets in the number entry column.

Revised to:
Line 35 brackets removed.

Added brackets to Line 34, Combine line a through e to the number entry column.

  • Second update: Schedule P (540NR) Instructions, Page 7, column 2, How to Claim Your Credits section, Second Bolded Heading

Previously read:

Credits from Part III, Line 4 through Line 10 and Line 15 through Line 21

Revised to:

Credits from Part III, Line 4 through Line 10 and Line 16 through Line 20

Back to Tax Form Changes for 2008