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Jun 27, 2023

Steuerheft der Gesellschaft mit beschränkter Haftung 2022

Breadcrumbs: Verweise in dieser Anleitung beziehen sich auf den Internal Revenue Code (IRC) mit Stand vom 1. Januar 2015 und auf den California Revenue and Taxation Code (R&TC). Im Allgemeinen für steuerpflichtige Jahre

Breadcrumbs:

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

In general, for taxable years beginning on or after January 1, 2015, California law conforms to the Internal Revenue Code (IRC) as of January 1, 2015. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, go to ftb.ca.gov and search for conformity. Additional information can be found in FTB Pub. 1001, Supplemental Guidelines to California Adjustments, the instructions for California Schedule CA (540), California Adjustments – Residents, or Schedule CA (540NR), California Adjustments – Nonresidents or Part-Year Residents, and the Business Entity tax booklets.

The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax returns. We include information that is most useful to the greatest number of taxpayers in the limited space available. It is not possible to include all requirements of the California Revenue and Taxation Code (R&TC) in the instructions. Taxpayers should not consider the instructions as authoritative law.

Soundstage Filming Tax Credit – For taxable years beginning on or after January 1, 2022, California R&TC Sections 23698(k) allows a fourth film credit, the Soundstage Filming Tax Credit against tax. The credit is allocated and certified by the California Film Commission (CFC). The qualified taxpayer can:

For more information, get form FTB 3541, California Motion Picture and Television Production Credit, form FTB 3551, Sale of Credit Attributable to an Independent Film, go to ftb.ca.gov and search for motion picture, or go to the CFC website at film.ca.gov and search for soundstage filming tax credit.

State Historic Rehabilitation Tax Credit – For taxable years beginning on or after January 1, 2021, a State Historic Rehabilitation Tax Credit is available to qualified taxpayers that received a tax credit allocation from the California Tax Credit Allocation Committee (CTCAC). The credit is for the rehabilitation of certified historic structures and for individual taxpayers, a qualified residence. Any credits not used in the taxable year may be carried forward up to eight years. Taxpayers should apply for the tax credit reservation with CTCAC and have received a tax credit allocation confirmation number from CTCAC prior to claiming the State Historic Rehabilitation Tax Credit on form FTB 3835. The credit was not funded, and cannot be claimed, for tax year 2021. For more information, get form FTB 3835, State Historic Rehabilitation Tax Credit, or go to the California Office of Historic Preservation website at ohp.parks.ca.gov and search shrtc.

Homeless Hiring Tax Credit – 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 eligible individuals. 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, get form FTB 3831, Homeless Hiring Tax Credit or go to ftb.ca.gov and search for hhtc.

Reporting Requirements – Taxpayers may need to file form FTB 4197, Information on Tax Expenditure Items, with the Franchise Tax Board (FTB) to report tax expenditure items as part of the FTB’s annual reporting requirements under R&TC Section 41. To determine if you have an R&TC Section 41 reporting requirement, see the R&TC Section 41 Reporting Requirements section or get form FTB 4197.

Principal Business Activity Codes – The Principal Business Activity Codes, located within these instructions, have been updated and revised to reflect updates to the North American Industry Classification System (NAICS).

High Road Cannabis Tax Credit – For taxable years beginning on or after January 1, 2023, and before January 1, 2028, a High Road Cannabis Tax Credit (HRCTC) will be available to a qualified taxpayer that is a licensed commercial cannabis business that meets specified criteria. The HRCTC is allowed in an amount equal to 25 percent of the total amount of the qualified taxpayer’s qualified expenditures in the taxable year not to exceed $250,000 per taxable year. Any credits not used in the taxable year may be carried forward up to eight years. A qualified taxpayer must request a tentative credit reservation from the 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 after July. For more information, go to ftb.ca.gov and search for hrctc.

Thomas and Woolsey Wildfires Exclusion – For taxable years beginning before January 1, 2027, California law allows a qualified taxpayer an exclusion from gross income for 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. For more information, see Specific Line Instructions and R&TC Section 17138.6 and 24309.

Fire Victims Trust Exclusion – For taxable years beginning before January 1, 2028, California law allows a qualified taxpayer an exclusion from gross income for any amount received from the Fire Victims Trust, established pursuant to the order of the United States Bankruptcy Court for the Northern District of California dated June 20, 2020, case number 19-30088, docket number 8053. If a qualified taxpayer included income for an amount received from the Fire Victims Trust 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. For more information, see Specific Line Instructions and R&TC Section 17138.5 and 24309.3.

Turf Replacement Water Conservation Program – For taxable years beginning on or after January 1, 2022, and before January 1, 2027, California law allows an exclusion from gross income for any amount received as a rebate, voucher, or other financial incentive issued by a public water system, as defined, local government, or state agency for participation in a turf replacement water conservation program. For more information, see Specific Line Instructions and R&TC Section 17138.2 and 24308.9.

College Access Tax Credit – The sunset date for the College Access Tax Credit is extended until taxable years beginning before January 1, 2028. For more information, get form FTB 3592, College Access Tax Credit.

Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant – For taxable years beginning on or after January 1, 2021, and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program that is established by Section 12100.975 of the Government Code. For more information, see Specific Line Instructions and R&TC Section 17158 and 24312.

Taxpayers should file form FTB 4197 with the FTB to report tax expenditure items as part of the FTB’s annual reporting requirements under R&TC Section 41. “Tax expenditure” means a credit, deduction, exclusion, exemption, or any other tax benefit provided for by the state. The FTB uses information from form FTB 4197 for reports required by the California Legislature. Taxpayers that have a reporting requirement for any of the following should file form FTB 4197:

For more information, get form FTB 4197.

LLCs may be classified for tax purposes as a partnership, a corporation, or a disregarded entity. The LLC must file the appropriate California tax return for its classification. LLCs classified as a:

LLCs classified as partnerships should not file Form 565, Partnership Return of Income.

The LLC will file Form 565 only if it meets an exception. For more information, see the exceptions in General Information D, Who Must File.

California Microbusiness COVID-19 Relief Grant – For taxable years beginning on or after January 1, 2020, and before January 1, 2023, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Microbusiness COVID-19 Relief Program that is administered by the Office of Small Business Advocate (CalOSBA). For more information, see R&TC Section 17158.1 and the Specific Line Instructions.

California Venues Grant – For taxable years beginning on or after September 1, 2020, and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Venues Grant Program that is administered by the CalOSBA. For more information, see R&TC Sections 17158 and 24312 and the Specific Line Instructions.

Shuttered Venue Operator Grant – For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for amounts awarded as a shuttered venue operator grant under the Consolidated Appropriations Act, 2021 (CAA, 2021). The CAA, 2021 allows deductions for eligible expenses paid for with grant amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions do not apply to an ineligible entity. “Ineligible entity” means a taxpayer that is either a publicly-traded company or does not meet the 25 percent reduction from gross receipts requirements under Section 311 of Division N of the CAA, 2021. For more information, see Specific Instructions or R&TC Section 24308.3.

Other Loan Forgiveness – For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for borrowers of forgiveness of indebtedness described in Section 1109(d)(2)(D) of the federal Coronavirus Aid, Relief and Economic Security (CARES) Act as stated by section 278, Division N of the federal CAA, 2021. The CAA 2021, allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions generally do not apply to an ineligible entity. “Ineligible entity” means a taxpayer that is either a publicly-traded company or does not meet the 25 percent reduction from gross receipts requirements under Section 311 of the CAA, 2021. For more information, see Specific Line Instructions or go to ftb.ca.gov and search for AB 80.

Elective Tax for Pass-Through Entities (PTE) and Credit for Owners – For taxable years beginning on or after January 1, 2021, and before January 1, 2026, California law allows an entity taxed as a partnership or an “S” corporation to annually elect to pay an elective tax at a rate of 9.3 percent based on its qualified net income. The election shall be made on an original, timely filed return and is irrevocable for the taxable year.

The law allows a credit against the personal income tax to a taxpayer, other than a partnership, that is a partner, shareholder, or member of a qualified entity that elects to pay the elective tax, in an amount equal to 9.3 percent of the partner’s, shareholder’s, or member’s pro rata share or distributive share and guaranteed payments of qualified net income subject to the election made by the qualified entity. A disregarded business entity and its partners or members cannot claim the credit, except for a disregarded single member limited liability company (SMLLC) that is owned by an individual, fiduciary, estate, or trust subject to personal income tax. For more information, go to ftb.ca.gov and search for pte elective tax and get the following PTE elective tax forms and instructions:

Gross Income Exclusion for Bruce’s Beach – Effective September 30, 2021, California law allows an exclusion from gross income for the first time sale in the taxable year in which the land within Manhattan State Beach, known as “Peck’s Manhattan Beach Tract Block 5” and commonly referred to as “Bruce’s Beach” is sold, transferred, or encumbered. A recipient’s gross income does not include the following:

Small Business COVID-19 Relief Grant Program – California allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the COVID-19 Relief Grant under Executive Order No. E 20/21-182 and the California Small Business COVID-19 Relief Grant Program established by Section 12100.83 of the Government Code. If any amount was included for federal purposes, exclude that amount for California purposes.

Paycheck Protection Program (PPP) Loans Forgiveness – For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for covered loan amounts forgiven under the federal CARES Act, Paycheck Protection Program and Health Care Enhancement Act, Paycheck Protection Program Flexibility Act of 2020, the CAA, 2021, or the PPP Extension Act of 2021.

Also, the ARPA expands PPP eligibility to include “additional covered nonprofit entities” which includes certain Code 501(c) nonprofit organizations and Internet-only news publishers and Internet-only periodical publishers. California law does not conform to this expansion of PPP eligibility. For more information, see Specific Line Instructions.

The CAA, 2021, allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions do not apply to an ineligible entity. “Ineligible entity” means a taxpayer that is either a publicly-traded company or does not meet the 25 percent reduction from gross receipts requirements under Section 311 of Division N of the CAA, 2021. For more information, see Specific Line Instructions or R&TC Section 24308.6 or go to ftb.ca.gov and search for AB 80.

Advance Grant Amount – For taxable years beginning on or after January 1, 2019, California law conforms to the federal law regarding the treatment for an emergency EIDL grant under the federal CARES Act or a targeted EIDL advance under the CAA, 2021.

Loophole Closure and Small Business and Working Families Tax Relief Act of 2019 – The federal Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017, made changes to the Internal Revenue Code (IRC). California Revenue and Taxation Code does not conform to all of the changes. In general, for taxable years beginning on or after January 1, 2019, California conforms to the following TCJA provisions:

Technical Termination of a Partnership – For taxable years beginning on or after January 1, 2019, California conforms to the TCJA repeal of the termination of a partnership by the sale or exchange of 50 percent or more of the total interest in a partnership within a 12 month period.

A partnership may elect to have the repeal of the technical termination apply for taxable years beginning after December 31, 2017, and before January 1, 2019. Taxpayers make the R&TC Section 17859(d)(1) election by providing the following information to the FTB:

IRC Section 338 Election – For taxable years beginning on or after July 1, 2019, California requires taxpayers to use their federal IRC Section 338 election treatment for certain stock purchases treated as asset acquisitions or deemed election where purchasing corporation acquires asset of target corporation. If an election has not been made by a taxpayer under IRC Section 338, the taxpayer shall not make a separate state election for California.

Small Business Method of Accounting Election – For taxable years beginning on or after January 1, 2019, California conforms to certain provisions of the TCJA relating to changes to accounting methods for small businesses.

A small business may elect to apply the same provisions above to taxable years beginning on or after January 1, 2018 and before January 1, 2019. Taxpayers make the election by providing the following information to the FTB:

New Partnership Audit Regime – For federal purposes, the Bipartisan Budget Act of 2015 replaced the Tax Equity and Fiscal Responsibility Act of 1982, creating a centralized partnership audit regime, and generally transferring the liability for the tax due to the partnership. All partnerships with tax years beginning after 2017 are subject to this new regime unless an eligible partnership elects out. For California purposes, taxable years beginning on or after January 1, 2018, partnerships are required to report each change or correction made by the Internal Revenue Service (IRS), to the FTB, for the reviewed year within six months after the date of each final federal determination, and will generally be liable for the tax due.

Paperless Schedule K-1 – The FTB discontinued the Paperless Schedules K-1 (568) program due to the increasing support of our business e-file program. For more information regarding the California business e-file program, go to ftb.ca.gov and search for business efile.

Extension Due Date – The extension period for a limited liability company (LLC) classified as a partnership to file its tax return has changed from six months to seven months. See General Information E, When and Where to File, for more information.

Penalty for Non-Registered, Suspended, or Forfeited LLC – The FTB will assess a $2,000 penalty against a non-qualified foreign LLC that is doing business within the state while not registered to do business within the state, or while suspended or forfeited.

Business e-file – California law requires any business entity that files an original or amended tax return that is prepared using preparation software to electronically file (e-file) their tax return with the FTB. For more information, go to ftb.ca.gov and search for business efile.

Web Pay – LLCs can make payments online using Web Pay for Businesses. LLCs can make an immediate payment or schedule payments up to a year in advance. For more information, go to ftb.ca.gov/pay. Do not file form FTB 3588, Payment Voucher for LLC e-filed Returns.

Credit Card – LLCs can use a Discover, MasterCard, Visa, or American Express card to pay business taxes. Go to officialpayments.com. Official Payments Corporation charges a convenience fee for using this service. Do not file form FTB 3588.

Electronic Funds Withdrawal (EFW) – LLCs can make an annual tax, estimated fee, or extension payment using tax preparation software. Check with your software provider to determine if they support EFW for annual tax, estimated fee, or extension payments.

Payments and Credits Applied to Use Tax – If an LLC includes use tax on its income tax return, payments and credits will be applied to use tax first, then towards franchise or income tax, interest, and penalties. For more information, see General Information W, California Use Tax and Specific Instructions.

Like-Kind Exchanges – The TCJA amended IRC Section 1031 limiting the nonrecognition of gain or loss on like-kind exchanges to real property held for productive use or investment. California conforms to this change under the TCJA for exchanges initiated after January 10, 2019.

California Like-Kind Exchanges – California requires taxpayers who exchange real property located in California for like-kind property located outside of California under IRC Section 1031, to file an annual information return with the FTB. For more information, get form FTB 3840, California Like-Kind Exchanges, or go to ftb.ca.gov and search for like kind.

