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State of California Franchise Tax Board

Changes to 2013 Forms

Updates to the Form 3805V Instructions on 05/06/2015 –– Instructions for 3805V Form, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Individuals, Estates, and Trusts

We replaced text on:

  1. Page 5, Column 1, Part II, after Line 4 Long Form 540NR filers paragraph.
  2. Page 5, Column 1, Part III, Line 1

Previous Version

  1. Note: new text added.
  2. Line 1 – Enter the MTI from Part II, line 5. This is the maximum NOL carryover deduction you are allowed for 2013. NOL carryover amounts in excess of MTI may be eligible for carryover to 2014. See General Information B, Types of NOLs.

Revised Version

  1. Line 5 - Enter as a positive number the adjustments to itemized deductions, minus the adjustment to mortgage insurance premiums, used to figure your federal NOL carryover. For more information, see federal Publication 536, Table 1, Worksheet for NOL Carryover.
  2. Line 1 – Enter the MTI from Part II, line 6. This is the maximum NOL carryover deduction you are allowed for 2013. NOL carryover amounts in excess of MTI may be eligible for carryover to 2014. See General Information B, Types of NOLs.

Reason for the changes

The NOL carryover calculation on the PIT NOL form does not limit the miscellaneous itemized deductions that are subject to the 2% of AGI floor the same as federal. California conforms to federal.

Impact

This revision may increase the taxpayer’s modified taxable income, which may decrease the taxpayer’s net operating loss carryover to future years.

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Updates to the Form 3805V Instructions on 02/04/2015 –– Instructions for 3805V Form, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Individuals, Estates, and Trusts

We replaced text on:

  1. Page 2, NOL Carryback Chart, Column 1, Type of NOL and Description.
  2. Page 3 and Page 4, Specific Line Instructions, Part I, Section A, Line 25 NOL carryback general rule paragraph, Section B, Line 25 NOL carryback general rule paragraph, and Column E, Line 25 NOL carryback general rule paragraph.
  3. Page 5, Column 3.

Previous Version

  1. Does not include loss incurred from a disaster loss.
  2. The two-year carryback period does not apply to the portion of an NOL attributable to a qualified disaster.
  3. **Carryover period and percentage are limited to the NOL rules. No special legislation was enacted.

Revised Version

  1. Note: text deleted.
  2. Note: text deleted.
  3. **Carryover period and percentage are limited to the NOL rules. No special legislation was enacted.

    For taxable years beginning on or after January 1, 2013, the taxpayer can claim 100% of the disaster loss deduction (from Tuolumne, Mariposa, and San Francisco Counties Rim Fire occurred on 08/13 to 10/13) in the year the loss was incurred, or make an election under IRC Section 165(i) to claim the disaster loss deduction against the previous year’s income. If the disaster loss deduction (from Tuolumne, Mariposa, and San Francisco Counties Rim Fire) is claimed in 2013, any remaining disaster loss would create an NOL for 2013, and the applicable NOL carryback and carryforward rules for 2013 would apply. The taxpayer must carryback the NOL attributable to the disaster loss for two years or elect to carryforward the NOL for 20 years.

Reason for the changes

R&TC Section 17276.20 allows an NOL attributable to a taxable year beginning on or after January 1, 2013, to be carried back to each of the two taxable years preceeding the taxable year of the loss. This provision also applies to an NOL attributable to a qualified disaster loss. As a result, the form and instructions are revised to allow an NOL attributable to a qualified disaster loss to be carried back.

Impact

There is no impact to tax liability for 2013. However, if loss is carried back to the prior year(s) 2011 and 2012, net income will be decreased, which will result in a decrease in the tax liability for 2011 and 2012.

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Updates to the Form 3805V Instructions on 01/10/2014 –– Instructions for 3805V Form, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Individuals, Estates, and Trusts

We replaced text on Page 5, Column 2, Designated Disasters chart.


Previous Version

Designated Disasters

Year Code Event
2011 51 Los Angeles and San Bernardino County Severe Winds 11/11***

Revised Version

Designated Disasters

Year Code Event
2013 52 Tuolumne, Mariposa, and San Francisco Counties Rim Fire 08/13 to 10/13**
2011 51 Los Angeles and San Bernardino County Severe Winds 11/11***

Reason for the changes

The President declared a major disaster for Tuolumne, Mariposa, and San Francisco counties affected by the Rim Fire that occurred during the period of August 17, 2013 to October 24, 2013. No special state legislation was enacted.

Taxpayers can claim the disaster loss deduction in the taxable year in which the disaster occurred or in the taxable year immediately before the disaster occurred.

Impact

If the taxpayers claim the disaster loss deduction, the taxable income for tax purposes will decrease, which will result in a decrease in the tax liability.

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