What’s New with Tax Forms

Overview

Latest information on upcoming tax form changes.

2024

New Forms


Legislative Changes

2023

New Forms

  • New Form FTB 3820, High-Road Cannabis Tax Credit (AB 195)

    For taxable years beginning on or after January 1, 2023, and before January 1, 2028, the High-Road Cannabis Tax Credit (HRCTC) will be available to licensed commercial cannabis businesses that meet the qualifications. The credit is allowed to a qualified taxpayer in an amount equal to 25% of qualified expenditures in the taxable year. The credit amount cannot exceed $250,000. Unused credit may be carried forward up to eight years. All types of entities, except for exempt organizations, are eligible to claim this credit.

    A qualified taxpayer must request a tentative credit reservation from the Franchise Tax Board (FTB) during the month of July for each taxable year or within 30 days of the start of their taxable year if the qualified taxpayer’s taxable year begins from August 1st through December 31st. For more information, go to ftb.ca.gov and search for hrctc.

  • New Form FTB 3821, Cannabis Equity Tax Credit(AB 195)

    For taxable years beginning on or after January 1, 2023, and before January 1, 2028, a Cannabis Equity Tax Credit (CETC) is available to equity licensees that have received approval, including approval contingent upon the availability of funds, for the fee waiver and deferral program administered by the Department of Cannabis Control (DCC). The allowable credit is $10,000 per taxable year for each qualified taxpayer. Unused credit may be carried forward up to eight years. All types of entities, except for exempt organizations, are eligible to claim this credit. For more information, go to ftb.ca.gov and search for cetc.

    We anticipate the draft of forms FTB 3820 and FTB 3821 to be available in early August.

Legislative Changes

Significant chaptered California legislation that require tax form changes. This is not an all-inclusive list.

  • SB 131– Kincade and Zogg Wildfires, New Employment Credit Expansion, and Incomplete Gift Non-Grantor ING Trusts:
    • Kincade and Zogg Wildfires - For taxable years beginning on or after January 1, 2020, and before January 1, 2028, California allows a qualified taxpayer an exclusion from gross income for any qualified amount received in a settlement from Pacific Gas & Electric Company or its subsidiary relating to the 2019 Kincade Fire or the 2020 Zogg Fire. If a qualified taxpayer included income for a qualified amount received from these settlements in a prior taxable year, the taxpayer can file an amended return for that year within the normal statute of limitations. We revised the 2022 Publication 1001.
    • New Employment Credit Expansion – For taxable years beginning on or after January 1, 2023, and before January 1, 2026, the New Employment Credit is expanded for qualified taxpayers engaged in semiconductor manufacturing or semiconductor research and development, lithium production, manufacturing of lithium batteries, or electric airplane manufacturing.
    • Incomplete Gift Non-Grantor ING Trusts – For taxable years beginning on or after January 1, 2023, the income of an incomplete gift non-grantor ING trust shall be included in a qualified taxpayer’s gross income as if it were a grantor trust under R&TC Section 17731. The income of an ING Trust for a taxable year shall not be included in a qualified taxpayer’s gross income if an irrevocable election is timely filed in the form and manner prescribed by the FTB, and the requirements of R&TC Section 17082 are met. The ING Trust income is reported on the grantor’s income tax return.

      On Form 541, under “Type of entity,” we added two checkbox items to the list, “(11) – ING trust” and “(12) – ING trust w/ election.” Also, we added another checkbox item “(13) – Qualified disability trust” to resolve a long-standing processing issue not related to ING trusts.

  • SB 132 – Program 3.0 California Motion Picture and Television Production Credit and Sound Stage Filming Tax Credit:
    • Program 3.0 California Motion Picture and Television Production Credit – For taxable years beginning on or after January 1, 2020, California law allows the Program 3.0 California Motion Picture and Television Production Credit to reduce tax below tentative minimum tax.
    • Soundstage Filming Tax Credit – For taxable years beginning on or after January 1, 2022, California law allows the Soundstage Filming Tax Credit to reduce tax below tentative minimum tax.

    We revised the 2022 Schedule P’s (540, 540NR, 100, 100W, and 541) for the above changes. Revisions for the prior years 2020 and 2021 Schedule P’s for the Program 3.0 California Motion Picture and Television Production Credit are pending.

Federal Tax Forms Changes that Impact California Tax Forms

The Internal Revenue Service (IRS) made changes to federal forms that require changes to California tax forms.

  • The 2023 IRS draft of federal Form 1065, Schedule K, line 13a Contributions was expanded to two lines, Line 13a Cash contributions and Line 13b Noncash contributions. We will update the Schedule K (565 and 568) and Schedule K-1 (565 and 568) to reflect this change.
  • The 2023 IRS draft of federal Schedule K-1 (1065) modified Part II, Item J. This question is being modified to add a separate checkbox for both “Sale” and “Exchange”. We will update the existing question on Schedule K-1 (565 and 568) to reflect this change.
  • The 2023 IRS draft of federal Schedule K-1 (1065) added a new question, Item K3. We will update Schedule K-1 (565 and 568) to add this new question.

Other Form Changes

Other notable form changes.

  • e-file Form 109 – For taxable years beginning on or after January 1, 2023, the Franchise Tax Board (FTB) offers e-file for exempt organizations filing Form 109, California Exempt Organization Business Income Tax Return. Check with your software provider to see if they support exempt organization e-file.