Apportioning Trade or Business – “Apportioning trade or business” means a distinct trade or business whose business income is required to be apportioned because it has income derived from sources within this state and from sources outside this state. An apportioning trade or business can be conducted in many forms, including, but not limited to, the following:

For more information, get Schedule R, Apportionment and Allocation of Income.

Gross Receipts – R&TC Section 25120 was amended to add the definition of gross receipts. For a complete definition of “gross receipts”, refer to R&TC Section 25120(f), or go to ftb.ca.gov and search for 25120.

Single-Sales Factor Formula – R&TC Section 25128.7 requires all business income of an apportioning trade or business, other than an apportioning trade or business under R&TC Section 25128(b), to apportion its business income to California using the single-sales factor formula. For more information, get Schedule R or go to ftb.ca.gov and search for single sales factor.

Market Assignment – R&TC Section 25136 requires all taxpayers to assign sales, other than sales of tangible personal property, using market assignment. For more information, get Schedule R or go to ftb.ca.gov and search for market assignment.

Doing Business – A taxpayer is doing business if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:

In determining the amount of the taxpayer’s sales, property, and payroll for doing business purposes, include the taxpayer’s pro rata share of amounts from partnerships and S corporations. These amounts are reported on the member’s Schedule K-1 on Table 2, Part C.

Partnerships and LLCs are considered doing business in California if they have a general partner or member doing business on their behalf in California. Likewise, general partners and members are considered doing business in California if the partnership or LLC, respectively, is doing business in this state. For more information, see R&TC Section 23101 or go to ftb.ca.gov and search for doing business.

Backup Withholding – With certain limited exceptions, payers that are required to withhold and remit backup withholding to the IRS are also required to withhold and remit to the FTB on income sourced to California. If the payee has backup withholding, the payee must contact the FTB to provide a valid Taxpayer Identification Number (TIN), before filing the tax return. Failure to provide a valid TIN may result in a denial of the backup withholding credit. For more information, go to ftb.ca.gov and search for backup withholding.

Suspension/Forfeiture – LLCs are suspended or forfeited for failure to file or failure to pay. See General Information V, Suspension/Forfeiture, for more information.

The LLC must estimate the fee it will owe for the year and make an estimated fee payment by the 15th day of the 6th month of the current taxable year. LLCs will use form FTB 3536, Estimated Fee for LLCs, to remit the estimated fee. A penalty will apply if the LLC’s estimated fee payment is less than the fee owed for the year. The penalty is equal to 10 percent of the amount of the LLC fee owed for the year over the amount of the timely estimated fee payment. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year.

The LLC fee remains due and payable by the due date of the LLC’s return. LLCs will use form FTB 3536 to pay by the due date of the LLC’s return, any amount of LLC fee owed that was not paid as a timely estimated fee payment. If the taxable year of the LLC ends prior to the 15th day of the 6th month of the taxable year, no estimated fee payment is due, and the LLC fee is due on the due date of the LLC’s return. See General Information F, Limited Liability Company Tax and Fee, for more information.

The LLC fee is based on total California source income rather than on worldwide total income. For more information, see Schedule IW, LLC Income Worksheet Instructions.

A series LLC is a single LLC that has separate allocations of assets each within its own series. When filing form FTB 3522, LLC Tax Voucher, write “Series LLC # ___” after the name for each series. In addition, write “Series LLC” in black or blue ink on the top right margin of the voucher. Only the first series to pay tax or file a return may use a California Secretary of State (SOS) file number. On all other series, enter zeros for the entity identification number on the first voucher and we will assign a number and notify each series. Get FTB 3556 LLC MEO, Limited Liability Company Filing Information, for more information.

An LLC can designate a paid preparer to discuss the tax return with the FTB. For more information see General Information M, Signatures.

In order to expedite processing, be sure to use the business entity name as it appears with the California SOS and a valid California identification number.

The FTB may request copies of California or federal returns that are subject to or related to a federal examination. Generally, the California statute of limitations is four years from the due date of the return or from the date filed, whichever is later. However, the statute is extended in situations in which an individual or a business entity is under examination by the IRS. For more information concerning the extended statute of limitations, due to a federal examination, see General Information J, Amended Return.

The FTB recommends keeping copies of returns and records that verify income, deductions, adjustments, or credits reported, for at least the minimum time required under the statute of limitations. However, some records should be kept much longer. For example, members should keep records substantiating their basis in an LLC and LLCs should keep records to figure the basis of its assets.

For LLCs classified as partnerships, California tax law generally conforms to federal tax law in the area of partnerships (IRC, Subchapter K – Partners and Partnerships). However, there are some differences:

The Federal TCJA signed into law on December 22, 2017 made changes to the IRC. In general, California R&TC does not conform to the changes. California taxpayers continue to follow the IRC as of the specified date of January 1, 2015, with modifications. The following is a non-exhaustive list of the TCJA changes:

Additional federal/state differences may occur for the following:

This list is not intended to be all-inclusive of the federal and state differences. For more information, consult California’s R&TC.

Partnership Converting to a Corporation – IRS Revenue Ruling 2009-15 was released which explains that in certain situations, a partnership that converts to a corporation under Section 301.7701-3(c)(1)(i) or under a state law formless conversion statute is eligible to make an S election effective for the corporation’s first taxable year.

If an LLC elects to be taxed as a corporation for federal tax purposes, the LLC must file Forms 100/100S/100-ES/100W, form FTB 3539, and/or form FTB 3586 and enter the FEIN, and California SOS file number, if applicable, in the space provided. The LLC will be subject to the applicable provisions of the Corporation Tax Law and should be considered a corporation for purpose of all instructions unless otherwise indicated.

A partnership (or other business entity) that converts to an LLC during the year must file two California returns. Even if the partners/members and the business operations remain the same, the partnership should file Form 565, (or the appropriate form) for the beginning of the year to the date of change. For the remainder of the year, the newly converted LLC must file Form 568. See General Information I, Accounting Periods, for further instructions.

If the LLC was involved in a reportable transaction, including a listed transaction, the LLC may have a disclosure requirement. Attach the federal Form 8886, Reportable Transaction Disclosure Statement, to the back of the California return along with any other supporting schedules. If this is the first time the reportable transaction is disclosed on the return, send a duplicate copy of the federal Form 8886 to the address below:

The FTB may impose penalties if the LLC fails to file federal Form 8886, federal Form 8918, Material Advisor Disclosure Statement, or any other required information. A material advisor is required to provide a reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor.

For more information, go to ftb.ca.gov and search for disclosure obligation.

If the LLC had to repay an amount that was included in income in an earlier year, under a claim of right, the LLC may be able to deduct the amount repaid from its income for the year in which it was repaid. Or, if the amount the LLC repaid is more than $3,000, the LLC may be able to take a credit against its tax for the year in which it was repaid. For more information, see the Repayments section of federal Pub. 525, Taxable and Nontaxable Income.

You can download, view, and print California tax forms and publications at ftb.ca.gov/forms.

The IRS has federal forms and publications available to download, view, and print at irs.gov.

Access other California state agency websites at ca.gov.

For additional business tax information, go to taxes.ca.gov, sponsored by the Board of Equalization (BOE), California Department of Tax and Fee Administration (CDTFA), Employment Development Department (EDD), the FTB, and the IRS.

LLCs combine traditional corporate and partnership characteristics. LLC members are afforded all of the following:

LLCs classified as partnerships for tax purposes generally will determine their California income, deductions, and credits under the Personal Income Tax Law. They will be subject to an annual tax as well as the LLC fee based on total California income. See General Information F, Limited Liability Company Tax and Fee, and Schedule IW instructions included in this booklet, for more information.

LLCs organized in California are vested with all the rights and powers enjoyed by a natural person in carrying out business affairs. However, California law does not allow the formation or registration of LLCs (foreign or domestic) in California to render any type of professional service for which a license, certification, or registration is required under the Business and Professions Code or the Chiropractic Act, with the exception of insurance agents and insurance brokers.

California law requires LLCs not organized in the state of California to register with the California SOS before entering into any intrastate business in California. The laws of the state or foreign country in which the LLC is organized generally govern the internal affairs of the LLC. The California SOS may not deny recognition of an LLC because the laws of the organization’s home state or foreign country differ from California’s laws, except in the case of professional service LLCs, which are not allowed to register as LLCs in California.

For more information about organizing and registering an LLC, contact:

or go to sos.ca.gov.

Use Form 568 to:

Use Form 568 as the return for calendar year 2022 or any fiscal year beginning in 2022.

An LLC may be classified for tax purposes as a partnership, a corporation, or a disregarded entity. The LLC should file the appropriate California return.

Form 568 must be filed by every LLC that is not taxable as a corporation if any of the following apply:

An LLC is not required to file a tax return and is not subject to the annual tax and LLC fee if both the following are true:

LLCs that are formed in California, are required to file articles of organization with the California SOS before doing business in this state.

LLCs organized under the laws of another state or foreign country are required to register with the California SOS before entering into intrastate business in California.

Nonregistered foreign LLCs that are members of an LLC doing business in California or general partners in a limited partnership doing business in California are considered doing business in California.

Regardless of where the trade or business of the LLC is primarily conducted, an LLC is considered to be doing business in California if any of its members, managers, or other agents are conducting business in California on behalf of the LLC.

LLCs classified as a general corporation file Form 100, California Corporation Franchise or Income Tax Return. LLCs classified as an S corporation file Form 100S, California S Corporation Franchise or Income Tax Return. For LLCs classified as disregarded entities, see General Information S, Check-the-Box Regulations.

The LLC is still required to file Form 568 if the LLC is registered in California even if both of the following apply:

The LLC’s filing requirement will be satisfied by doing all of the following:

Certain publicly traded partnerships treated as corporations under IRC Section 7704 must file Form 100.

A resident member of an out-of-state LLC taxed as a partnership not required to file Form 568, may be required to furnish a copy of federal Form 1065, U.S. Return of Partnership Income, to substantiate the member’s share of LLC income or loss.

An LLC must file Form 568, pay any nonconsenting nonresident members’ tax, and pay any amount of the LLC fee owed that was not paid as an estimated fee with form FTB 3536, by the original due date of the LLC’s return.

For LLCs classified as partnerships, the original due date of the return is the 15th day of the 3rd month following the close of the taxable year.

For more information, see R&TC Section 18633.5.

When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day.

Due to the federal Emancipation Day holiday observed on April 17, 2023, tax returns filed and payments mailed or submitted on April 18, 2023, will be considered timely.

California does not require the filing of written applications for extensions. All LLCs in good standing that are classified as partnerships have an automatic seven month extension to file. If the LLC cannot file its Form 568 by the return’s due date, the LLC is granted an automatic seven month extension unless the LLC is suspended or forfeited.

SMLLCs disregarded for tax purposes will be granted an automatic six month extension, with the exception of an SMLLC owned by a partnership or an LLC that is classified as a partnership for California tax purposes, which will be granted an automatic seven month extension. For more information see R&TC Section 18567.

However, the automatic extension does not extend the time to pay the LLC fee or nonconsenting nonresident members’ tax.

If the LLC is filing the return under extension, see form FTB 3537, Payment for Automatic Extension for LLCs, included in this booklet, to submit the required payments.

Using black or blue ink, make the check or money order payable to the “Franchise Tax Board.” Write the LLC’s California SOS file number, FEIN, and “2022 Form 568” on the check or money order.

Note: The California SOS file number is 12 digits long.

Make all checks or money orders payable in U.S. dollars and drawn against a U.S. financial institution.

Do not attach a copy of the return with the balance due payment if the LLC already filed a return for the same taxable year.

RETURN WITHOUT PAYMENT or PAID ELECTRONICALLY

LLCs can make an annual tax, estimated fee, or extension payment using tax preparation software. Check with your software provider to determine if they support EFW for annual tax, estimated fee, or extension payments.

If the 2022 annual tax of $800 was not paid on or before the 15th day of the 4th month after the beginning of the taxable year (fiscal year) or April 15, 2022 (calendar year), the tax should be sent using the 2022 form FTB 3522, as soon as possible. Do not use the 2023 form FTB 3522 included in this booklet.

If the LLC’s taxable year is 15 days or less and it did not conduct business in the state during the 15 day period, see the instructions for Exceptions to Filing Form 568 in General Information D, Who Must File, in this booklet.

Also see General Information G, Penalties and Interest, for the additional amount that is now due. To assure proper application of the tax payment to the LLC account, do not send the $800 annual tax with Form 568.

The 2023 $800 annual tax is due on or before the 15th day of the 4th month after the beginning of the 2023 taxable year (fiscal year) or April 15, 2022 (calendar year). The payment is sent with form FTB 3522. Do not mail the $800 annual tax with Form 568. When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day.

Due to the federal Emancipation Day holiday observed on April 17, 2023, tax returns filed and payments mailed or submitted on April 18, 2023, will be considered timely.

For taxable years beginning on or after January 1, 2021 and before January 1, 2024, an LLC that organizes, registers, or files with the Secretary of State to do business in California is exempt from the annual LLC tax in its first taxable year.

California law conforms to federal law regarding the use of certain designated private delivery services to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. See the instructions for federal Form 1065 for a list of designated delivery services. If a private delivery service is used, address the return to:

Caution: Private delivery services cannot deliver items to PO boxes. If using one of these services to mail any item to the FTB, Do not use an FTB PO box.

The definition of limited liability company has been revised to exclude certain title holding companies that are tax exempt provided that they are treated as partnerships or disregarded entities for tax purposes. As such they are not liable for the annual LLC tax and fee.

Enter all payment types (overpayment from prior year, annual tax, fee, etc.) made for the 2022 taxable year on the applicable line of Form 568.

LLCs are subject to an $800 annual tax if they are doing business in California or have articles of organization accepted, or a certificate of registration issued by the California SOS. The annual tax is prepaid for the privilege of doing business in California, and is due and payable on or before the 15th day of the 4th month after the beginning of the taxable year. The annual tax must be paid for each taxable year until the appropriate papers are filed. See General Information Q, Cancelling a Limited Liability Company, for more information.

Use form FTB 3522 to submit the $800 annual tax payment. Using black or blue ink, make the check or money order payable to the “Franchise Tax Board.” Write the LLC’s California SOS file number, FEIN, and “2023 FTB 3522” on the check or money order.

