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Changes to 2011 Forms

Updates to the Schedule P (540) Instructions on 02/07/2013 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on Page 5, Column 1, Line 13i.

Previous Version

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 5 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.

Revised Version

Pollution control facilities

For regular tax, you may elect to amortize the basis of a certified pollution control facility over 60 months. For facilities placed in service before 1999, the AMT deduction is figured using the alternative depreciation system (ADS) described in IRC Section 168(g). Use the federal Class Life Asset Depreciation Range System (ADR) under the straight-line method. For facilities placed in service after 1998, the AMT deduction is figured under the modified accelerated cost recovery system (MACRS) using the straight-line method. Enter the difference between your AMT pollution control facilities depreciation and your regular tax pollution control facilities amortization. If your AMT pollution control facilities depreciation is more than your regular tax pollution control facilities amortization, enter the adjustment as a negative amount.

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.

The Pollution control facilities adjustment line was erroneously deleted in the 2011 tax year and is therefore, being added back this year.

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.

By adding back the Pollution control facilities adjustment, the tax liability for taxpayers may increase.

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Updates to the Schedule P (540) Instructions on 04/25/2012 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on Page 3, Column 1, Line 3 -- Personal property taxes and real property taxes.

Previous Version

Enter on this line any of the following from federal Schedule A (Form 1040) line 6 and line 8:

  • State and local personal property taxes
  • State, local, or foreign real property taxes

Revised Version

Enter on this line any of the following from federal Schedule A (Form 1040) line 6, line 7, and line 8:

  • State and local personal property taxes
  • State, local, or foreign real property taxes

Reason for the changes

The amounts reported on Line 3 of Schedule P (540), come from federal Schedule A (Form 1040).

In 2011, federal Schedule A (Form 1040), line 7, title changed from “New Motor Vehicle Taxes” to “Personal Property Taxes”. Since the amount reported on federal Schedule A, line 7, is now a personal property tax it should have been reported on Schedule P (540NR), line 3.

Impact

This revision may increase the tentative minimum tax on Schedule P (540NR) which may increase the overall tax liability.

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Updates to the Schedule P (540) Instructions on 03/14/2012 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on Page 1, Column 1, What’s New, Real Estate Taxes Deduction paragraph.

Previous Version

Real Estate Taxes Deduction
Beginning in January 2011, you are required to provide additional information regarding your property tax deduction. See Part III of Schedule CA for more information.

Revised Version

Note: text deleted.

Reason for the changes

This language is not applicable because there is no Part III of the Schedule CA.

Impact

No tax impact.

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