2022

New Forms

  • FTB 3831, Homeless Hiring Tax Credit (AB 150)

    For taxable years beginning on or after January 1, 2022, and before January 1, 2027, a Homeless Hiring Tax Credit (HHTC) will be available to a qualified taxpayer that hires individuals who are, or recently were, homeless. The amount of the tax credit will be based on the number of hours the employee works in the taxable year. Employers must obtain a certification of the individual's homeless status from an organization that works with the homeless and must receive a tentative credit reservation for that employee. Any credits not used in the taxable year may be carried forward up to three years. For more information, go to Homeless Hiring Tax Credit.

  • FTB 3835, State Historic Rehabilitation Credit (SB 451 / AB 150)

    For taxable years beginning on or after January 1, 2022, a State Historic Rehabilitation Tax Credit is available to qualified taxpayers for the rehabilitation of certified historic structures and for individual taxpayers, qualified residences. The tax credit is allocated and certified by the California Tax Credit Allocation Committee (CTCAC)). For more information, go to the California Office of Historic Preservation website and search for shrt.

Legislative Changes

Significant chaptered California legislation that require tax form changes. This is not an all-inclusive list.

  • SB 113 – For taxable year 2022 and after, Pass-Through Entity (PTE) elective tax credit will be applied to net tax after Other State Tax Credit (OSTC). On Schedule P (540, 540NR and 541), we will add new Section B4 for the PTE elective tax credit, after the Section B3, OSTC.
  • SB 201 – Zero Income Young Child Tax Credit (YCTC) and Foster Youth Tax Credit (FYTC):
    • SB 201, expands the Young Child Tax Credit (YCTC) to include zero and negative income taxpayers. Prior to SB 201, to qualify for the YCTC, taxpayers needed to qualify for the Earned Income Tax Credit (EITC). One of the qualifications for EITC is earned income. SB 201 allows taxpayers with zero earned income or negative earned income (up to a negative $32,490) that don't qualify for EITC to still qualify for the YCTC. We will update the YCTC section on form FTB 3514 for this legislative change.
    • SB 201, also creates the new Foster Youth Tax Credit (FYTC) for taxpayers (ages 18 to 25) that were placed through the California foster care system while 13 years of age or older. Additional qualifications for the FYTC are tied to the EITC similar to the YCTC (with exception to the zero or negative income). We will add a new section for FYTC to the end of form FTB 3514 formatted similar to the existing YCTC section but with some additional fields.
    • We will add a new refundable FYTC line to Forms 540, 540NR, and 540 2EZ. The new FYTC line will be placed after the existing EITC and YCTC lines.
  • AB 851 – Excludes the Pass-Through Entity (PTE) elective tax credit when calculating the tax liability for the Other State Tax Credit on Schedule S. This will only be an instructional change on Schedule S.
  • AB 1249, Fire Victims Trusts, and SB 1246, Thomas and Woolsey Fire Victims, allow retroactive gross income exclusion to qualified taxpayers for amounts received from the Fire Victims Trust and any amount received in a settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire. If a qualified taxpayer included income for an amount received from these settlements in a prior taxable year, the taxpayer can file an amended tax return for that year. If the normal statute of limitations has expired, the taxpayer must file a claim by September 29, 2023. We revised the 2021 Publication 1001 and are in process of revising other prior years Publication 1001.
  • AB 152 – Retroactive gross income exclusion for supplemental paid sick leave grant. See Schedule X and  Form 100X instructions.

Federal Tax Forms Changes that Impact California Tax Forms

The Internal Revenue Service (IRS) made changes to federal forms that require changes to California tax forms.

  • The 2022 IRS drafts federal Form 1040, Schedule 1, and Schedule A expanded lines on certain line numbers. For example, on Form 1040, line 1 is now lines 1a to line 1z. We will update Schedule CA (540 and 540NR) to mirror the expanded lines on these equivalent federal forms.
  • The 2022 IRS draft of federal Form 1040 changed name of Qualifying Widow(er) filing status to Qualifying Surviving Spouse. For California, the filing status name will be changed to Qualifying Surviving Spouse/RDP on Forms 540, 540NR, 540 2EZ, and all other tax forms products.

Other Form Changes

Other notable form changes.

  • Schedule K-1 (565 and 568) – The 2022 Form 565 and 568 instructions will contain methods to compute the beginning tax basis capital account analysis balance for those filing these forms that did not previously calculate their tax basis capital account on Schedule K-1 (565) and Schedule K-1 (568) under California law including methods similar to those the IRS permitted in its 2020 Form 1065 instructions.
  • On 2022 form FTB 5870A, Tax on Accumulation Distribution of Trusts, line 2 and line 3 have been removed. California does not conform to Internal Revenue Code Section 665, which exempts from taxation accumulated income distributed before a beneficiary is born or reaches age 21.
  • Schedule CA (540 and 540NR) – California conforms to the Internal Revenue Service's final regulations issued on 10/19/2022, that provide guidance for decedents' estates and non-grantor trusts clarifying that certain deductions of such estates and non-grantor trusts are not miscellaneous itemized deductions. The 2022 Schedule CA (540) and Schedule CA (540NR) will be updated to allow excess deduction on termination of an estate or trust as an income adjustment to AGI. We will revise prior tax years 2021 and 2020 forms as well.