If the 15th day of the 4th month of an existing foreign LLC’s taxable year has passed before the existing foreign LLC commences business in California or registers with the California SOS, the annual tax should be paid immediately after commencing business or registering with the California SOS.

Exemption from First Taxable Year Annual LLC Tax – For taxable years beginning on or after January 1, 2021 and before January 1, 2024, an LLC that organizes, registers, or files with the Secretary of State to do business in California is exempt from the annual LLC tax in its first taxable year.

Deployed Military Exemption – For taxable years beginning on or after January 1, 2020, and before January 1, 2030, an LLC that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the annual tax if the owner is deployed during the taxable year and the LLC operates at a loss or ceases operation. LLCs exempt from the annual tax should print “Deployed Military” in black or blue ink in the top margin of the tax return.

For the purposes of this exemption:

(A) “Deployed” means being called to active duty or active service during a period when the United States is engaged in combat or homeland defense. “Deployed” does not include either of the following:

(B) “Operates at a loss” means an LLC’s expenses exceed its receipts.

(C) “Small business” means an LLC with two hundred fifty thousand dollars ($250,000) or less of total income from all sources derived from or attributable to California.

If the LLC is claiming Deployed Military Exemption, enter zero on line 2 and line 3 of Form 568. See the Specific Instructions for Form 568 for more details.

In addition to the annual tax, every LLC must pay a fee if the total California annual income is equal to or greater than $250,000. For more information, see Schedule IW instructions included in this booklet.

The LLC must estimate the fee it will owe for the year and make an estimated fee payment by the 15th day of the 6th month of the current taxable year. LLCs use form FTB 3536, to remit the estimated fee. A penalty will apply if the LLC’s estimated fee payment is less than the fee owed for the year. The penalty is equal to 10 percent of the amount of the LLC fee owed for the year over the amount of the timely estimated fee payment. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year.

The LLC fee remains due and payable by the due date of the LLC’s return. LLCs will use form FTB 3536 to pay by the due date of the LLC’s return, any amount of LLC fee owed that was not paid as a timely estimated fee payment. If the taxable year of the LLC ends prior to the 15th day of the 6th month of the taxable year, no estimated fee payment is due, and the LLC fee is due on the due date of the LLC’s return. Use the following chart to compute the fee:

If you have a total California annual income of $250,000 or greater, you must report a fee.

To determine the LLC fee see the Specific Line Instructions for line 1.

If the FTB determines multiple LLCs were formed for the primary purpose of reducing fees, the LLC’s total income from all sources that are reportable to California could include the aggregate total income of all commonly controlled LLC members. “Commonly controlled” means control of more than 50 percent of the capital interests or profit interests of the taxpayer and any other LLC or partnership by the same persons.

If the laws of the state where the LLC is formed provide for the designation of series of interests (for example, a Delaware Series LLC) and: (1) the holders of the interests in each series are limited to the assets of that series upon redemption, liquidation, or termination, and may share in the income only of that series, and (2) under home state law, the payment of the expenses, charges, and liabilities of each series is limited to the assets of that series, then each series in a series LLC is considered a separate LLC and must file its own Form 568 and pay its own separate LLC annual tax and fee, if it is registered or doing business in California.

Every nonresident member must sign a form FTB 3832, Limited Liability Company Nonresident Members’ Consent. The LLC returns the signed form with Form 568. If a nonresident member fails to sign form FTB 3832, the LLC is required to pay tax on that member’s distributive share of income at the highest marginal rate. Any amount paid by the LLC will be considered a payment made by the nonresident member.

The tax may be reduced by the amount of tax previously withheld and paid by the LLC with respect to each nonconsenting nonresident member.

Reminder: All nonresident members must file a California tax return. The completion of form FTB 3832 does not satisfy the nonresident member’s California filing requirement. Corporate members are also considered doing business in California and may have additional filing requirements. For more information, get FTB Pub. 1060, Guide for Corporations Starting Business in California. Nonresident individuals may qualify to file a group Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, and should get FTB Pub. 1067, Guidelines for Filing a Group Form 540NR.

If the LLC’s return is being filed on or before the original due date of the return, the LLC completes the Schedule T, Nonconsenting Nonresident (NCNR) Members’ Tax Liability. See the Specific Instructions for Schedule T in this booklet for more information.

If the LLC owes NCNR tax and is unable to complete Form 568 on or before the original due date, it must complete form FTB 3537. For more information on when the NCNR members’ tax along with the voucher must be received by, see form FTB 3537.

Unless failure is due to a reasonable cause, a penalty will be assessed if the LLC is required to file a Form 568 and either of the following apply:

The amount of the penalty for each month, or part of a month (for a maximum of twelve months), that the failure continues, is $18 multiplied by the total number of members in the LLC during any part of the taxable year for which the return is due. Interest will be charged on the penalty from the date the notice of tax due is mailed until the date the return is filed.

For “small partnerships,” as defined in IRC Section 6231, the federal exception to the imposition of penalties for failure to file partnership returns does not apply for California purposes. For more information, see R&TC Section 19172.

Any LLC that fails to file Form 568 on or before the extended due date is assessed a penalty. The penalty is 5 percent of the unpaid tax (which includes the LLC fee and nonconsenting nonresident members’ tax) for each month, or part of the month, the return remains unfiled from the due date of the return until filed. The penalty may not exceed 25 percent of the unpaid tax. If an LLC does not file its return by the extended due date, the automatic extension will not apply and the late filing penalty will be assessed from the original due date of the return. See R&TC Section 19131 for more information.

The failure-to-pay penalty is imposed from the due date of the return or the due date of the payment. Since any amount of the LLC fee due which was not paid as an estimated fee payment, and the nonconsenting nonresident members’ tax are due with the return, the penalty is calculated from the original due date of the return. The annual tax payment date is the 15th day of the 4th month during the taxable year, so the penalty is calculated from this date. The penalty for each item is calculated separately.

The failure-to-pay penalty begins at 5 percent. Every month or fraction thereof the amount is not paid the penalty increases 0.5 percent. The penalty continues to increase for 40 months, thereby maximizing at 25 percent. See R&TC Section 19132 for more information.

If an LLC is subject to both the penalty for failure to file a timely return and the penalty for failure to pay the total tax by the due date, a combination of the two penalties may be assessed, but the total penalty may not exceed 25 percent of the unpaid tax. However, the penalty for failure to comply with the filing requirements will be assessed in addition to the penalty for failure to file a timely return and the penalty for failure to pay the total tax by the due date. The FTB may waive the late payment penalty based on reasonable cause. Reasonable cause is presumed when 90 percent of the tax is paid by the original due date of the return.

If the LLC underpays the estimated fee, a penalty of 10 percent will be added to the fee. The underpayment amount will be equal to the difference between the total amount of the fee due for the taxable year less the amount paid by the due date. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year.

Interest is due and payable on any tax due if not paid by the original due date. Interest is also due on some penalties. The automatic extension of time to file does not stop interest from accruing. California follows federal rules for the calculation of interest. Get FTB Pub. 1138, Business Entity Refund/Billing Information, for more information.

A penalty may also be charged if a payment is returned for insufficient funds. In addition, fees may be charged for the cost of collection.

Compute ordinary income or loss by the accounting method regularly used to maintain the LLC’s books and records. This method must clearly reflect the LLC’s income or loss.

LLCs given permission to change their accounting method for federal purposes should see IRC Section 481 for information relating to the adjustments required by changes in accounting method.

Generally, an LLC may not use the cash method of accounting if the LLC has a corporate member, averages annual gross receipts of more than $5 million, or is a tax shelter. For exceptions, see IRC Section 448.

The mark-to-market accounting method is required for securities dealers. The IRC Section 481 adjustment is taken into account ratably over five years beginning with the first income year.

LLC returns normally must be filed for an accounting period that includes 12 full months. A short period return must be filed if the LLC is created or terminated within the taxable year. In that case, write “Short Period” in black or blue ink at the top of Form 568, Side 1.

For information on the required taxable year of a partnership that also applies to LLCs, see the instructions for federal Form 1065.

If, after the LLC files its return, it becomes aware of changes it must make, the LLC should file an amended Form 568 and an amended Schedule K-1 (568) for each member, if applicable. Check the amended return box in Item H(3) Form 568, Side 1. Give a corrected Schedule K-1 (568) with box G(2) checked and label “Amended” to each affected member. If the LLC originally filed a Form 540NR group nonresident member return, the LLC should file an amended Form 540NR.

Attach a statement that identifies the line number of each amended item, the corrected amount or treatment of the item, and an explanation of the reason(s) for each change.

If the LLC’s federal return is changed for any reason, the federal change may affect the LLC’s California return. This would include changes made because of an examination. The LLC must file an amended return within six months of the final federal determination if the LLC fee or tax a member owes has been affected. The LLC should attach a copy of the federal Revenue Agent’s Report or other notice of the adjustments to the return. The LLC should inform the members that they may also be required to file amended returns within six months from the date of the final federal determination.

Every LLC must file information returns if, in the course of its trade or business, any of the following occur:

Payments of any amount by a broker, dealer, or barter exchange agent must also be reported.

LLCs must report payments made to California residents by providing copies of federal Form 1099 (series). For nonresidents, see the reporting and withholding requirements on Form 592, Resident and Nonresident Withholding Statement; Form 592-B, Resident and Nonresident Withholding Tax Statement, Form 592-F, Foreign Partner or Member Annual Return, Form 592-PTE. Get FTB Pub. 1017, Resident and Nonresident Withholding Guidelines, for more information.

LLCs must submit a copy of federal Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, within 15 days after the date of the transaction.

LLCs must report interest paid on municipal bonds that are issued by a state other than California or a municipality other than a California municipality that are held by California taxpayers. Entities paying interest to California taxpayers on these types of bonds are required to report interest payments aggregating $10 or more paid after January 1, 2021. Information returns will be due June 1, 2022. For more information, get form FTB 4800 MEO, Interest and Interest-Dividend Payment Reporting Requirement Letter.

LLCs must use form FTB 3834, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, to report interest due or to be refunded under the look-back method on long-term contracts. If you are filing form FTB 3834 to compute the interest due or to be refunded under the Look-Back method, attach a copy of form FTB 3834 to Form 568.

Any information returns required for federal purposes under IRC Sections 6038, 6038A, 6038B, and 6038D are also required for California purposes. Attach the information returns to the Form 568 when filed. If the information returns are not provided, penalties may be imposed under R&TC Sections 19141.2 and 19141.5.

All information returns, unless otherwise noted, are mailed separately from the Form 568. Information returns should be sent to:

California LLC tax law generally follows federal partnership tax law for LLCs classified as partnerships, in all of the following areas:

See the instructions for federal Form 1065 for specific information about these areas.

Form 568 is not considered a valid return unless it is signed by an authorized member or manager of the LLC. If a receiver, trustee in bankruptcy, or assignee controls the organization’s property or business, that individual must sign the return.

Include an authorized member or manager’s phone number and email address in case the FTB needs to contact the LLC for information needed to process this return. By providing this information the FTB will be able to process the return or issue the refund faster.

Anyone who is paid to prepare the LLC return must sign the return and complete the “Paid Preparer’s Use Only” area of the return.

All of the following must be completed by the paid preparer:

An individual who prepares the return and does not charge the LLC should not sign the LLC return.

If the LLC wants to allow the paid preparer to discuss its 2022 Form 568 with the FTB, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer’s Use Only” section of the return. It does not apply to the firm, if any, shown in that section.

If the “Yes” box is checked, the LLC is authorizing the FTB to call the paid preparer to answer any questions that may arise during the processing of its return. The LLC is also authorizing the paid preparer to:

The LLC is not authorizing the paid preparer to receive any refund check, bind the LLC to anything (including any additional tax liability), or otherwise represent the LLC before the FTB.

The authorization will automatically end no later than the due date (without regard to extensions) for filing the LLC’s 2023 tax return. If the LLC wants to expand the paid preparer’s authorization, go to ftb.ca.gov/poa. If the LLC wants to revoke the authorization before it ends, notify the FTB in writing or call 800-852-5711.

Nonresident members of an LLC doing business or deriving income from sources in California may elect to file a group nonresident return (R&TC Section 18535).

Get FTB Pub. 1067, Guidelines for Filing a Group Form 540NR, for more information.

Income of nonresident members, including banks and corporations, derived from “qualifying investment securities” of an LLC that qualifies as an “investment partnership” is considered income from sources other than California, except as noted Nonresident individuals or foreign members generally will not be taxed on this income. The LLC should inform its nonresident individuals or foreign members if all or a portion of their distributive share of income is from “qualifying investment securities” of an “investment partnership” and whether it is sourced to California. See the instructions for Question L, included in this booklet, for definitions of “investment partnership” and “qualifying investment securities.”

However, for apportioning purposes, income from an LLC that is an investment partnership (LLC investment partnership) is generally considered business income (see Appeal of Estate of Marion Markus, Cal. St. Bd. of Equal., May 6, 1986). LLC investment partnerships that are doing business within and outside California should apportion California source income using California Schedule R. LLC investment partnerships that are doing business solely within California should treat all business income of the LLC investment partnership as California source income.

LLC investment partnerships that have California source income should show on Schedule K-1 (568), column (e) each member’s distributive share of California source income.

Generally, members who are nonresident individuals would not record this income as California source income. However, there are two exceptions to the general rule when a nonresident individual may have California source income from an LLC investment partnership. Nonresident individual members will be taxed on their distributive shares of income from the “LLC investment partnership” if the income from the qualifying investment securities is interrelated with either of the following:

Nonresident individual members will be taxed on their distributive share of investment income from an LLC investment partnership if the qualifying securities were purchased with working capital of a trade or business the nonresident owns an interest in and that is conducted in California (R&TC Section 17955).

Corporations that are members in an LLC investment partnership are not generally taxed on their distributive share of LLC income, provided that the income from the LLC is the corporation’s only California source income. However, the corporation will be taxed on its distributive share of California source income from the LLC if either of the following apply:

An LLC with multiple members is required to file form FTB 3832 with Form 568 when one or more of its members is a nonresident of California. Form FTB 3832 is signed by the nonresident individuals and foreign entity members to show their consent to California’s jurisdiction to tax their distributive share of income attributable to California sources.

File form FTB 3832 for either of the following:

Separate forms for an individual (or groups of individuals) are permissible. The LLC must maintain and have available for examination a form FTB 3832 signed by each nonresident member.

