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FTB is developing a California Schedule M-3

FTB will have its own version of the Schedule M-3 for the 2008 taxable year. We are currently in the form-drafting stage and would like your assistance. We will hold an Interested Parties Meeting on August 11, 2008 to get public feedback on the new California Schedule�M-3. Please refer to the Announcements section on the FTB website home page for details on the time and location. We will post drafts of the Schedule M-3, Net Income (Loss) for Corporations (also for S Corporations, Certain Partnerships, and Limited Liability Companies) on our website at for review and comments.

The California Schedule M-3 reconciles differences between financial results from operations and taxable income for each entity. We will not require a Schedule M-3 (100) for tax-exempt corporations under R&TC Section 23701 that file Form 100 to include nonexempt income.

The proposed drafts of the Schedule M-3 are similar to the federal Schedule M-3, but will require reporting California amounts. C corporations including water's-edge filers, S corporations, partnerships, and limited liability companies classified as partnerships will be required to file the form with proposed filing limitations comparable to federal filing requirements. Schedule M-3 filers will no longer file the California Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return.

Because our objective is to develop a form that will cause the least burden to taxpayers, we welcome your suggestions for making this form easier to complete and file. A question and answer section will soon be available on our website, and will include information about why the form is needed, filing requirements, and other issues. We will also post comments we receive during the review process.

Watch for more information on the Schedule M-3 in future issues of Tax News.