The LLC must pay the tax for every nonresident member that did not sign a form FTB 3832. The LLC is responsible for paying the tax on that nonresident member’s distributive share of income determined at the highest marginal rate for that member. See General Information F, Limited Liability Company Tax and Fee, for more information.

The tax may be reduced by the amount of tax previously withheld and paid by the LLC with respect to each nonconsenting nonresident member.

If the LLC fails to timely pay the tax of such nonresident member, the LLC shall be subject to penalties and interest (R&TC Sections 19132 and 19101). Any amount paid by the LLC on behalf of a nonresident individual or foreign entity member will be considered a payment made by the member.

An LLC may recover from the nonresident member the tax it paid on behalf of the nonresident member.

To claim credit for the tax, the nonresident member needs to attach a copy of the Schedule K-1 (568) to their California income tax return.

Nonresidents pay tax to California only on their California taxable income. For more information, get FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency.

CAUTION: The requirements and procedures discussed above are not related to the nonresident withholding requirements discussed under General Information R, Withholding Requirements.

In general, LLCs are required to pay the $800 annual tax and file a California return until the appropriate papers are filed. In order to cancel an LLC, the following steps must be taken:

The Form LLC-4/7’s effective date will stop the assessment of the $800 annual tax for future taxable years. If Form LLC-4/7 is filed after the taxable year ending date, a subsequent year return and an additional $800 tax may be required.

The annual tax will not be assessed if the LLC meets all of the following requirements:

Domestic LLCs organized in California can file a Limited Liability Company Form LLC-4/8, Short Form Cancellation Certificate, if the following requirements are met:

The LLC must file SOS Form LLC-4/8, with the SOS. The LLC must include a statement that all of the items above have been completed before the California SOS will cancel the LLC. If available, attach an endorsed SOS filed copy of Form LLC-4/8 to the first tax return.

For more information on how to cancel your LLC, contact:

Where to File: Completed forms along with the applicable fees, if any, can be mailed to:

or delivered in person (drop off) to the Sacramento office:

This form is filed only in the Sacramento office.

Office hours are Monday through Friday, 8 a.m. to 5 p.m. (excluding state holidays).

If the LLC is being cancelled to be converted to another type of business entity, be sure to file the appropriate forms with the California SOS.

Get FTB Pub. 1038, Guide to Dissolve, Surrender, or Cancel a California Business Entity, for more information.

If the LLC is filing a short period return for 2022 and the 2022 forms are not available, the LLC must use the 2021 Form 568 and change the taxable year.

As described in IRC Section 1446 and modified by R&TC Section 18666, if an LLC has any income or gain from a trade or business within California, and if any portion of that income or gain is allocable under IRC Section 704 to a foreign (non U.S.) nonresident member, the LLC is required to withhold tax on the allocable amount.

California generally conforms to IRC Section 1446 and corresponding federal rulings and procedures. The main differences between California and federal laws in this area are:

An LLC is required to withhold funds for income or franchise taxes when it makes a distribution of income to a domestic (U.S.) nonresident member (R&TC Section 18662). This includes prior year income that should have been, but was not previously reported as income from California sources on the member’s California income tax return. However, withholding is not required if distributions of income from California sources to the member are $1,500 or less during the calendar year or if the FTB directs the payer not to withhold.

Domestic (U.S.) nonresident members include individuals who are nonresidents of California and corporations that are not qualified to do business in California or do not have a permanent place of business in California. Domestic nonresident members also include nonresident estates, trusts, partnerships, and LLCs that do not have a permanent place of business in California. Foreign nonresident members covered under R&TC Section 18666 are not domestic nonresident members.

LLCs with income from both within and outside California must make a reasonable estimate of the ratio, to be applied to the distributions, that approximates the ratio of California source income to total income. The ratio for the prior year will generally be accepted as reasonable in determining the California part of the distribution subject to withholding. LLCs are required to withhold tax at a rate of 7 percent of distributions (including property) of income from California sources made to domestic nonresident members. For more information, get Schedule R.

The FTB has administrative authority to allow reduced withholding rates, including waivers, when requested in writing. These authorizations may be one-time, annual, or for a longer period. Waivers or reduced withholding rates will normally be approved when distributions are made by publicly traded partnerships and on distributions to brokerage firms, tax-exempt organizations, and tiered LLCs.

No withholding of tax is required if the distribution is a return of capital or does not represent taxable income for the current or prior years. Although a waiver is not required in this situation, if upon examination the FTB determines that tax withholding was required on a distribution, the LLC may be liable for the amount that should have been withheld including interest and penalties.

Send waiver requests and inquiries to:

Waivers may also be submitted online. Go to ftb.ca.gov and search for 588 online.

Report withholding on Forms 592, 592-B, 592-F, and 592-PTE. Withholding payments are remitted with Forms 592-A, 592-Q, and 592-V, Payment Voucher for Resident and Nonresident Withholding.

The taxable income of nonresident members is the distributive share of California sourced LLC income, not the distributed amount. For more information, get FTB Pub. 1017.

The nonresident withholding requirements and procedures discussed above are not related to the nonconsenting nonresident members’ tax paid by an LLC on behalf of nonresident members as discussed under General Information P, Nonresident Members.

California generally conforms to the federal entity classification regulations (commonly known as “check-the-box” regulations). These regulations allow certain unincorporated entities to choose tax treatment as a partnership, a corporation, or a single member LLC (SMLLC) (SB 1234; Stats. 1997, Ch. 608).

Generally, any elections made for federal purposes under the federal “check-the-box” regulations are treated as California elections. No separate elections are allowed. If federal Form 8832, Entity Classification Election, is filed with the federal return, a copy should be attached to the electing entity’s California return for the year in which the election is effective. The entity should file the appropriate California return.

An “eligible entity” may choose its classification. An eligible entity is a business entity that is not a trust, a corporation organized under any federal or state statute, a foreign entity specifically listed as a per se corporation, or other special business entities. Other special business entities under the IRC include publicly traded partnerships, REMICs, financial asset securitization investment trusts (FASITs), or regulated investment companies (RICs). An eligible entity with two or more owners will be a partnership for tax purposes unless it elects to be taxed as a corporation. For tax purposes, an eligible entity with a single owner will be disregarded. If the separate existence of an entity is disregarded, its activities are treated as activities of the owner and reported on the appropriate California return.

The exception to the general rule exists under R&TC Section 23038(b)(2)(C) in the case of an eligible business entity.

The exception does not apply to a business entity which, during the 60 month period preceding January 1, 1997, was appropriately classified as an association taxable as a corporation and met all of the following conditions:

The eligible business entities are generally:

These business trusts and previously existing foreign SMLLCs will continue to be classified as corporations for California tax purposes and must continue to file Form 100, unless they make an irrevocable election to be classified or disregarded the same as they are for federal tax purposes. See form FTB 3574, Special Election for Business Trusts and Certain Foreign Single Member LLCs, and Cal. Code Regs., tit. 18 sections 23038(a)-(b).

California regulations make the classification of business entities under federal regulations (Treas. Reg. Sections 301.7701-1 through 301.7701-3) generally applicable to California. If an eligible entity is disregarded for federal tax purposes, it is also disregarded for state tax purposes, except that an SMLLC must still pay a tax and fee, file a return, and limit tax credits.

An SMLLC is required to complete Form 568, Side 1, Side 2, Side 3, Side 7 (Schedule IW), and pay the annual tax and LLC fee (if applicable). If a nonresident has not signed the single member LLC consent on Side 3, then the SMLLC is required to complete Schedule T on Side 4.

However, if either of the following two items below are met, Schedule B and Schedule K are also required to be filed:

Note: If the SMLLC does not meet the 3 million criteria for filing Schedule B (568) and Schedule K (568), the SMLLC is still required to complete Schedule IW.

If Schedule K (568) is required to be filed, disregarded entities should prepare Schedule K (568) by entering the amount of the corresponding Member’s share of Income, Deductions, Credits, etc. attributable to the activities of the disregarded entity from the member’s federal Form 1040 or 1040-SR, including Schedules B, C, D, E, F, and Federal Schedule K, or Federal Form 1120 or 1120S (of the owner). SMLLCs do not complete Schedule K-1 (568). The single owner would include the various items of income, deductions, credits, etc., of the SMLLC on the tax return filed by the owner.

Utilization of credits attributable to the SMLLC is limited to the regular tax liability on the income attributable to the activities of the SMLLC. The limitation on the SMLLC’s credits is the difference between: 1) The regular tax liability of the single owner computed with the items of income, deductions, etc., attributable to the SMLLC; and 2) The regular tax liability of the single owner computed without the items of income, deductions, etc., attributable to the SMLLC. It is the responsibility of the single owner to limit the credits on the owner’s tax return. The single owner should be prepared to furnish information supporting the use of any credits attributable to the SMLLC.

The owner of the SMLLC should perform the following steps to determine the SMLLC’s credit limitation:

The following example shows the credit limit calculation for an SMLLC that is owned by a C corporation. The SMLLC has a Research credit of $4,000. The computation of the C corporation’s regular tax liability with the SMLLC income is $5,000. The computation of the C corporation’s regular tax liability without the SMLLC income is $3,000. The difference in tax is $2,000, which is the C corporation’s credit limitation on all LLC credits. The owner of the SMLLC then performs the following steps:

The LLC needs approval from the FTB to use a substitute Schedule K-1 (568). The substitute schedule must include the Member’s Instructions for Schedule K-1 (568) or other prepared specific instructions. For more information and access to form FTB 1096, Agreement to Comply with FTB Pub. 1098, Annual Requirements and Specifications; or FTB Pub. 1098, Annual Requirements and Specifications for the Development and Use of Substitute, Scannable, Absolute Positioning, and Reproduced Tax Forms, email the FTB’s Substitute Forms Program at [email protected].

California will follow the revised federal instructions (with some exceptions) for reporting the sale, exchange, or disposition of property for which an IRC Section 179 expense deduction was claimed in prior years by a partnership, LLC, or S corporation.

If there is gain from the sale, exchange, or disposition of property for which an IRC Section 179 expense deduction was claimed in a prior year, special rules apply. Members should follow the instructions in federal Form 4797, Sales of Business Property.

LLCs should follow the instructions in federal Form 4797 with the exception that the amount of gain on property subject to the IRC Section 179 recapture must be included in the total income for the LLC.

The gain on property subject to the IRC Section 179 recapture should be reported on the Schedule K (568) and Schedule K-1 (568) as supplemental information as instructed on the federal Form 4797.

The LLC must provide all of the following information with respect to a disposition of business property if an IRC Section 179 expense deduction was claimed in prior years:

If an LLC does not file Form 568 and/or does not pay any tax, penalty, or interest due, its powers, rights, and privileges may be suspended (in the case of a domestic LLC) or forfeited (in the case of a foreign LLC). Also, any contracts entered into during suspension or forfeiture are voidable at the request of any party to the contract other than the suspended or forfeited LLC. Such contracts will remain voidable and unenforceable unless the LLC applies for relief from contract voidability and the FTB grants relief. See R&TC Sections 23301, 23305.1, and 23305.2, for more information.

Use tax has been in effect in California since July 1, 1935. It applies to purchases of property from out-of-state sellers and is similar to sales tax paid on purchases made in California. If the LLC has not already paid all use tax due to the California Department of Tax and Fee Administration, it may be able to report and pay the use tax due on its state income tax return. However, LLCs required to hold a California seller’s permit or to otherwise register with the California Department of Tax and Fee Administration for sales and use tax purposes may not report use tax on their state income tax return. See the information below and the instructions for line 13 of the income tax return.

In general, LLCs must pay California use tax on purchases of merchandise for use in California, made from out-of-state sellers, for example, by telephone, online, by mail, or in person.

LLCs must pay California use tax on taxable items if:

Example: The LLC purchases a conference table from a company in North Carolina. The company ships the table from North Carolina to the LLC’s address in California for the LLC’s use, and does not charge California sales or use tax. The LLC owes use tax on the purchase.

However, not all purchases require the LLC to pay use tax. For example, the LLC would include purchases of office equipment, but not exempt purchases of food products or prescription medicine.

For more information on nontaxable and exempt purchases, the LLC may refer to Publication 61, Sales and Use Taxes: Exemptions and Exclusions, on the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov.

For more information about California use tax, refer to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov and type “Find Information About Use Tax” in the search bar.

Complete the Use Tax Worksheet to calculate the amount due.

Extensions to File. If the LLC requests an extension to file its tax return, wait until the LLC files its tax return to report the purchases subject to use tax and to make the use tax payment.

Interest, Penalties, and Fees. Failure to timely report and pay use tax due may result in the assessment of interest, penalties, and fees.

Application of Payments. For purchases made during taxable years starting on or after January 1, 2015, payments and credits reported on an income tax return will be applied first to the use tax liability, instead of income tax liabilities, penalties, and interest.

Changes in Use Tax Reported. Do not file an Amended Limited Liability Company Return of Income to revise the use tax previously reported. If the LLC has changes to the amount of use tax previously reported on the original tax return, contact the California Department of Tax and Fee Administration.

For assistance with use tax questions, go to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov or call their Customer Service Center at 800-400-7115 (CRS:711) (for hearing and speech disabilities). For California income tax information, contact the Franchise Tax Board at ftb.ca.gov.

Enter any items specially allocated to the members on the applicable line of the member’s Schedule K-1 (568) and the total amounts on the applicable lines of Schedule K (568). Do not enter these items directly on Form 568, Side 4, Schedule A or Schedule D (568). Do not apply the apportionment factor to the items on Schedule K (568).

Whole numbers should be shown on the return and accompanying schedules.

Before mailing, make sure entries have been made for all of the following:

Use the Additional Information field for “Owner/Representative/Attention” name and other supplemental address information only.

If the limited liability company has a foreign address, follow the country’s practice for entering the city, county, province, state, country, and postal code, as applicable, in the appropriate boxes. Do not abbreviate the country name.

See the instructions for Schedule L – Balance Sheets – before completing this item.

If the LLC is required to complete this item, enter the total assets at the end of the LLC’s taxable year. This is determined by the accounting method regularly used to maintain the LLC’s books and records. If there are no assets at the end of the taxable year, enter $0.

If the LLC is filing a final year tax return, check the “Final Return” box on Form 568, Side 1, Item H(2), and check the “A final Schedule K-1 (568)” box for Item G(1) on Schedule K-1 (568). Attach a statement that explains the reason for the termination or liquidation of the partnership.

Check the box if this Form 568 is being filed as a protective claim for refund. A protective claim is a claim for refund filed before the expiration of the statute of limitations for which a determination of the claim depends on the resolution of some other disputed issues, such as pending state or federal litigation or audit. For more information on how to file a protective claim, go to ftb.ca.gov and search for protective claim.

All LLCs must answer all three questions. The questions provide information regarding changes in control or ownership of legal entities owning or under certain circumstances leasing California real property (R&TC Section 64). (Real property includes land, buildings, structures, fixtures – see R&TC Section 104).

If any of the answers are “Yes,” a Statement of Change in Control and Ownership of Legal Entities, must be filed with the State of California; failure to do so within 90 days of the event date will result in penalties. The form for this statement is form BOE-100-B, filed with the California State Board of Equalization. Get this form and information from the BOE website (boe.ca.gov) by searching for Legal Entity Ownership Program (LEOP).

There may be a change in ownership or control if, during this year, one of the following occurred with respect to this LLC (or any legal entity in which it holds a controlling or majority interest):

For purposes of these questions, leased real property is a leasehold interest in taxable real property: (1) leased for a term of 35 years or more (including renewal options), if not leased from a government agency; or (2) leased for any term, if leased from a government agency. For LLC’s, ownership interest is measured by a member’s interest in both the capital and profits interests in the LLC.

R&TC Section 64(e) requires this information for use in determining whether a change in ownership has occurred under section 64(c) and (d); it is used by the LEOP.

For purposes of this worksheet, “Total California Income” means total income from all sources derived from or attributable to this state. The definition of total income for purposes of calculating the LLC fee excludes all allocations, distributions, or gains from another LLC that was already subject to the LLC fee. “Total income” means gross income, plus the cost of goods sold that are paid or incurred in connection with the trade or business of the taxpayer attributed to California. Total income from all sources derived or attributable to this state is determined using the rules for assigning sales under R&TC Sections 25135 and 25136 and the regulations thereunder, as modified by regulations under R&TC Section 25137, if applicable, other than those provisions that exclude receipts from the sales factor.

If the SMLLC does not meet the 3 million criteria for filing Schedule B (568) and Schedule K (568), the SMLLC is still required to complete Schedule IW. Disregarded entities that do not meet the filing requirements to complete Schedule B or Schedule K should prepare Schedule IW by entering the California amounts attributable to the disregarded entity from the member’s federal Schedule B, C, D, E, F (Form 1040), or additional schedules associated with other activities. For example, if an SMLLC has IRC Section 1231 gains, the SMLLC will need to get the amount from the schedule containing that information, such as Schedule D-1, and enter the amount on line 14 of the Schedule IW.

Use only amounts that are from sources derived from or attributable to California when completing lines 1-17 of this worksheet. If the LLC business is wholly within California, the total income amount is assigned to California and is entered on Schedule IW. If the LLC conducts business within and outside of California, the LLC must assign its total income, item by item, to California based on the following rules:

Total income from sales of tangible personal property with a destination in California (except sales to the U. S. Government) are attributable to California if the property is delivered or shipped to a purchaser within California regardless of the freight on board point or other conditions of sale. Total income from sales of tangible personal property (except sales to the U.S. Government) which are shipped from an office, store, warehouse, factory, or other place of storage within California are assigned to California unless the seller is taxable in the state of destination. Any transportation of goods by vehicle is a form of shipment, whether the vehicle is owned by the seller, the purchaser, or a common carrier. If a seller transfers possession of goods to a purchaser at the purchaser’s place of business in California, the sale is a California sale. However, if goods are transferred to the purchaser’s employee or agent at some other location in California and the purchaser immediately transports the goods to another state, the sale is not a California sale. (See FTB Legal Ruling 95-3).

Total income from sales of tangible personal property to the U.S. Government are attributable to California if the property is shipped from California even if the taxpayer is taxable in the state of destination. Only sales for which the U.S. Government makes direct payment to the seller according to the terms of a contract constitute sales to the U.S. Government. Thus, as a general rule, sales by a subcontractor to the prime contractor, the party to the contract with the U.S. Government, do not constitute sales to the U.S. Government.

Market Assignment – R&TC Section 25136 requires all taxpayers to assign sales, other than sales of tangible personal property, using market assignment.

The market assignment method and single-sales factor apportionment may result in California sourced income or apportionable business income if a taxpayer is receiving income from intangibles or services from California sources. Such income includes:

For more information, see R&TC Section 25136 and Cal. Code Regs., tit. 18 section 25136-2, get Schedule R or go to ftb.ca.gov and search for market assignment.

Alternative Methods. There are alternative methods to assign total income to California that apply to specific industries. These rules are contained in the regulations adopted pursuant to R&TC Section 25137. If the LLC is in one of these lines of business, the sale assignment methodology employed in the regulation applicable to the LLC’s line of business should be used to determine total income derived from or attributable to California.

The rules contained in R&TC Section 25137(c) that serve to remove items from assignment in their totality are not applicable to the determination of income derived from or attributable to California.

The definition of “Total Income” excludes allocations, distributions, or gains to an LLC from another LLC, if that allocation, distribution, or gain was already subject to the LLC fee. Do not include any income on the worksheet that has already been subject to the LLC fee.

Pass-through Entities. LLCs with ownership interest in a pass-through entity, other than an LLC, must report their distributive share of the pass-through entity’s "Total Income from all sources derived from or attributable to this state." Their distributive share must include the matching cost of goods sold and any deductions that are subtracted from gross ordinary income to obtain net ordinary income. The matching cost of goods sold must be entered on line 3b and any deductions on line 3c. If you received Schedule K-1s (565) with Table 3 information, include the sum of the Table 3 amounts on Schedule IW, lines 3b, 3c, 8b, and 9b as follows:

All Table 3 amounts come from partnerships and LLCs that have filed Form 565.

Lines 1b, 2b, 3b, 3c, and 17 may not be negative numbers. LLCs that are disregarded entities compute the “Total Income” on Schedule IW. Use the applicable lines.

Enter the LLC’s “Total California Income” as computed on line 17 of Schedule IW. The amount entered on Form 568, line 1, may not be a negative number.

Enter the amount of the LLC fee. The LLC must pay a fee if the total California income is equal to or greater than $250,000.

Enter zero if the LLC is claiming Deployed Military Exemption. See General Information F, Limited Liability Company Tax and Fee, for more details.

The LLC must estimate the fee it will owe for the year and make an estimated fee payment by the 15th day of the 6th month of the current taxable year. When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day. LLCs will use form FTB 3536, to remit the estimated fee. LLCs will also use form FTB 3536 to pay by the due date of the LLC’s return, any amount of LLC fee owed that was not paid as a timely estimated fee payment. A penalty will apply if the LLC’s estimated fee payment is less than the fee owed for the year. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year. See General Information G, Penalties and Interest, for more details.

Enter the $800 annual tax. This tax was due the 15th day of the 4th month (fiscal year) or April 15, 2022 (calendar year), after the beginning of the LLC’s 2022 taxable year and paid with the 2022 form FTB 3522. When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day. If the annual LLC tax was not paid within the prescribed time period, penalties and interest are now due. See General Information G, Penalties and Interest, for more details.

Enter zero on line 3 if the LLC is claiming Deployed Military Exemption.

Enter the total amount of elective tax from form FTB 3804, Part I, Elective Tax, line 3.

Enter the total tax computed on Schedule T from Side 4 of Form 568. The LLC is responsible for paying the tax of nonconsenting nonresident members and nonconsenting owners of disregarded entities. Treat a nonconsenting owner of a disregarded entity in the same manner as a nonconsenting nonresident member. See the Specific Line Instructions for Schedule T.

The nonconsenting nonresident members’ tax paid by an LLC on behalf of a nonresident is allocated to the nonresident member on Schedule K-1 (568).

Use this line to report the Partnership Level Tax (PLT) for California purposes resulting from changes or corrections made by IRS under its centralized partnership audit regime. PLT is typically reported on an amended return. See R&TC Section 18622.5(d)(1)(A) for how to compute the PLT for state tax purposes.

Enter the amount paid with form FTB 3537 and 2022 form FTB 3522 and form FTB 3536. If the LLC is a nonconsenting nonresident member of another LLC, an amount will be entered on line 15e of the Schedule K-1 from that LLC. In addition to amounts paid with form FTB 3537 and 2022 form FTB 3522 and form FTB 3536, the amount from line 15e of the Schedule K-1 may be claimed on line 8, but may not exceed the amount on line 5.

Line 9 – Amount paid with form FTB 3893.

If the LLC was withheld upon by another entity, the LLC can either allocate the entire withholding credit to all its members or claim a portion on line 11 (not to exceed the total tax and fee due) and allocate the remaining portion to all its members. If the LLC claims any of the amount withheld, attach Form 592-B or Form 593, Real Estate Withholding Statement, to the front lower portion of the LLC return. The LLC must file Form 592, 592-F, or 592-PTE, and Form 592-B to allocate any remaining withholding credit to its members. For additional information, get FTB Pub. 1017.

As explained under General Information W, California use tax applies to purchases of merchandise from out-of-state sellers (for example, purchases made by telephone, online, by mail, or in person) where sales or use tax was not paid and those items were used in California. For questions on whether a purchase is taxable, go to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov, or call their Customer Service Center at 800-400-7115 (CRS:711) (for hearing and speech disabilities).

Note: The following businesses are required to report purchases subject to use tax directly to the California Department of Tax and Fee Administration and may not report use tax on their income tax return:

An LLC that is not required to report purchases subject to use tax directly to the California Department of Tax and Fee Administration may, with some exceptions, report use tax on its Limited Liability Company Return of Income. To report use tax on the tax return, complete the Use Tax Worksheet on this page.

Note: An LLC may not report use tax on its income tax return for certain types of transactions. These types of purchases are listed in the instructions for completing Worksheet, line 1.

If the LLC owes use tax but does not report it on the income tax return, the LLC must report and pay the tax to the California Department of Tax and Fee Administration. For information on how to report use tax directly to the California Department of Tax and Fee Administration, go to their website at cdtfa.ca.gov and type “Find Information About Use Tax” in the search bar.

Failure to timely report and pay the use tax due may result in the assessment of interest, penalties, and fees.

Round all amounts to the nearest whole dollar.

Worksheet, Line 1, Purchases Subject to Use Tax

Report purchases of items that would have been subject to sales tax if purchased from a California retailer unless your receipt shows that California tax was paid directly to the retailer. For example, generally, purchases of clothing would be included, but not exempt purchases of food products or prescription medicine. For more information on nontaxable and exempt purchases, visit the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov.

Note: Do not report the following types of purchases on the LLC’s income tax return:

Worksheet, Line 2, Sales and Use Tax Rate

Enter the sales and use tax rate applicable to the place in California where the property is used, stored, or otherwise consumed. If the LLC does not know the applicable city or county sales and use tax rate, please go to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov and type “City and County Sales and Use Tax Rates” in the search bar or call their Customer Service Center at 800-400-7115 (CRS:711) (for hearing and speech disabilities).

Worksheet, Line 4, Credit for Tax Paid to Another State

This is a credit for tax paid to other states on purchases reported on line 1. The LLC can claim a credit up to the amount of tax that would have been due if the purchase had been made in California. For example, if the LLC paid $8.00 sales tax to another state for a purchase, and would have paid $6.00 in California, the LLC can only claim a credit of $6.00 for that purchase.

Enter penalties and interest. See General Information G, Penalties and Interest.

Enter the total amount due. See General Information E, When and Where to File.

California uses the six-digit PBA code from the Principal Business Activity Codes chart included in this booklet.

For example, if, as its principal business activity, the partnership (a) purchases raw materials, (b) subcontracts out for labor to make a finished product from the raw materials, and (c) retains title to the goods, the partnership is considered to be a manufacturer and must enter “Manufacturer” on the business activity line and on the principal business activity code line, one of the codes (311110 through 339900) listed under “Manufacturing” on the list, Codes for Principal Business Activity.

Enter the maximum number of members in the LLC at any time during the taxable year. For multiple member LLCs, the number of Schedules K-1 (568) attached to the Form 568 must equal the number of members entered on Question K. Do not use abbreviations or terms such as “various.”

Check the “Yes” or “No” box. SMLLCs are excluded from providing a Schedule K-1 (568).

An “investment partnership” is a partnership that meets both of the following criteria:

“Qualifying investment securities” include all of the following:

“Qualifying investment securities” do not include an interest in a partnership, unless the partnership qualifies as an “investment partnership.” See R&TC Sections 17955 and 23040.1 and General Information O, Investment Partnerships, for more information.

If Question N is answered “Yes,” see the federal partnership instructions concerning an election to adjust the basis of the LLC’s assets under IRC Section 754.

California requires taxes to be withheld from certain payments or allocations of income and sent to the FTB (R&TC Sections 18662 and 18666). If the LLC does not withhold and, upon examination, the FTB determines that withholding was required, the LLC may be liable for the tax and penalties. The reference to Forms 592, 592-A, 592-B, 592-F, and 592-PTE relates to LLC withholding. If you need additional information concerning LLC withholding, see General Information K, Required Information Returns, and General Information R, Withholding Requirements, in this booklet.

See General Information S, Check-the-Box Regulations, for the filing requirements for disregarded entities.

Federal Form 8886, Reportable Transaction Disclosure Statement, must be attached to any return on which the LLC has claimed or reported income from, or a deduction, loss, credit, or other tax benefit attributable to, participation in a reportable transaction. If the LLC is required to file this form with the federal return, attach a copy to the LLC’s Form 568. Do not attach copies of federal Schedule K-1 (1065).

A material advisor is required to provide a reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor.

A Reportable Transaction is any transaction as defined in R&TC Section 18407 and Treas. Reg. 1.6011-4 and includes, but is not limited to:

Check the “Yes” or “No” box to indicate if the LLC is deferring any income from the disposition of assets. If “Yes,” enter the four-digit year in which the assets were disposed (ex. 2022) on line CC (2). If there are multiple years, write “see attached” on the line and attach a schedule listing the years. This question is applicable if the LLC is deferring any income from a disposition of assets in the current taxable year or prior taxable years.

Check the box for the type(s) of previously deferred income the LLC is reporting. If there are multiple sources of income, check the box for the appropriate items and attach a schedule listing the income type and year of disposition. If the LLC is reporting “Other” types of previously deferred income, check the box for “Other” and attach a schedule listing the income type and year of disposition. This question is applicable if the LLC is reporting previously deferred income in the current taxable year or prior taxable years.

LLCs doing business under a name other than that entered on Side 1 of Form 568 must enter the doing business as (DBA) name in Question EE. If the LLC is doing business under multiple DBA’s attach a schedule listing all DBA’s. Leave Question EE blank if the LLC is not using DBA’s to conduct business.

Check the “Yes” or “No” box to indicate if the LLC operated as another entity type such as a Corporation, S Corporation, General Partnership, Limited Partnership, LLC, or Sole Proprietorship in the previous five (5) years. If “Yes,” enter prior FEIN(s) if different, business name(s), and entity type(s) for prior returns filed with the FTB and/or IRS on line FF (2). If there are multiple entries, write “see attached” on the line and attach a schedule listing the prior FEINs, business names, and entity types.

Check “Yes” or “No” if the LLC previously operated outside California. Check “Yes” or “No” if this is the LLC’s first year of doing business in California.

Check the applicable box if activities were aggregated for at-risk purposes or grouped for passive activity purposes. Get the instructions for federal Form 1065, under At-Risk Limitations and Grouping Activities, for more information.

On line (3), do not round cents to the nearest whole dollar. Enter the amounts with dollars and cents as actually remitted.

Complete all requested information and provide the identification number of the entity (Federal TIN/SSN or FEIN/CA Corp no./CA SOS File no.) that will report the items of income, deductions, credits, etc., of the disregarded entity. The owner will be responsible for limiting any credits attributable to the disregarded entity. Check the box for the entity type of the ultimate owner of the SMLLC. Note: Check exempt organization if the owner is a pension plan, charitable organization, insurance company, or a government entity.

The LLC must treat the failure of the sole owner to sign this consent in the same manner as the failure of a nonresident member to sign form FTB 3832. See the Specific Line Instructions for Schedule T.

If the single member of the LLC signs the consent, only complete Form 568, Side 1, Side 2, Side 3, Side 7 (Schedule IW), and pay the amount due.

Schedules B & K are required to be filed if any of the following are met:

See Instructions for Schedule IW for more information.

Multiple member LLCs will complete the remaining schedules, as appropriate.

Single member LLCs (SMLLCs) do not complete form FTB 3832. An SMLLC consents to be taxed under California jurisdiction by signing the Single Member LLC Information and Consent on Form 568. Multiple member LLCs must complete and sign form FTB 3832.

California’s reporting requirements for LLCs are generally the same as the federal reporting requirements for partnerships. Follow the instructions for federal Form 1125-A, Cost of Goods Sold.

California’s reporting requirements for LLCs classified as partnerships are generally the same as the federal reporting requirements for partnerships.

Follow the instructions for federal Form 1065 and include only trade or business activity income on line 1 through line 12. However, for California tax purposes, business income of the LLC is defined using the rules set forth in R&TC Section 25120. Therefore, certain income that may be portfolio income for federal purposes may be included as business income for California sourcing purposes. Do not include rental activity income or portfolio income on these lines. Rental activity income and portfolio income are separately reported on Schedule K (568) and Schedule K-1 (568). Rental real estate activities are also reported on federal Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation. Attach a copy of federal Form 8825 to Form 568. Use California amounts and attach a statement reconciling any differences between federal and California amounts.

Use worldwide amounts determined under California law when completing these lines.

Form 568, Schedule B, line 4 through line 11 have been separated to report total gains and total losses. Net amounts are no longer reported. List total gains and total losses separately, even if listed together on federal forms. For example, the LLC is required to report a $100 Other Income item and a <$20> Other Loss item. The $100 Other Income item must be reported on line 10 and the <$20> Other Loss item loss must be reported as a negative number on line 11.

Enter on line 6 the LLC’s total farm profit from federal Schedule F (Form 1040), Profit or Loss From Farming, line 34, Net farm profit or (loss). Enter on line 7 the LLC’s total farm loss from federal Schedule F (Form 1040), line 34. Attach federal Schedule F to Form 568. If the amount includable for California purposes is different from the amount on federal Schedule F, enter the California amount and attach an explanation of the difference.

Include only ordinary gains or losses from the sale, exchange, or involuntary conversion of assets used in a trade or business activity. Ordinary gains or losses from the sale, exchange, or involuntary conversion of rental activity assets must be reported separately on Schedule K (568) and Schedule K-1 (568), generally as part of the net income (loss) from the rental activity.

An LLC that is a member in another LLC or partner in a partnership must include on Schedule D-1, Sales of Business Property, its share of ordinary gains (losses) from sales, exchanges, or involuntary conversions (other than casualties or thefts) of the other LLC’s or partnership’s trade or business assets.

California’s reporting requirements for LLCs are generally the same as the federal reporting requirements for partnerships.

Follow the instructions for federal Form 1065 and include only trade or business activity deductions on line 13 through line 21. Line 21 (Other Deductions) includes repairs, rents and taxes. Do not include any rental activity expenses or deductions that are allocable to portfolio income on these lines. Rental activity deductions and deductions allocable to portfolio income are separately reported on Schedule K (568) and Schedule K-1 (568).

Use worldwide amounts determined under California law when completing these lines.

Federal reporting requirements for organization and syndication expenses and uniform capitalization rules apply for California.

For taxable years beginning on or after January 1, 2014, California does not allow a business expense deduction for any fine or penalty paid or incurred by an owner of a professional sports franchise assessed or imposed by the professional sports league that includes that franchise. If the LLC deducted the fine or penalty for federal purposes, do not include the deduction for California purposes.

Claim of Right. To claim the deduction, enter the amount on line 21. If you elect to take the credit instead of the deduction, remember to use the California tax rate and add the credit amount to the total on line 12, Total payments (Form 568, Side 1). To the left of this total, write "IRC 1341" and the amount of the credit.

Enter on line 17a, only the total depreciation and amortization claimed on assets used in a trade or business activity. Complete and attach form FTB 3885L, Depreciation and Amortization (included in this booklet), to figure depreciation and amortization. Transfer the total from form FTB 3885L, line 6, to Form 568, Side 4, line 17a, or federal Form 8825, as appropriate (use California amounts).

Do not include any expense deduction for depreciable property (IRC Section 179) on this line. This expense is not deducted by the LLC. Instead, the expense is passed through separately to the members and is reported on line 12 of Schedule K (568) and Schedule K-1 (568).

Use Schedule T to compute the nonconsenting nonresident members’ tax liability to be paid by the LLC. List the names and identification numbers of all nonresident members who have not signed a form FTB 3832 or a nonresident single member who has not signed the SMLLC Information and Consent on Side 3 of Form 568, and have not consented to be subject to California tax. Also, list the nonresident members’ distributive share of income.

To compute the amount of tax that must be paid by the LLC on behalf of a nonconsenting nonresident member, multiply such member’s distributive share of income by the following rates:

Each member’s Nonconsenting Nonresident Members’ Tax may be reduced by the amount of tax previously withheld under R&TC Section 18662 and paid by the LLC on behalf of such member.

Multiply column (c) by column (d) and put the result in column (e) for each nonconsenting nonresident member. Reduce column (e) by the amount in column (f) and put the net amount in column (g) for each nonconsenting nonresident member. Column (g) cannot be less than zero.

The tax being paid by the LLC on behalf of nonconsenting nonresident members is due by the original due date of the return.

Reminder: All members must file a California tax return. The completion of Schedule T or form FTB 3832 does not satisfy the member’s California filing requirement. Corporate members are also considered doing business in California and may have additional filing requirements. For additional information get FTB Pub. 1060, Guide for Corporations Starting Business in California. Nonresident individuals may qualify to file a group Form 540NR and should get FTB Pub. 1067, Guidelines for Filing a Group Form 540NR.

If Question 4a through Question 4c on federal Form 1065, Schedule B, are all answered “Yes” and the LLC has 10 or fewer members, the LLC is not required to complete Schedules L, M-1, M-2, or Item G on Side 1 of Form 568 or Item K on Schedule K-1 (568).

California’s reporting requirements for LLCs classified as partnerships, are the same as the federal reporting requirements for partnerships. The amounts reported on the balance sheet should agree with the books and records of the LLC and should include all amounts whether or not subject to taxation. Attach a statement explaining any differences between federal and state amounts or the balance sheet and the LLC’s books and records. Follow the instructions for federal Form 1065, Schedule L.

If the LLC is required to complete Schedule M-1 and Schedule M-2, the amounts shown should agree with the LLC’s books and records and the balance sheet amounts. Attach a statement explaining any differences.

Use worldwide amounts determined under California law when completing Schedule M-1. Also, the amounts on Schedule M-2 should equal the total of the amounts reported in Item K, columns (c), (d), and (e), of all the members’ Schedules K-1 (568). If the sum of all members’ schedules K-1 do not equal the corresponding M-2 lines attach a statement explaining the difference.

Net Income (Loss) Reconciliation for Certain LLCs. For taxable years beginning on or after January 1, 2014, the IRS allows LLCs with at least $10 million but less than $50 million in total assets at tax year end to file Schedule M-1 (Form 1065) in place of Schedule M-3 (Form 1065), Parts II and III. However, Schedule M-3 (Form 1065), Part I, is required for these LLCs. For California purposes, the LLC must complete the California Schedule M-1, and attach either of the following:

The FTB will accept the federal Schedule M-3 (Form 1065) in a spreadsheet format if more convenient.

Complete Schedule O if “initial return” is checked in Question H of Form 568.

Schedule O is a summary of the entities liquidated to capitalize the LLC and the amount of gains recognized in such liquidations.

Include the complete names and identification numbers of all entities liquidated. Check the appropriate box for the type of entity liquidated. Include the amount of liquidation gains recognized in order to capitalize the LLC.

Schedule K (568) is a summary schedule for the LLC’s income, deductions, credits, etc. and Schedule K-1 (568) shows each member’s distributive share. The line items for both of these schedules are the same unless otherwise noted.

One copy of each Schedule K-1 (568) must be attached to the Form 568 when it is filed.

Be sure to give each member a copy of their respective Schedule K-1 (568). The LLC should also include a copy of the Member’s Instructions for Schedule K-1 (568) or specific instructions for each item reported. These items should be provided to the member on or before the due date of the Form 568.

Refer to the Schedule K Federal/State Line References chart, in this booklet, and Specific Line Instructions when completing California Schedule K (568) and Schedule K-1 (568).

Under federal law, the CAA, 2021 allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, if you are an ineligible entity and deducted eligible expenses for federal purposes, enter the total amount of those expenses deducted on the applicable line(s) as a column (c) adjustment.

Under federal law, the CAA, 2021 allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision with modifications. For California purposes, if you are an ineligible entity and deducted eligible expenses for federal purposes, enter that amount on the applicable line(s) as a column (c) adjustment.

Also, the ARPA expands PPP eligibility to include “additional covered nonprofit entities” which includes certain Code 501(c) nonprofit organizations and Internet-only news publishers and Internet-only periodical publishers. California law does not conform to this expansion of PPP eligibility. If you met the PPP eligibility requirements and excluded the amount from gross income for federal purposes, enter that amount on the applicable line(s) as a column (c) adjustment.

Under federal law, the CAA, 2021 allows deductions for eligible expenses paid for with grant amounts. California law conforms to this federal provision, with modifications. For California purposes, if you are an ineligible entity and deducted eligible expenses for federal purposes, enter the total amount of those expenses deducted on the applicable line(s) as a column (c) adjustment.

Beginning in taxable year 2020, partners, members, shareholders, or beneficiaries of pass-through entities conducting a commercial cannabis activity licensed under the California Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) should file form FTB 4197, Information on Tax Expenditure Items. The FTB uses information from form FTB 4197 for reports required by the California Legislature.

If the LLC conducted a commercial cannabis business activity licensed under the California MAUCRSA, or received flow-through income from another pass-through entity in that business, attach a schedule to the Schedule K-1 (568) showing the breakdown of the following information:

Get form FTB 4197 for more information.

Disregarded entities – Schedule K is only required to be filed if any of the following is met:

If Schedule K (568) is required to be filed, prepare Schedule K by entering the amount of the corresponding Member’s share of Income, Deductions, Credits, etc. attributable to the activities of the disregarded entity from the Member’s federal Form 1040 or 1040-SR including Schedule B, Interest and Ordinary Dividends, Schedule C, Profit or Loss from Business (Sole Proprietorship), Schedule D, Capital Gains and Losses, Schedule E, Supplemental Income and Loss, and Schedule F, federal Schedule K, or federal Form 1120 or 1120S, of the owner.

In column (b) on Schedule K (568), Members’ Shares of Income, Deductions, Credits, etc., enter the amounts from federal Schedule K (1065), Partners’ Distributive Share Items.

In column (c), enter the adjustments resulting from differences between California and federal law (not adjustments related to California source income). In column (d), enter the worldwide income computed under California law.

For members to comply with the requirements of IRC Section 469, trade or business activity income (loss), rental activity income (loss), and portfolio income (loss) must be considered separately by the member. Rental activity income (loss) and portfolio income (loss) are not reported on Form 568, Side 4 so that these amounts are not combined with trade or business activity income (loss). Use Schedule K, lines 2, 3, 5, 6, 7, 8, 9, and 11a to report these amounts.

To help ensure the accurate and timely processing of the LLC’s Form 568, verify the following:

The Schedule K-1 (568) details each member’s distributive share of the LLC’s income, deductions, credits, etc. The LLC completes the entire Schedule K-1 (568) by filling out the member’s and LLC’s information (name, address, identifying numbers), Questions A through K and the member’s distributive share of items.

For members with PMB addresses, include the designation number in the member’s address area. Precede the number (or letter) with “PMB.”

For each individual member, enter the member’s social security number (SSN) or Individual Taxpayer Identification Number (ITIN). For all other members enter their FEIN. However, if a member is an individual retirement arrangement (IRA), enter the identifying number of the custodian of the IRA. Do not enter the SSN or ITIN of the person for whom the IRA is maintained.

The LLC files one California Schedule K-1 (568) for each member with the LLC return and gives one copy to the appropriate member. Do not attach federal Schedules K-1 (1065). The LLC should also provide each member with a copy of either the Member’s Instructions for Schedule K-1 (568) or specific instructions for each item reported.

A resident member should include the entire distributive share of LLC income in their California income. If the LLC apportions its income, the member may be entitled to a tax credit for taxes paid to other states. The member should be referred to the California Schedule S, Other State Tax Credit, for more information.

Business Income: Regardless of the classification of income for federal purposes, the LLC’s income from California sources is determined in accordance with California law (Cal. Code Regs., tit. 18 section 17951-4).

The California source income from a trade or business of a Nonresident Member is determined as follows:

The LLC should apportion business income using the Uniform Division of Income for Tax Purposes Act (R&TC Sections 25120 through 25139). Special rules apply if the LLC has nonbusiness income.

Nonbusiness Income: Nonbusiness income attributable to real or tangible personal property (such as rents, royalties, or gains or losses) located in California is California source income (Cal. Code Regs., tit. 18 section 17951-3 and R&TC Sections 25124 and 25125). Enter this information on the appropriate line of Schedule K-1 (568). If the LLC believes it may have a unitary member, the information for that member should also be entered in Schedule K-1 (568), Table 2, Part B, for that member.

The source of nonbusiness income attributable to intangible property depends upon the member’s state of residence or commercial domicile. Individuals generally source this income to their state of residence and corporations to their commercial domicile, R&TC Sections 17951 through 17955.

Because the determination of the source of intangible nonbusiness income must be made at the member level, this income is not entered on Schedule K-1 (568), column (e). It is only entered in Table 1.

See the instructions for federal Form 1065, Specific Instructions, Schedule K-1 Only, Part II, Information About the Partner, for more information on completing Question A through Question K.

Check the appropriate box to indicate the member’s entity type. Exempt organizations should check the exempt organization box regardless of legal form.

If the member is a Disregarded Entity (DE) check the DE box and enter the DE owner's name and TIN.

Check the appropriate box to indicate whether this member is foreign or not.

Percentages must be 4 to 7 characters in length and have a decimal point before the final 4 characters. For example, 50 percent is represented as 50.0000, 5 percent as 5.0000, 100 percent as 100.0000. Do not enter a fraction, the percentage symbol (%), or the term “Various” or “Formula”.

For more information on completing Question D, get the instructions for federal Form 1065, Specific Instructions, Schedule K-1 Only, Part II, Information About the Partner.

Enter the reportable transaction number, and/or the tax shelter registration number if applicable. See instructions for Form 568, Question V, for more information.

If the “YES” box is checked on Form 568, Question T, then check the box for Question F(1) on Schedule K-1 (568).

If the “YES” box is checked on Form 568, Question L, then check the box for Question F(2) on Schedule K-1 (568).

If the LLC is filing a final year tax return, check the “Final Return” box on Form 568, Side 1, Item H(2), and check the “A final Schedule K-1 (568)” box for Item G(1) on Schedule K-1 (568). Attach a statement that explains the reason for the termination, or liquidation of the limited liability company.

Check the appropriate box to indicate whether the member contributed property with a built-in gain or loss during the tax year. If the “Yes” box is checked, attach a statement that contains the following information. For more information, get the Instructions for federal Form 1065.

The LLC should report the member's share of net unrecognized section 704(c) gains or losses, both at the beginning and at the end of the LLC's tax year. For more information, get the Instructions for federal Form 1065.

Beginning in taxable year 2021, all LLCs must report members' capital accounts using the tax basis method on California Schedule K-1 (568). Current year net income/loss and other increases/decreases are now separately reported in columns (c) and (d), respectively. For more information on member tax basis capital account reporting, get the Instructions for the federal Form 1065, Specific Instructions, Schedule K and Schedule K-1, Part II Information about the Partner, Item L.

If you did not report members' capital accounts utilizing the tax basis method using California amounts last year and did not maintain capital accounts under the tax basis method using California amounts in your books and records, you may refigure a member's beginning capital account using the tax basis method, modified outside basis method, modified previously taxed capital method, section 704(b) method, or California modified federal tax basis method, described below, for this year only. The same method must be used to determine each member's beginning capital account. All other lines in Question L must be reported using the tax basis method described in the federal Form 1065 instructions using California amounts. Attach a statement to the members' Schedules K-1 indicating the method used to determine each member's beginning capital account. If the modified previously taxed capital method is used, the statement must also include the method used to determine the LLC's net liquidity value (fair market value, section 704(b) book value, etc.). The method used to determine the LLC's net liquidity value must be adopted for all members in the LLC.

Attach a statement indicating whether the tax basis method used in 2021 was determined using California amounts or federal amounts. If it was determined using California amounts, the same method should be used. The tax basis method is the federal tax basis method (transactional approach), as described in the federal Form 1065 instructions, taking into account all historical California adjustments that affect capital accounts (i.e. CA adjustments to depreciation).

If the tax basis method was determined using federal amounts in 2021, in order to compute the beginning capital account balance, in addition to the tax basis method described above, the following methods may be used to determine the California beginning capital account balance for taxable year 2022 only:

The amount to report as a member's beginning capital account under the modified outside basis method is equal to the member's California adjusted tax basis in its LLC interest as determined under the principles and provisions of subchapter K including, for example, sections 705, 722, 733, and 742; and subtracting from that basis (1) the member's share of LLC liabilities under section 752 and (2) the sum of member's section 743(b) adjustments (that is, net section 743(b) adjustments). For purposes of establishing a member's beginning capital account, you may rely on the adjusted tax basis information provided by your members.

The amount to report as a member's beginning capital account under the modified previously taxed capital method is equal to the following.

Tax gain and loss must be determined using California tax basis.

The amount to report as a member's beginning capital account under the section 704(b) method is equal to the member's section 704(b) capital account determined using California amounts, minus the member's share of section 704(c) built-in gain in the LLC's assets, plus the member's share of section 704(c) built-in loss in the LLC's assets. Property contributed to a LLC is section 704(c) property if, at the time of the contribution, its fair market value differs from its adjusted tax basis. Section 704(c) property also includes property with differences resulting from revaluations (reverse section 704(c) allocations). For more information see sections 704(b) and 704(c) and Regulations sections 1.704-1 through 1.704-3.

For section 704(c) property use the California tax basis to determine section 704(c) built-in gain or loss.

Use the 2022 Federal beginning account balance taking into account all historical California adjustments that affect capital accounts. For this method, include in your statement which method was used for determining the beginning federal capital account balance for taxable year 2020 on the federal return. If the modified previously taxed capital method was used, the statement must also include the method used to determine the LLC's net liquidity value (fair market value, section 704(b) book value, etc.). The method used to determine the LLC's net liquidity value must be adopted for all members in the LLC.

Column (e) is used to report California source or apportioned amounts and credits. Include the following items in this column:

For Individuals:

For Corporations and Other Business Entities:

For all members, nonbusiness income from intangible property should not be entered in column (e). Enter this income in Table 1. For more information, see Member’s Instructions for Schedule K-1 (568).

Column (d) and Column (e): Schedule K-1 (568), column (d), includes the member’s distributive share of total LLC income, deductions, gains, or losses under California law. Column (e) includes only income, deductions, gains or losses that are apportioned or sourced to California. The computation of these amounts is a matter of law and regulation. The residency of the member is not a factor in the computation of amounts to be included in column (d) and column (e).

For an LLC that is doing business wholly within California, column (e) will generally be the same as column (d), except for nonbusiness intangible income (for example, nonbusiness interest, dividends, gain, or loss from sales of securities).

For an LLC that is doing business within and outside California, the amounts in column (d) and column (e) may be different.

If the LLC knows the member is a resident individual, then the LLC answers “Yes” to Question H on Schedule K-1 (568), and completes column (d), only. Otherwise, the LLC should complete column (e) for all other members.

Complete Table 1 only if the LLC has nonbusiness intangible income. If the LLC has nonbusiness intangible income, and knows that the member is a resident individual, then the LLC does not need to complete Table 1 for the member.

The LLC will complete Table 2, Parts A to C for unitary members and Table 2 Part C for all non-unitary members. Table 2 does not need to be completed for non-unitary individuals.

The LLC will complete Table 2, Part C to report the member’s distributive share of property, payroll and sales Total within California.

The members will use Table 2, Part C to determine if they meet threshold amount of California property, payroll and sales for doing business threshold in California. See General Information A, Important Information, regarding Doing Business for more information.

Special rules apply if the LLC and a member are engaged in a single unitary business. In that case, a unitary member will not use the income information shown in column (e). Instead, the member’s distributive share of business income is combined with the member’s own business income. The combined business income is apportioned using an apportionment formula that consists of an aggregate of the member’s share of the apportionment factors from the LLC and the member’s own apportionment factors, Cal. Code Regs., tit. 18 section 25137-1. The determination of whether a single sales factor or 3-factor apportionment formula applies to the combined income will be made at the member level. The member’s distributive share of business income and property, payroll, and sales factors are entered in Table 2.

If the LLC knows that all of the members are unitary with the LLC, the LLC need not complete column (e) or attach Schedule R. For further information, see Member’s Instructions for Schedule K-1 (568).

If the apportioning trade or business conducted by a members is not unitary with the apportioning trade or business of the LLC, the LLC apportions its business income separately using Schedules R-1, R-2, R-3, and R-4 only. The different items of business income as apportioned to California are entered in column (e).

If items of income (loss), deduction, or credit from more than one activity are reported on Schedule K-1 (568), the LLC must attach a statement to Schedule K-1 (568) for each activity that is a passive activity to the member. Rental activities are passive activities to all members; trade or business activities may be passive activities to some members. The attachment must include all the information explained in the instructions for federal Schedule K-1 (1065).

The California Schedule K (568) generally follows the federal Schedule K (1065). Where California and federal laws are the same, the instructions for California Schedule K (568) refer to the instructions for federal Schedule K (1065).

When completing the California Schedule K (568) and Schedule K-1 (568), refer to the Schedule K Federal/State Line References chart.

See the instructions for federal Form 1065, Specific Instructions Schedules K and K-1, and Schedule K-1 (568) Income (Loss), line 1 through line 11. Form 568, Schedule K and Schedule K-1 lines 10a and 10b have been separated to report total gains and total losses, and lines 11b and 11c have been separated to report total other income and losses. Net amounts are no longer reported. For example, the partnership is required to report a $100 IRC Section 1231 gain item and a <$60> IRC Section 1231 loss item. The $100 IRC Section 1231 gain item must be reported on line 10a and the <$60> IRC Section 1231 loss item must be reported as a negative number on line 10b.

Energy conservation rebates, vouchers, or other financial incentives are excluded from income.

Schedule K (568) must include all income and losses from the LLC activities as determined under California laws and regulations. Any differences reported between the federal and California amounts should be related to differences in the tax laws. Do not apply the apportionment formula to the income or losses on Schedule K (568).

California Microbusiness COVID-19 Relief Grant. California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Microbusiness COVID-19 Relief Program that is administered by the CalOSBA. Federal law has no similar exclusion. Enter the the amount of this type of income on line 11b, column (c).

California Venues Grant. For taxable years beginning on or after September 1, 2020 and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Venues Grant Program that is administered by CalOSBA. Federal law has no similar exclusion. Enter the amount of this type of income on line 11b, column (c).

Qualified Opportunity Zone Funds. The TCJA established Opportunity Zones. IRC Sections 1400Z-1 and 1400Z-2 provide a temporary deferral of inclusion of gross income for capital gains reinvested in a qualified opportunity fund, and exclude capital gains from the sale or exchange of an investment in such funds. California does not conform to the deferral and exclusion of capital gains reinvested or invested in federal opportunity zone funds under IRC Sections 1400Z-1 and 1400Z-2, and has no similar provisions. If, for California purposes, gains from investment in qualified opportunity zone property had been included in income during previous taxable year, do not include the gain in the current year income.

Thomas and Woolsey Wildfires Exclusion. California law allows a qualified taxpayer an exclusion from gross income for any amount received in settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

Fire Victims Trust Exclusion. California law allows a qualified taxpayer an exclusion from gross income for any amount received from the Fire Victims Trust. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

Turf replacement water conservation program. California law allows an exclusion from gross income for any amount received as a rebate, voucher, or other financial incentive issued by a public water system, local government, or state agency for participation in a turf replacement water conservation program. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant. California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program that is established by Section 12100.975 of the Government Code. If any amount was included for federal purposes, exclude that amount for California purposes on 11b, column (c).

Financial Incentive for Seismic Improvement. California law allows an income exclusion for loan forgiveness, grants, credits, rebates, vouchers, or other financial incentive issued by the California Residential Mitigation Program or California Earthquake Authority to assist a residential property owner or occupant with expenses paid, or obligations incurred, for earthquake loss mitigation. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

IRC Section 951A income. California does not conform to IRC Section 951A. If, for federal purposes, global intangible low-taxed income (GILTI) was included make an adjustment on line 11b, column (c).

Small Business COVID-19 Relief Grant Program. California allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the COVID-19 Relief Grant under Executive Order No. E 20/21-182 and the California Small Business COVID-19 Relief Grant Program established by Section 12100.83 of the Government Code. If any amount was included for federal purposes, exclude that amount for California purposes.

An adjustment to increase the business income of a service LLC to reflect the guaranteed payment deduction adjustment required by Cal. Code Regs., tit. 18 section 17951-4(g) should be made here.

Enter on lines 10a and 10b the amounts shown on Schedule D-1, line 7. Do not include specially allocated ordinary gains and losses, or net gains (losses) from involuntary conversions due to casualties or thefts on this line. Instead, report them on line 11b or 11c, along with a schedule and explanation.

If the LLC has more than one activity and the amount on line 10a or line 10b is a passive activity amount to the member, attach a statement to Schedule K-1 (568), that identifies the activity to which IRC Section 1231 gain (loss) relates.

See the instructions for federal Form 1065, Specific Instructions Schedules K and K-1, and Schedule K-1 (568), Deductions, line 12 and line 13a through line 13e.

IRC Section 179 expense deductions are subject to different rules for California. See instructions for form FTB 3885L.

Enter the total amount of charitable contributions made by the LLC during its taxable year on Schedule K (568) and each member’s distributive share on Schedule K-1 (568). Attach an itemized list to both schedules that show the amount subject to the 50 percent, 30 percent, and 20 percent limitations.

For taxable years beginning after December 31, 2017, and before January 1, 2026, the 50 percent limitation under IRC Section 170(b) for cash contributions to public charities and certain private foundations is increased to 60 percent for federal purposes. California does not conform. The limitation for California is 50 percent.

Members are allowed a deduction for contributions to qualified organizations as provided in IRC Section 170. California law conforms to the federal law, relating to the denial of the deduction for lobbying activities, club dues, and employee remuneration in excess of one million dollars.

California conforms to IRC Section 170(f)(8) substantiation requirement for charitable contributions.

For taxable years beginning on or after January 1, 2017, and before January 1, 2028, do not include any amounts taken into account for the College Access Tax credit as a contribution deduction on line 13a.

This line must be completed whether or not a member is subject to the investment interest rules. Enter the interest paid or accrued to purchase or carry property held for investment. Property held for investment includes property that produces portfolio income (interest, dividends, annuities, royalties, etc.). Therefore, interest expense allocable to portfolio income should be reported on line 13b of Schedule K (568) and Schedule K-1 (568) rather than line 13d of Schedule K (568) and Schedule K-1 (568).

Property held for investment includes a member’s interest in a trade or business activity that is not a passive activity to the LLC and in which the member does not materially participate. An example would be the rule concerning a member’s working interest in an oil and gas property (i.e., the member’s interest is not limited if the member does not materially participate in the oil and gas activity). Investment interest does not include interest expense allocable to a passive activity. For more information get form FTB 3526, Investment Interest Expense Deduction.

The information reported on line 14 of the federal Schedule K (1065), and box 14 of the federal Schedule K-1 (1065), does not apply to California and therefore there is no line 14.

California line numbers are different from federal line numbers in this section.

Add the total amounts on all member’s Schedule K-1 (568). If taxes were withheld by the LLC or if there is a pass-through withholding credit from another entity or backup withholding, the LLC must provide each affected member (including California residents) a completed Form 592-B. Members must attach Form 592-B to the front of their California tax return to claim the withheld amounts. Schedule K-1 (568) may not be used to claim this withholding credit.

These lines relate to rental activities. Use line 15f to report credits related to trade or business activities.

A credit may be claimed by owners of residential rental projects providing low-income housing (IRC Section 42). Generally, the credit is effective for buildings placed in service after 1986. Get form FTB 3521, Low-Income Housing Credit, for more information.

Report any information that the members need to figure credits related to a rental real estate activity, other than the low-income housing credit. Attach to each member’s Schedule K-1 (568) a statement showing the amount to be reported and the applicable form on which the amount should be reported.

Use this line to report information that the members need to figure credits related to a rental activity. Attach to each member’s Schedule K-1 (568) a statement showing the amount to be reported and the applicable form on which the amount should be reported.

If income tax was paid by the LLC on behalf of a nonresident member who did not sign form FTB 3832, the amount paid is entered on the member’s Schedule K-1 (568), line 15e. This is not a distributive share item, it is only reported on the specific nonresident member’s Schedule K-1. Members must attach a copy of Schedule K-1 (568) to their California income tax return to claim the tax paid by the LLC on their behalf.

If income tax was paid by an LLC on behalf of a member that is an LLC and form FTB 3832 is not signed on behalf of the member LLC, the amount paid by an LLC is entered on the member LLC’s Schedule K-1 (568), line 15e. Part of this amount or this entire amount may be reported on Form 568, line 7 (see instructions). Any remaining withholding credit is allocated to all members according to their LLC interest. Individual members must attach a copy of the following to their California tax return to claim their share of the tax paid by the LLC on behalf of the member LLC:

Attach a schedule showing each member’s allocable share of any credit or credit information that is related to a trade or business activity.

Credits that may be reported on line 15f (depending on the type of activity they relate to) include:

All credit forms are available at ftb.ca.gov/forms.

The Other Credits line may also include the distributive share of net income taxes paid to other states by the LLC. Subject to limitations of R&TC Sections 18001 and 18006, members may claim a credit against their individual income tax for net income taxes paid by the LLC to another state. The amount of tax paid must be supported by a schedule of payments and evidence of tax liability by the LLC to the other states. Refer the members to California Schedule S for more information.

The information reported on line 16 of the federal Schedule K (1065) and box 16 of the federal Schedule K-1 (1065), Foreign Transactions, do not apply to California and therefore there is no line 16.

Enter each member’s distributive share of income and deductions that are adjustments and tax preference items. Schedule P (100, 100W, 540, 540NR, or 541), Alternative Minimum Tax and Credit Limitations, to determine amounts and for other information.

California law conforms to the existing federal law eliminating the deduction for contributions of appreciated property as an item of tax preference. As a result, taxpayers no longer need to include in their computation of Alternative Minimum Taxable Income the amount by which any allowable deduction for contributions of appreciated property exceeds the taxpayer’s adjusted basis in the contributed property.

For additional information, see instructions for federal Schedule K (1065), Alternative Minimum Tax (AMT) Items, line 17a through line 17f. For differences between federal and California law for alternative minimum tax (AMT), see R&TC Section 17062.

Enter on Schedule K (568), the amounts of tax-exempt interest income, other tax-exempt income, and nondeductible expenses from federal Schedule K (1065), lines 18a, 18b, and 18c. Enter on Schedule K-1 (568), the amounts of tax-exempt income, other tax-exempt income, and nondeductible expenses, from federal Schedule K-1 (1065), box 18. The LLC should give each member a description and the amount of the member’s share for each item applicable to California in this category.

Enter on Schedule K (568), the amounts of cash and marketable securities, and other property from federal Schedule K (1065), line 19a and line 19b. Enter on Schedule K-1 (568), the amounts of cash and marketable securities, and other property from federal Schedule K-1 (1065), box 19.

These lines must be completed whether or not a partner is subject to the investment interest rules.

Enter on line 20a only the investment income included on line 5, line 6, line 7, and line 11a of Schedule K (568) and Schedule K-1 (568). Enter on line 20b only investment expenses included on line 13d of Schedule K (568) and Schedule K-1 (568).

If items of investment income or expenses are included in the amounts that are required to be passed through separately to the member on Schedule K-1 (568), items other than the amounts included on line 5 through line 9, line 11a, and line 13d of Schedule K-1 (568), give each member a statement identifying these amounts.

Investment income includes gross income from property held for investment, gain attributable to the disposition of property held for investment, and other amounts that are gross portfolio income. Investment income and investment expenses generally do not include any income or expenses from a passive activity.

Property subject to a net lease is not treated as investment property because it is subject to the passive loss rules. Do not reduce investment income by losses from passive activities.

Investment expenses are deductible expenses (other than interest) directly connected with the production of investment income. Get the instructions for form FTB 3526 for more information.

If the LLC completed the credit recapture portion of FTB 3531, California Competes Tax Credit – Enter only the recaptured amount used. Get the instructions for form FTB 3531, Part III, Credit Recapture, for more information.

See the instructions for the federal Schedule K (1065), line 20c, Other Items and Amounts. For credit recaptures attach a schedule including credit recapture names and amounts.

The gain on property subject to the IRC Section 179 Recapture should be reported on the Schedule K as supplemental information as instructed on the federal Form 4797.

The LLC must provide all of the following information with respect to a disposition of business property if an IRC Section 179 expense deduction was claimed in prior years:

If the LLC conducted more than one at-risk activity, the LLC is required to provide certain information separately for each at-risk activity to its members. Get the Instructions for federal Form 1065, Specific Instructions, Schedule K and Schedule K-1, Part III, Line 22.

If the LLC conducted more than one activity (determined for purposes of the passive activity loss and credit limitations), the LLC is required to provide information separately for each activity to its members. Get the Instructions for federal Form 1065, Specific Instructions, Schedule K and Schedule K-1, Part III, Line 23.

The LLC may need to report supplemental information that is not specifically requested on the Schedule K-1 (568) separately to each member. If the LLC has supplemental information not included in lines 1 through 20b, write “See attached” on line 20c, column (b) and column (d) and provide a schedule with the details.

Members may need to obtain the amount of their proportionate interest of aggregate gross receipts, less returns and allowances, from the LLC.

The gain or loss on property subject to the IRC Section 179 Recapture should be reported on Schedule K-1 as supplemental information as instructed on the federal Form 4797.

The LLC must provide all of the following information with respect to a disposition of business property if an IRC section 179 expense deduction was claimed in prior years:

Alternative minimum taxable income does not include income, positive and negative adjustments, and preference items attributed to any trade or business of a qualified taxpayer who has gross receipts, less returns and allowances, during the taxable year of less than $1,000,000 from all trades or businesses in which the taxpayer is an owner or has an ownership interest. The LLC should provide the member’s proportionate interest of aggregate gross receipts on Schedule K-1 (568), line 20c.

For purposes of R&TC Section 17062(b)(4), “aggregate gross receipts, less returns and allowances” means the sum of all of the following:

“Aggregate gross receipts” means the sum of the gross receipts from the production of business income, as defined in R&TC Section 25120(a), and the gross receipts from the production of nonbusiness income, as defined in R&TC Section 25120(d).

R&TC Section 25120 was amended to add the definition of gross receipts. For a complete definition of “gross receipts”, refer to R&TC Section 25120(f), or go to ftb.ca.gov and search for 25120.

For purposes of this section, “pass-through entity” means a partnership (as defined by R&TC Section 17008), an S corporation, a regulated investment company (RIC), a real estate investment trust (REIT) and a REMIC. See R&TC Section 17062 for more information.

Also show on line 20c a statement noting each of the following:

See the federal instructions for Schedule K (1065), Analysis of Net Income (Loss).

Enter the member’s share of nonbusiness income from intangibles. Because the source of this income must be determined at the member level, do not enter income in this category in column (e). If the income (loss) for an income item is a mixture of income (loss) in different subclasses (for example, short-term and long-term capital gain), attach a supplemental statement providing a breakdown of income (loss) in each subclass.

Enter nonbusiness income from intangibles in Table 1 net of related expenses. Do not include expenses offset against nonbusiness income from intangibles in column (e).

The LLC will complete Table 2, Parts A to C for unitary members and Table 2, Part C for all non-unitary members. Table 2 does not need to be completed for non-unitary individuals.

The final determination of unity is made at the member level. If the LLC and the member are unitary, or if the LLC is uncertain as to whether it is unitary with the member, it should furnish the information in Table 2.

Part A. Enter the member’s distributive share of the LLC’s business income. The member will then add that income to its own business income and apportion the combined business income.

“Business income” is defined by Cal. Code Regs., tit. 18 section 25120(a) as income arising in the regular course of the taxpayer’s trade or business. Business income includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitutes integral parts of the taxpayer’s regular trade or business.

Part B. Enter the member’s share of nonbusiness income from real and tangible property that is located in California. Because this income has a California source, this income should also be included on the appropriate line in column (e).

Nonbusiness income is all income other than business income.

Part C. Enter the member’s distributive share of the LLC’s payroll, property, and sales factors.

The LLC will complete Table 2, Part C to report the member’s distributive share of property, payroll and sales Total within California.

The members will use Table 2, Part C to determine if they meet threshold amount of California property, payroll and sales for doing business threshold in California. See General Information regarding Doing Business for more information.

The following chart cross-references the line items on the federal Schedule K (1065) to the appropriate line items on the California Schedule K (568). For more information, see the Specific Line Instructions for Schedule K (568) and Schedule K-1 (568), Member’s Share of Income, Deductions, Credits, etc, included in this booklet.

This list of principal business activities and their associated codes is designed to classify a business by the type of activity in which it is engaged to facilitate the administration of the California Revenue and Taxation Code. These principal business activity codes are based on the North American Industry Classification System.

Using the list of activities and codes below, determine from which activity the limited liability company (LLC) derives the largest percentage of its "total receipts." Total receipts is defined as the sum of gross receipts or sales plus all other income. If the LLC purchases raw materials and supplies them to a subcontractor to produce the finished product, but retains title to the product, the LLC is considered a manufacturer and must use one of the manufacturing codes (311110-339900).

Once the principal business activity is determined, entries must be made on Form 568, Item J. Enter a description of the principal product or service of the LLC. For the business entity code, enter the six-digit code selection from the list below.

Nonstore retailers sell all types of merchandise using such methods as Internet, mail-order catalogs, interactive television, or direct sales. These types of Retailers should select the PBA associated with their primary line of products sold. For example, establishments primarily selling prescription and non-prescription drugs, select PBA code 456110 Pharmacies & Drug Retailers.

“Offices of Bank Holding Companies” and “Offices of Other Holding Companies” are located under Management of Companies (Holding Companies).

Use our automated phone service to get recorded answers to many of your questions about California taxes and to order California business entity tax forms and publications. This service is available in English and Spanish to callers with touch-tone telephones. Have paper and pencil ready to take notes.

If you need an answer to any of the following questions, call 800-338-0505, select “Business Entity Information,” then “Frequently Asked Questions.” Follow the recorded instructions, and enter the three digit code when you are instructed to do so.

Telephone assistance is available year-round from 8 a.m. until 5 p.m. Monday through Friday, except holidays. Hours subject to change.

Asistencia telefónica está disponible durante todo el año desde las 8 a.m. hasta las 5 p.m. de lunes a viernes, excepto días feriados. Las horas están sujetas a cambios.

If you write to us, be sure your letter includes your California SOS file number, your FEIN, your daytime and evening telephone numbers, and a copy of the notice. Send your letter to:

We will respond to your letter within ten weeks. In some cases, we may need to call you for additional information. Do not attach your letter to your California tax return.

You can download, view, and print California tax forms and publications at ftb.ca.gov/forms.

Our California Tax Service Center website offers California business tax information and forms for the BOE, CDTFA, EDD, FTB, and IRS at taxes.ca.gov.

You can also download, view, and print federal forms and publications at irs.gov.

Call our automated phone service at the number listed on this page and follow the recorded instructions.

Allow two weeks to receive your order. If you live outside California, allow three weeks to receive your order. Write to:

Many post offices and libraries provide free California tax booklets during the filing season.

Employees at libraries and post offices cannot provide tax information or assistance.

The FTB’s goals include making certain that your rights are protected so that you have the highest confidence in the integrity, efficiency, and fairness of our state tax system. For more information get FTB 4058, California Taxpayers’ Bill of Rights – Information for Taxpayers. See “Where To Get Income Tax Forms and Publications”. To request FTB 4058 by phone, enter code 943.